Tom Ewing & Robin Feldman: The Giants Among Us
`
`Law Review
`
`Stanford
`
`The Giants Among Us
`
`TOM EWING & ROBIN FELDMAN‘
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`CITE AS: 2012 STAN. TECH. L. REV. 1
`
`http:/fstlx.stanford.edu/pdf/feldman—giants-among~us.pdf
`
`" @ Thomas Ewing, JD, MS, MA, Licentiate in Industrial Management E: Economies (expected 2012); Robin Feldmm,
`Professor of Law 8: Directot of LAB iject, UC Haslings Law. We are grateful lo Ben DePDorteI,]nsh Horowitz, Jonathan
`Mame, Daden Shanske, Steve Tadelis, Ow: Granslrand. and Marcus FinléEHolgerssnn. We would also like to thank James Nolan,
`Patn'cin Dyek. Chris Johnson, Sandy Lin, Jason Ross, Williams Casey, Leanne Yu, and Elaine Zhoug for their excellent research
`assistance.
`
`IVM v. Xilinx
`Exhibit - XLNX-2001
`Trial Number: IPR2012-00023
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`Tom Ewing 8: Robin Feldman: The Giants Among Us
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`TABLE OF CONTENTS
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`INTRODUCTION ............................................................................................................................................ 1
`
`
`A. Inkling-ind!Venting;
`
`B. Potent: andAgblioationI Held"by 1'33!le Vean
`C. 011an oftbo Poly’oliouu
`.
`
`C. Funding Source:............................
`D. Roam: on Inoomnontw
`
`
`E. Collecting Rownno: Pfioatoon'ng 2’? Other Eogblom‘ ......
`F. OtborMan AggrogatorI a? Intmnnooz‘iomm.
`
`II. POTENTIAL POSITIVE EFFECTS ..................................................................................................... 18
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`A. The Forgotten Inventor .........................................
`
`B. The Maid/man............................................................................................................................................ 20
`C. Tb: Litigation DgfianIo and....................................................................................................................... 21
`
`23
`III. POTENTIAL HARMS...
`
`25
`A. A Tax on Pmdnotio3....
`................................................ 26
`B. OppomntfloIfirAnflmnyormoe Conduct
`
`26
`C. Baiting Rivalr’ Com ....................................................................
`........................................ 28
`D. Other TmblingMnrketBebooior...“
`
`29
`E. Odd Cbarnotm'IfioI oftbo 13pm .S'Iqbpbing tbs Market.
`F. Odd Cbaraotoflirtim oftbo Agngator Bm‘inoII............................................................................................. 30
`G. Economic“ Stabilz'y....................................................................................................................................... 31
`H. "To Sen): Man”..........
`32
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`I. Anoilhgy ngblimtionI ................................................................................................................................... 33
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`A. Rognfarog/Ooomgbt 35
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`B. hub: Inn .S'bino I3.....................................................................................................................
`........37
`C. Roaming tbs Tootb oftbo Ego:-.................................................................................................................... 4‘1
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`APPENDDK B ................................................................................................................................................... 44
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`APPENDIX C ................................................................................................................................................... 47
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`Robin Feldman & Tom Ewing: The Giants Among Us
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`INTRODUCTION
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`The patent world is quietly undergoing a change of seismic proportions. In a few short years, a
`handful of entities have amassed vast treasuries of patents on an unprecedented scale. To give some
`sense of the magnitude of this change, our research shows that in a little more than five years, the
`most massive of these has accumulated 30,000—60,000 patents worldwide, which would make it the
`5th largest patent portfolio of any domestic US company and the 15th largest of any company in the
`world.
`
`Although size is important in understanding the nature of the shift, size alone is not the issue. It
`is also the method of organiZation and the types of activities that are causing a paradigm shift in the
`world of patents and innovation.
`
`These entities, which we call mass aggregators, do not engage in the manufacturing of products
`not do they conduct much research. Rather, they pursue other goals of interest to their founders and
`investors. Non—practicing entities have been around the patent world for some time, and in the past,
`they have fallen into two broad categories.1 The first category includes universities and research
`laboratories, which tend to have scholars engaged in basic research and license out inventions rather
`than manufactuling products on their own. The second category includes individuals or small groups
`who purchase patents to assert them against existing, successful products. Those in the second
`category have been described colloquially as “trolls,” which appears to be a reference to the
`children’s tale of the three billy goats who must pay a toll to the troll waiting under the bridge if they
`wish to pass. Troll activity is generally reviled by operating companies as falling somewhere betwaen
`extortion and a drag on innovation.2 In particular, many believe that patent trolls often extract a
`disproportionate return, far beyond the value that their patented invention adds to the commercial
`product, if it adds at all-1
`
`The new mass aggregator, however, is an entirely different beast; To begin with, funding sources
`for mass aggregators include some very successful and respectable organizations,
`including
`manufacturing companies such as Apple, eBay, Google, Intel, Microsoft, Nokia, and Sony, as well as
`academic institutions such as the University of Pennsylvania and Notre Dame, and other entities
`such as the World Bank and the William and Flora Hewlett Foundation. Nations such as China,
`France, South Korea, and Taiwan even have their own mass aggregators to varying degrees.
`Moreover,
`the acquisition appetites and patent supply sources are quite interesting. Mass
`aggregators may have portfolios that range across vastly different areas of innovation from
`computers to telecommunications to biomedicine to nanotechnology.4 In some of the acquisition
`
`‘ Sannu K. Shrestha, TmIlr ”Mm-test Makers? Art EmpiricalAm ' quaupmt-fiahg Enfifisn 1‘10 COLUM. L. REV. 114, 115
`("N'PEs are firms that rarely or never pracn'ce their patents, ins
`focusing on eaming licensing fees”); U.S. FED. TRADE
`COMM’N, THE. EVOLVING [P MARKETPLACE: .ALIGNING PATENT NOTICE AND Emotes WITH Common 2011 WL
`338912 at 60 (2011), smile“: at http://www.ftc.gov/os/2011/03/110307patentreportpdf ("NPE also commonly refers to firms
`that obtain nearly all of their patents through acquisition or purchase in order to assert them against manufacnrrers."); m aim
`Colleen V. China, Of Twill", Daw'dr, Galbraith and Ifihgr: Nmfi'wr and Emacs“ in the litigation tyngsms Patent, 87 N.C. L. REV.
`1571, 1572 (2009}.
`2 Chieu, .mpm note 1 at 1577-75 ("The term NPE generally refers to a patents: that does not make products or ‘practiee’ its
`inventions”); Jeremiah S. Helm, Comment, Wig Pbmmfimi Finn: Signor! Perm! Trail: Tbs Dinky-etc Input: 9" eBay v.
`Mercurchange M Insomniac, 13 MICH. 'I'ELECOLM 8r TECH. L. REV. 331, 333 (2006) (distinguishing between universities and
`patent trolls); Mark A Imley, An Uuiwmh'u Pam: mm. 18 FoaDHsM Damn. PROP. MEDIA & ENT. L]. 611, 629-30 (2003)
`(distinguishing between universities as non-practicing entities and trolls); Gerard N. Magliocca, Bianébmisr and Bar-yank: Patent
`Tmllr and the Pm'lr g‘lsnamflhfl, B2. NO’I‘RE DALE L REV. 1309, 1810 (2007) (“Mat-eat troll’ . .
`. is a derogatory term for firms that
`use their patents to extract settlements rather than license or manufacture technology"); an aim ay P. Kesan, ijémhg Imm'an.
`77 FORDHAM L. REV. 2169, 2195 (2009) (cautioning universitim against appealing troll-lilac
`ecause patent trolls are pereerved
`WM)-
`3 See Lemley, nmm note 2, at 613-14; Magliocca, J‘Iqfim note 2 at 1310 (“Critics claim that these firms are little more than
`blackmailers who put a crippling tax on productive enterprises”).
`4 Phamnaceutimls seems to be the one technical area generally excluded from mass aggregation, perhaps because the
`phanrlaceuticsl innovation system has evolved to include lesser degrees of technical sharing.
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`Robin Feldman 8: Tom Ewing. The Giants Among Us
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`activity, mass aggregators purchase large chunks, and even the majority, of an operating company’s
`patents and patent applications. They typically pay cash up front, as well as a share of any future
`profits generated from asserting the patents against anyone other than the selling manufacturer. Mass
`aggregators have engaged in other unusual acquisition approaches as well, including purportedly
`purchasing the rights to all future inventions by researchers at universities in developing countries.
`Other acquisition approaches purportedly include targeted purchases of patents that are of particular
`interest to the mass aggregators’ investors.
`The types of returns promised to investors and the types of benefits offered to participants are
`also quite different from garden-variety non—practicing entities, as are some of the tactics used in
`organizing the entities and in asserting the patents. Finally, the scale itself is simply mind—boggling.
`Mass aggregators operate on a scale and at a level of sophistication and complexity that would have
`been unimaginable a decade ago. They have taken the prototype strategies pioneered by a prior
`generation of non-practicing entities and changed them into some of the cleverest strategies yet seen
`in the intellectual property rights field.
`The goal of this article is to shed some light on mass aggregators. We hope to provide some
`understanding of the nature of the changeI to analyze its economics and implications, and to offer
`some normative considerations. In the descriptive section, we focus on the oldest and largest of the
`mass aggregators, Intellectual Ventures, which has gone to great lengths to maintain secrecy.
`Working from public sources and investing thousands of hours of research, we offer a detailed
`picture of the entity, tracing through approximately 1300 shell companies and thousands of patents.
`The section also describes in brief form several other mass aggregators, including ones that are public
`companies.
`
`In the analytic section, we examine the potential implications of mass aggregators for the patent
`system specifically, for innovation in general, and for the economy as a whole. We look at the
`potential positive effects that mass aggregators might bring, including facilitating appropriate rewards
`for forgotten inventors, creating a market to connect innovators with those who can manufacture
`their inventions, and, most important, operating as a form of insurance—something akin to an Anti—
`Troll defense fund.
`
`On the other side, we look at: the potential economic dangers of mass aggregators and the
`market for patent monetization they create. Given the imperfections of the patent system and the
`odd characteristics of the product created by the market for patent monetization, mass aggregators
`may serve as a tax on current production that reduces future innovation. Characteristics of the
`market may also provide opportunities for anticompetitive behavior.
`Finally, we offer a few preliminary, normative observations on whether and to what extent the
`sovereign, in the form of various governmental bodies, should become involved in these market—level
`changes. The section also considers broadly the types of changes that would have to occur for such
`participation to take place in a meaningful and minimally disruptive fashion.
`
`I. FACTS
`
`Over the last five years, information about mass agregators has slowly filtered out into the
`patent community. Initial information was fueled largely by speculation as well as quiet, oblique
`comments from those bound by confidentiality agreements or concerned about incurring the wrath
`of the aggregators. As a reporter researching one of the mass agregators noted as recently as July
`2011,
`
`[W]e called people who had licensing arrangements with [Intellectual Ventures], we called
`people who were defendants in lawsuits involving [Intellectual Ventures] patents, We called
`every single company being sued by Oasis Research. No one would talk to us.5
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`5 Alex Blumberg & Laura Sydell, TbirAm-rfm th- Wben Parme- Ams (National Public Radio broadcast, July 22, 2011)
`(transcript
`available
`at http://www.npr.org/blogs/money/2011/07/25/133576157/when—patenrsuattack)
`(noting that
`the
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`We encountered similar reticence when We first began trying to understand the structure and
`activities of aggregators. “You can’t find out anything about them; don’t even try," is a chant that has
`been whispered in intellectual property circles for a number of years. It motivated us to take a hard
`look, and the information eventually unraveled like the yarn from an old sweater.
`A literature search on Intellectual Ventures reveals many opinions about the company but few
`independent facts. We have aimed to fill that void by tracing the intellectual property assets that the
`company appears to own, identifying the sources of those assets, and describing the company’s
`activities. The data We provide here is the result of four years of painstaking research, piecing
`together bits of information available flom public sources.
`
`A. Intellectual Venture:
`
`Much about Intellectual Ventures is shrouded in secrecy. Intellectual Ventures has acknowledged
`that it intentionally withholds the true scope and nature of its IP portfolio.6 Its licensing transactions
`and interactions are protected by strict nondisclosure agreements, and the structure of its business
`activities makes it difficult to get a handle on the full extent of its activities. For example, our
`research has identified more than a thousand shell companies that Intellectual Ventures has used to
`conduct its intellectual property acquisitions, and it has taken considerable effort to identify these.
`The range and scope of its activities are so vast that it is difficult to conceptualize the reach of
`Intellectual Ventures.
`
`Intellectual Ventures was founded in 2000 by Nathan Myhrvold and Edward Jung, both of
`whom formerly served in high—level positions at Microsoft." Peter Detlcin also played a key
`management role in developing Intellectual Ventures.B In one of patent law’s great ironies, Detkin
`coined the derogatory term “patent tro ” during his tenure as the chief intellectual property officer at
`Intel.9
`
`Although operations began in 2000, Intellectual Ventures does not appear to have begun its
`massive patent acquisitions in earnest until somewhere around 2004 or 2005, when the annual
`number of acquisitions transaction we could identify rose from a handful to several hundred.
`According to Intellectual Ventures, inventionper re is its product, and both Myhrvold and Detkin
`have referred to the company’s business model as “Invention Capitalism.” They define Invention
`Capitalism as applying concepts from venture capital and private equity to develop and commercially
`exploit new inventions.10
`
`Although Intellectual Ventures is designed to make money from trading in patent rights, the
`founders describe their activities as ones that will incentivize research and development in all
`technical subjects. Myhrvold, for example, has been quoted as saying the following:
`
`Most of people think of research as a charity, a philanthropic thing. They don’t view it as a
`for-profit venture. So our goal is to make research something you can invest in. I think it’s
`
`
`reluctance was fueled in part by fear and in part by Intellectual Ventures’ nondisclosure agreement, rumored to be the strictest in
`Silicon Valley).
`‘ J's: Victoria Slind—Flor, Tb: Gaodfrlh: Delhi! and thyme on Patents Tmllr 6' Inhllrml Wm, 19 INTELL ASSET MGMT.
`23, 34 (noting that Intellectual Ventures will not reveal how many patents it has or the entities to which it has licenSed technology,
`and quoting Myhrvold‘s response that “We're a private company. We don't disclose our investment plans any more than Warren
`Buffet does.”); no 41m Steve Lohr, Taming PM in» Tammi” Cqm'ml’, N.Y. TIMES, Feb. 13, 2010, at Bl (paraphrasing Myhrvold as
`saying that Intellectual Ventute’s “penchant for secrecy" is a legacy from its startup days when it “did not want to tip its hand”).
`7 Intellectual Ventures LLC was formed on September 21, 1999. Corporations Division — Registration Data Search, WASH.
`SEC. OF STATE, http:llwww.sos.wagov/corps/seareh_detail.aspx?ubi=6019fl‘l733 (last visited Nov. 15, 2011). Nathan Myhrvold
`formerly served as Microsoft‘s chief technology officer, and Jung served as Microsoft’s chief architect Our Tm, INTELLECTUAL
`VENTURE, http://intellectualvmmresrom/WhoWeAre/OurTeamaspx (last visited Nov. 15, 2011).
`-
`“ Detkin joined Intellectual Ventures in 200?. Peter N. Detkin, having his Pm Flying Fkld, 6 J. MARSHALL REV. INTELL.
`PROP. L. 636 n.* (2007), available at http:f/wwwjmripl.com/Publimtions/Volfi/Issufi/Detkinpdf.
`9 Id. at 636 (stating that he coined the term); Brenda Sandburg, YmMa} Nat Hm a Cbnics. Tmlkhgfar Dalian, 'I‘I—IE RECORDER
`Only 30, 2001), http://www.phonetel.com/pdfs/LWTrolls.pdf (using the term and attributing it to Detkin).
`1” In Detkin, 1'1ng not: 8, at 636 n.*; Lohr, .rgbm note 6 (citing Nathan Myhrvo
`; Nathan Myhrvolcl, Tits Big Idea: Funding
`Entries, Harman BUSINESS REVIEW, .Mar. 2010, at 40, 4mm}: afhttprl/hbrnrg/ZOIO 03/the—hig—idea—funding-eureka/ar/‘l.
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`a valuable investment if you know what you’re doing. So we think that if we supply capital
`and expertise in the right way then we can make a hell of an investment and if we are
`successful at doing it, the net research budget will go up.11
`
`The scope of Intellectual Ventures’ activities is so vast that it is difficult to contemplate the reach
`of the company. It has invested in innovations and technologies across a broad spectrum of
`industries—everything from computer hardware to biomedicine to consumer electronics to
`nanotechnology.
`In more than 1,000 transactions, by our count,
`the company has acquired
`inventions and related intellectual property from individual inventors, corporations of all sizes,
`governments, research laboratories, and universities.
`
`Getting a handle on the scope and activities of an entity as secretive as Intellectual Ventures is
`not easy.12 We have tried to create a picture of the company by piecing together information from
`publicly available sources. These sources include the patent assignment records of the United States
`Patent and Trademark Office (USPTO); the USPTO’s PAIR database,13 which includes the file
`histories of patents; the USPTO’s patent and application database; government records for key
`states, including Delaware, Nevada, Washington, and California; Internal Revenue Service filings for
`non—profit entities; Securities and Exchange Commission data from 10Q and 10K filings by
`corporations; the Federal Register; filings made in dOZens of litigations; and press releases and other
`publications from various entities.
`
`The structure of the Intellectual Ventures network of operations makes it tremendously difficult
`to detect and trace the company’s activities. For example, Intellectual Ventures has acknowledged
`that it uses shell companies for purchasing and holding patents, although it: has not publicly identified
`the number of shells or their names.14 In 2006, one magazine identified 50 shell companies that it
`believed were being operated by Intellectual Ventures. Our research has pieced together 1276 shell
`companies associated with Intellectual Ventures. We do not believe that we have identified all of the
`Intellectual Ventures shell companies, but these 1276 companies alone hold roughly 8000 US patents
`and 3000 pending US patent applications as of May 2011.15
`I
`Even with some knowledge of the shell companies, tracking the Intellectual Ventures portfolio is
`complicated by the fact that Intellectual Ventures has at times neglected to record its ownership for
`long periods of time. In some cases, for example, we found parties indicating that they had sold or
`licensed patents to Intellectual Ventlires—-even to the point of identifying the intellectual property
`with great particularity—but we could not locate a corresponding assignment in the USPTO
`database.16
`
`Although Intellectual Ventures has never divulged the precise nature and extent of its portfolio,
`the company has reported that it holds some 35,000 “invention assets?” The company does not
`define the term, but we assume that this phrase refers not only to patents but also to patent
`applications, non-filed invention disclosures,1J1 design patents, trademarks, and any trade secrets
`
`1‘ Nathan Myhrvold, Speech at the Churchill Club in Palo Alto, CA (Feb. 2?, 2007).
`12 Credit for this exhaustive research goes In co-author Tom Ewing.
`’3 PAIR stands for Patent Application Infonnan'on Retrieval
`1“ Sea Blind-Flor, .rapm note 6, at 32 (quoting Peter Detkin as admowledging that Intellectual Ventures uses shells for
`acquisidons and noting that many companies do this to keep potential liabilities of the acquired company fiom affecting the whole
`organization).
`15 At least 175 of the parent acquired by Intellectual Ventures have reached the end oftheir ms and expired. likewise,
`many more of their patents will expire in just a few years. We hay: not checked patent maintenance fee payment information to
`determine if any of the other patents have expired due to failure to pay maintenance fees. In any event, the “active” US portfolio is
`likely a bit smaller than suggested by the numbers above.
`15 In one case, Intellectual Ventures opted not to record a change of ownership for 2506 days following execution. An
`assignment for US Publication No. 20090254972 was executed onAug. 9, 2002, but not recorded unti'lJune 19, 2009. See , USPTO
`ASSIGNMENTS ON THE WEB, http://assignments.uspto.gov/sssignmenlx/de=pat (search "Publication Number" for
`“200902549723.
`17 Press Release, Inn-.llecmal Ventures, BhieCst Networks Signs Patent Agreement With Intellecnial Ventures Gone 28, 2011),
`mils“: arhnp://intellectualventutcs.com/newstoom/pressreleases/11-06-
`2B[BhJeCaLNetworkLSigns_Pa0ent_Agreement_With_Inrellectual_Venrutes.aspx.
`1" The company has claimed to have some 3000 unfiled invention disclosures. In Tom Ewing, Inside tabs World quublis
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`owned or licensed by the company. Further confusing the issue is whethet the company counts as
`“invention assets” patents or only patent families. The company also is not clear about where these
`assets exist, but we assume that this number represents the company’s worldwide portfolio. If the
`35,000 number were to represent the company’s United States portfolio alone, Intellectual Ventures
`would hold a portfolio larger than IBM’s United States portfolio, which is generally acknowledged as
`the largest domestic portfolio.
`
`To give a fuller picture of precisely what Intellectual Ventures owns, we assembled as much
`information as possible from public sources on the company‘s holdings that are actually patents. To
`summarize the information below, we estimate that Intellectual Ventures has a worldwide portfolio
`of 30,000-60,000 patents and applications as of May 2011. This would mean that in just a few short
`years, Intellectual Ventures has acquired at least the 5th largest patent portfolio among US companies
`and approximately the 15th largest patent portfolio worldwide.19
`
`B. Parent; aadApplimt‘iam Held éy Intrilrcml Vermeer
`
`With a great deal of digging, we were able to locate 1276 shell companies and related entities that
`appear to be associated with Intellectual Ventures?-o These companies hold approximately 8000 US
`patents and 3000 pending US patent. applications. We do not believe that we have found all of the
`shell companies.21 Nevertheless, we believe we can calculate a reasonable approximation of
`Intellectual Ventures’ patent holdings. The overall size of Intellectual Venture’s portfolio can be
`estimated in several ways based on the infonnation that we have obtained. The estimate below comes
`from what we have learned about these 1276 shell companies.22
`We begin by using information about Intellectual Venture’s shell companies. First, we have
`identified some 50 shells that appear to serve a management function, one shell that serves a
`trademark function, a dozen or so that serve investment functions. Of the remaining 1200
`companies, 954 companies have patents recorded against their names, and some 242 shells do not
`have patents recorded against their names, although some of them clearly hold licensed—in patent
`rights.
`
`We have noticed that Intellectual Ventures has a pattern of establishing a shell to receive assets
`well before the transaction related to those assets has been completed. Thus, we suspect that at least
`some of the 242 companies wiflrout patents recorded against their names are awaiting allocation of
`assets from a patent-related transaction. We suspect that others have already experienced a patent—
`related transaction, but that the transaction has yet to surface in the public record. For example, if
`Intellectual Ventures receives an exclusive license to a patent, the effect would be similar to owning
`the patent outright, but the parties would not necessarily record a change of patent ownership with
`
`
`
`Austrian, 42 INI‘EU... ASSET MGMT. 67 (2010).
`other things, to he completely accurate, one must
`19 Patent holdings are difficult to compare and rank because,
`account for patents expired on the basis of age and]or failure to pay annuitylmaintenanee fees.
`2" The shell companies that we know about seem to serve the following functions: 1201 patent holding shells, 1 trademark
`holding shell, 51 asset management shells, and 24 executive and investment shells. See Appendix C for a fin-flier discussion of
`research methodology.
`3‘ As noted elsewhereI We have found approximately 100 other companies registered in Delaware that appear to be shell
`companies but do not presmtly hold patents. We will continue to monitor these companies.
`35 The size of Intellectual Venmres’ portfolio can also be estimated based upon how much the company has spent acquiring
`this ortfolio and how much they have spent per patent. As an arbitrage buyer, one could assume that Intellectual Ventures spends
`to
`y the same amount per patent in all of in purchases. Myhrvold reported that Intellectual Ventures had spent $1.163 billion
`acquiring patents by May, 2009. Nigel Page, IVl‘bgflr Gm; 36 INTELL. ASSETMAG. 9, 10 (2009). In a. study of Ocean Torno patent
`auctions. we concluded that Intellectual Ventures had spent a little more than $61 million acquiring 410 US patmts and their
`foreign counterparts at an average cost of $143,966 per US patent obtained. Tom Ewing, Prlblfrb' Armand Patent Btgrm, 34-
`AVANCEPT (2010]. Some published reports have said that Intellectual Ventures pays only $40,000 pa patent. Page, rapt-a at 13.
`Application of this infometion combined with additional infannation about the growth of Intellectual Ventures’ portfolio since
`May, 2009 leads to an estimated US portfolio of 10,149 US patents and 27,649 foreign patents by May, 2011 along with several
`thousand pending applications worldwide. This second estimate fits well with the estimate based upon analysis of patent-holding
`shell companies.
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`the USPTO, especially if the recipient of the exclusive license believed it highly unlikely that the
`registered patent owner would resell the patent to someone else.
`The 954 shell companies that have patents recorded against their names have an average of 8.5
`patents and 3.2 patent applications per company. Assuming that the other 242 shell companies
`contain unrecorded transactions, and applying these averages would yield another 2057 patents and
`774 applications. Adding these missing patents and applications to our totals would yield roughly
`10,000 patents and 3700 applications.23
`
`Intellectual Ventures also claims that it files roughly 500 applications per year and that it is now
`one of the top 50 US patent filers. The company is somewhat vague as to whether these 500
`applications comprise just those from its invention sessions or whether further filings24 from
`purchased portfolios are included in this total. In any event, given that patent applications publish 13
`months after filing, there should be roughly 750 presently unpublished patent applications as of May
`2011.25 Including unpublished applications keeps our estimate of US patents at 10,000 but the
`number of applications rises to roughly 4-400.
`The actual portfolio may be substantially smaller or larger than this estimate suggests. For
`example, if Intellectual Ventures has been more prompt about recording assignments than appears to
`be the case, then the portfolio may be smaller. Conversely, if Intellectual Ventures has significantly
`more shell companies than We have found, then the portfolio may be substantially larger than our
`estimate.
`
`Despite having uncovered more than 1200 shell companies, we have little doubt that other shell
`companies have been fonned. Exclusive licenses granted to Intellectual Ventures represent the
`greatest source of unknown patents since these agreements may not necessarily be recorded against
`the patents to which they pertain. For example, we are aware of transactions involving the University
`of Rhode Island and Campinas State University in Brazil, but we have no idea what shell company
`was involved. The University of California, San Diego has reported agreements with five shell
`companies but the patents involved in the licensing arrangement have not been recorded.”s Similarly,
`the US Navy publicly disclosed the licensing of patents to two shell companies, but these licenses
`have not been recorded.”
`
`In terms of the non-US portion of the portfolio, we note that approximately half of Intellectual
`Ventures’ US portfolio originated with non—US entities. Many of these came from European entities,
`where intellectual property seems to be particularly undervalued in relation to United States
`intellectual property.28 This suggests that Intellectual Ventures may be acting as an arbitrageur to
`exploit the disparities in intellectual property valuation between the United States and the rest of the
`world. Finally, in contemplating the si2e of the company’s foreign patents, we note that a sizeable
`portion of the company’s portfolio is fairly young, and as a general matter, younger portfolios are
`prosecuted more vigorously in international jurisdictions than has historically been the case for older
`portfolios.29
`
`1133
`
`These factors strongly suggest that a typical US patent in the Intellectual Vennires’ portfolio has
`at least one foreign counterpart. Given that the world has more than 150 patent-granting countries,
`the global scope of any patent portfolio can jump tremendously when the foreign counterparts are
`
`3 This estimate does include cumin recently acquired portfolios or apparently allied ones.
`3‘ E.g., continuation applications and reissue applications.
`5 The earliest that an application filed in December 2010 would publish is June 2011, and only if the application had a
`foreign counterpart. Otherwise, the application will typically remain secret until it issues as a patent.
`2‘ Them companies are Eileen Technologies, Jacksonville Timucusn, DiscoVery Advance, Bet-ties Gates, and IDSpot.
`'17 These companies are Bixenta Ventures and NanoComm Systems.
`3‘ Gaetan de Rassenfimse, Ham 5MB: Eiqbbu‘ TbsirIntrI/eMPIWnyAm-sr: Epidcmfivm Sung Data 2, 3-4, B, 1 8 (Melbourne
`Inst; ofApplied Econ. and Sec. Research, Working Paper No. 20/10, 2010), amilabk at
`http://www.sp1ingerh'nk.com/content/g3g2641632872gpfl/.
`29 In, 9.3., WORLD WI‘EIIECI‘UAL PROP. 0115.,Wos1n PATENT REPORT, A STATISTICAL REVIEW 7 (2003), amilablr