When I wrote the first “Artificial Scarcity Watch” post, I envisioned it as an occasional feature, highlighting some of the trends that led me to cook up Anti-Star Trek. I think I’m going to have to pace myself, though, because otherwise I’ll spend all my time writing about intellectual property run amok. For instance, this story, about PayPal teaming up with the London police to shut down alleged music piracy websites, is barely worth mentioning.
I saw something else, though, that is too juicy to pass up. The latest episode of This American Life is called “When Pattents Attack!”, and NPR’s Planet Money blog also tells the story. It’s a devastating exposé of a company called Intellectual Ventures, and I highly recommend reading it if you feel that your blood pressure is too low or that you need more anger in your life.
IV is run by Nathan Myhrvold, a former Microsoft executive who is confused about climate chage and also has a book about modernist cooking. Malcolm Gladwell had a piece about the company in the New Yorker a few years ago, in which he portrayed IV as a kind of laboratory for innovation, focused on the science of coming up with good new ideas.
That all seems pretty laughable in retrospect. The Planet Money post reveals Intellectual Ventures to be a wretched hive of scum and villainy, and Nathan Myhrvold to be that lowest of rentier-capitalist parasites: a patent troll. Intellectual Ventures does not, for the most part, come up with ideas. What it does is buy patents–often very broad, legally dubious patents–and then extort licensing fees out of companies that allegedly infringe on them. Or else it licenses its patents to shell companies that exist only to sue people, thus producing eerie scenes like this:
And, in fact, that’s what’s happening with Chris Crawford’s patent. Intellectual Venures sold it to a company called Oasis research in June of 2010. Less than a month later, Oasis Research used the patent to sue over a dozen different tech companies, including Rackspace, GoDaddy, and AT&T.
. . .
The office was in a corridor where all the other doors looked exactly the same —locked, nameplates over the door, no light coming out. It was a corridor of silent, empty offices with names like “Software Rights Archive,” and “Bulletproof Technology of Texas.”
It turns out a lot of those companies in that corridor, maybe every single one of them, is doing exactly what Oasis Research is doing. They appear to have no employees. They are not coming up with new inventions. The companies are in Marshall, Texas because they are filing lawsuits for patent infringement.
As Planet Money points out, this is a gangster business model: pay me, or I sue you.
Technology companies pay Intellectual Ventures fees ranging “from tens of thousands to the millions and millions of dollars … to buy themselves insurance that protects them from being sued by any harmful, malevolent outsiders,” Sacca says.
There’s an implication in IV’s pitch, Sacca says: If you don’t join us, who knows what’ll happen?
He says it reminds him of “a mafia-style shakedown, where someone comes in the front door of your building and says, ‘It would be a shame if this place burnt down. I know the neighborhood really well and I can make sure that doesn’t happen.’ “
Hence even companies that know they are in the right will be reluctant to go to court against IV and its patent portfolio, due to the high cost of litigation. But of course, John Gotti is deeply offended by the suggestion that he might be involved in something unsavory. Says the lawyer who coined the term “Patent Troll” (!), but who now works with Intellectual Ventures:
In an email to us, Peter Detkin called the comparison to the mafia “ridiculous and offensive.” Detkin wrote:
We’re a disruptive company that’s providing a way for patent-holders to recognize value that wasn’t available before we came on the scene, and we are making a big impact on the market. That obviously makes people uncomfortable. But no amount of name-calling changes the fact that ideas have value.
True enough. But you can see why many people feel like lots of butcher shops have been burning.
Ah, if only Al Capone had been clever enough to cloak his enterprise in business school jargon–the mafia is a “disruptive company” that is “making a big impact on the market”! Brad DeLong cites this story as evidence that the patent system is broken. But from the perspective of Anti-Star Trek, it isn’t broken, at all. It’s doing exactly what it’s supposed to do: create artificial scarcity and enrich a small class of parasitic rentiers.