Tech Giants Pooling Cash To Buy Patents

theodp writes with a link to a Reuters report, based on a WSJ story, that "Verizon, Google, Cisco, and HP are among the companies that have joined a secretive group called the Allied Security Trust. Each of the companies will reportedly put $5 million in escrow to allow AST to snap up intellectual property on their behalf before it falls into the hands of parties that could use it against them. Patents will be resold after AST member companies have granted themselves a nonexclusive license to the underlying technology. According to AST CEO Brian Hinman, a former VP of IP and Licensing at IBM, the arrangement will keep member companies out of antitrust trouble." (The WSJ's story itself is more detailed, but it's subscriber-only.)

Comments

Offensive or defensive?

[adpsimpson]

If this is to be used for defensive measures, it's another sign of how badly broken the US patent system is - and how expensive that brokenness is to big businesses.

If it's to be used for offensive measures, then it's another sign of how badly broken the US patent system is - and how expensive that brokenness is to small businesses.

Re:Offensive or defensive?

[dintech]

Offensiveness and defensiveness both fall in to the 'interests' catagory so expect it to be used for both of these as necessary.

Where it gets interesting is what happens if two members are in despute about a single patent. Could this trust be used to arbitrate between them or come to some solution outside of the courtroom? Are the patents open to everybody with the organisation then?

I think it could be a very interesting deal, for those on the inside that is.

Re:Offensive or defensive?

[Ngarrang]

The patents owners won't HAVE to sell, but if someone came to your door with a wheelbarrow full of money, you might be tempted to say "Sure, here it is." But, now that the 'secretive' group has been exposed, they are no longer, um, a secret. Yes? No?

Re:Offensive or defensive?

[Devout_IPUite]

Either way, there's a serious need for patent reform. Unfortunately, that's a standard democrat white bread (lawyers, yum) and the republicans veered off of of their small government market freedom in favor of big business pandering years ago... So I can't imagine either party trying to fix this right now.

Re:Offensive or defensive?

[stjobe]

That's because you, like so many others today, have no principles.

Re:Offensive or defensive?

[xigxag]

It may be meant as a defensive measure, but its result is offensive, and anticompetitive.

The problem isn't that big businesses have to pay to keep themselves out of trouble. The problem is, what if this works as intended? Then ultimately, it will lower the relative risks of the member tech giants. So relatively speaking, every other small and medium business will have to pay a risk tax that does not exist for these large companies. Basically, AST will drive your mom & pop shop out of business, not through better products, but by unleveling the playing field, making it too risky for you to compete. Which will hobble the engine of American competitiveness, and in the long run, damage its place in the world economy. Not that Verizon et al. will care because they can always relocate to Europe or China if need be.

Re:Offensive or defensive?

[JesseMcDonald]

On the surface, a free market doesn't preclude companies from holding patents or unlimited licenses.

Sure it does. There are no patents -- or copyrights -- in a free market. In a free market anyone can do whatever they wish with their own property, insofar as such use is compatible with the same freedom for others. Patent and copyright infringement do not impact the ability of others to use their property as they wish, and as such are meaningless concepts in a free market.

Re:Offensive or defensive?

[Migraineman]

Unfortunately, the "principled man" often doesn't stay in business, because the "principled" decisions don't jive with First Sale Doctrine. You listening to me, Dad?

Yes, The Dad went out of business because he refused to sell his products to people who might use them in ways he didn't like. There was always this uncomfortable pause between where he'd ask what the end use was and the customer declining to answer. That usually was immediately followed by the customer saying "no thanks" because they wouldn't enter into a sale contract that had strings attached. Funny, I wouldn't buy a car that could only be started if I justified the trip to someone else.

You can stand on your political soapbox all you like. Expect your customers to find a way around the obstruction you present. You are motivating them to do so. At the end of the day, all you've done is devalue your patent to the point of worthlessness.

Re:Offensive or defensive?

[Miamicanes]

> The problem isn't that big businesses have to pay to keep themselves out of trouble.
> The problem is, what if this works as intended? Then ultimately, it will lower the relative risks
> of the member tech giants. So relatively speaking, every other small and medium business will have
> to pay a risk tax that does not exist for these large companies.

In other words, they're re-inventing ASCAP in a different industry. They'll offer to let those small companies join, for an extortionate annual fee, then eventually start suing everyone IT/Telcom-related who's not a member on the presumption that they couldn't possibly be doing business without infringing on SOMETHING the group owns. Then AT&T, Microsoft, Dell, and Sony will start another company with similar, but non-overlapping, patent portfolio, and metaphorically become BMG... and hit those same small companies up for a SECOND, equally-extortionate, annual fee.

Re:Offensive or defensive?

[stjobe]

Yeah, I understand what you're saying. I just don't like it.

Jokes aside, in my book Dad did the right thing. His actions were completely relevant in that he tried to do the right thing, not just simply the thing that made most financial sense. I applaud the Dad and wish more were like him.

Anyway, I guess I'm objecting more on a philosophical and/or ethical level than on a practical level. I've owned a small company and been an officer of a couple of others, so I know the drill - and you're right of course in your description of how it works.

I do think that if people stood up more for their principles (such as they might be) we'd have a healthier society as a whole, and perhaps even a healthier economy.

But on the other hand that might require a revolution.

Chief Executive Officer

[MRe_nl]

Brian Hinman is currently CEO of AST. Previously he was Vice President, Intellectual Property and Licensing for IBM Corporation. While at IBM, he held various positions including Business Development Executive for IBM Research at the Thomas J Watson Research Laboratory. Prior to IBM, he was Corporate Director of Business Development and Licensing at Westinghouse Corporation.

1, 2, 3, 4, Profit?

[Frosty Piss]

If ever this was a great boon to the IP Squatters! I see a bundle of the folks setting up "business models" based wholly on selling IP to this single group.

Re:1, 2, 3, 4, Profit?

[apathy maybe]

OK, so first you have to acquire a patent that would be relevant for them (either "invent" or buy or whatever). Then you have to attract the attention of this mob and persuade them that it would be cheaper to buy your patent, rather then just sue you for infringing one of their patents.

Then you have to repeat.

Good luck with that.

Personally, I don't see what the problem with this group is, in the current system. (Of course, there are heaps of problems with the current system, but this isn't the place to go into them.)

RICO?

[dreamchaser]

Sounds like racketerring in a sense. IANAL, but I wonder if an ambitious prosecutor somewhere could use the RICO statues instead of anti-trust statutes.

Any lawyers familiar with RICO want to chime in?

Re:RICO?

[sumdumass]

Spell this out to me. How does it sound like racketeering?

From what I can see, some companies have banded together to purchase patents related to stuff they might want to do in oder to give themselves a perpetual license, and then resell the patent. Unless they are going to hide the license in order to claim the patent is more valuable, I'm not sure where the evil is. If the Telecoms are the only companies that the patents are useful too, then it is no different then joe small selling them a license anyways, Most of the value of the patent will be gone once the license to the people most likely to use it is done. It is no different then you leasing a car for your family (wife and two teen age drivers) to drive. You'll get killed on the miles and it is a stupid idea but that doesn't make it illegal.

Patents==new oil/dotcom/housing bubble

[greyhueofdoubt]

So here we are at the base camp to another bubble in speculation and hyperinflation, this time in the market of IDEAS.

The way things used to work, advertisers tried to convince you of the utility and attractiveness of their products. Speculators predicted how much a product or resource would sell for. Now we will have ads and speculators working in the field of ideas, which are thoughts, which is a little disturbing to me.

It will happen soon that ads will be for brand names (not products); campaigns will be waged with one trademark against another; mascots engaging in mudflinging; ads proclaiming that some product has the most patents...

I see mutual-fund-like holding groups for IP that will begin paying big dividends. I see the market changing from product- and service-driven to trademark-driven.

Dammit I told myself no more posting before coffee.

The point I'm trying to make is that I foresee a huge bubble in patents and trademarks, and speculation thereof, and I'm worried that it could be the last straw for our poor economy. OK.

-b

the real problem...fix the USPO!

[mwilliamson]

What we need is to fix the problem, which is a broken patent system and an unqualified oversight mechanism. Courts aren't much help to settle issues because an (un|de)qualified jury simply listening to testimony of experts just isn't effective or fair.

What's going to end up happening with all these companies spending billions is that they will come to embrace the current screwed-up system and probably defend it because of their investment. They even may end up lobbying to maintain the status quo.

The small developer is screwed in the butt as usual.

Freedom For The Rich

[Bob9113]

Nice to see that we're developing another system whereby giant corporations are free to operate, and smaller enterprises are barred from entry. I'm sure that is exactly what Adam Smith had in mind for free market competition.