Patent Troll Intellectual Ventures Running Out Of Cash; Looking For $3 Billion From Investors

from the troll-troll-troll dept

It is not clear how close IV is to completing its new fund, or which type of investors might participate. Microsoft Corp, an early IV backer, has not invested in IV's new fund "at this time," spokeswoman Jennifer Crider said.



Google Inc, an early investor that in recent years has found itself opposed to IV in the patent policy debate, also said it will not participate.



"We joined Intellectual Ventures' first fund as a way to defend ourselves against unjustified patent claims," Google spokesman Matt Kallman said. "Once we came to understand IV's operating model, we didn't join its later funds."



[....] One of IV's early tech company investors, the chip design firm Xilinx, sued IV in 2011 after Xilinx refused IV demands to license additional patents, according to court filings. Xilinx's attempt to invalidate those patents in court is still pending.

The IV investor presentation reviewed by Reuters shows that at the end of last year, the average rate of return for IV's 2003 fund was 16.2 percent, while the 2008 fund stood at 2.5 percent. In a court filing in August, Intellectual Ventures said it has earned more than $3 billion to date in licensing fees....



[...] UTIMCO [University of Texas Investment Management Company] invested $50 million in Intellectual Ventures' 2008 fund. By the end of May 2013, IV had returned 31 cents on the dollar to UTIMCO, which ranked it 22nd out of 38 on cash returns among all of UTIMCO's 2008 private investments. The value of UTIMCO's stake in IV declined more than 4 percent since 2008, putting it fifth from the bottom among UTIMCO's 2008 deals.

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It would appear that Intellectual Ventures' grand plans to tax innovators has hit a bit of a roadblock: the company appears to be running out of cash. Reuters has the news that the company has basically stopped buying new patents and has even had to push back the closing date on a bunch of deals it was trying to complete while it scrounges for cash. The world's largest patent troll is seeking $3 billion in new investment money, to add to the $6 billion it already raised (and spent). The company also claims to have made $3 billion in license fees (what some might call shakedown fees). Of course, the numbers may be a little mixed up, since some of the massive licensing deals (sometimes over $100 million) often were described as "investments." That is, companies would be told if they paid massive sums to "invest" they'd effectively get a license.Of course, the Reuters article also highlights how many of the big tech companies who signed up early on are not at all interested in supporting IV any more. As we noted years ago, Nathan Myhrvold built IV with a sort of bait-and-switch pitch . He told everyone that he was building a "patent defense fund," which tech companies could share to avoid getting sued by others. It was only later that the companies realized they were enabling a new massive patent troll instead. And it seems that many are not happy.The Reuters report also highlights how it doesn't appear that IV's actual business looks very good either. While it claims at least some positive rate of return on some of its funds, numbers provided publicly by the University of Texas make it look pretty weak:That said, as we pointed out a few years ago, looking at the return rates on investment funds before they're closed can often be misleading, since many are dependent on big homeruns that may occur late in the game. Still, IV has been around for a decade now, and despite all the hype and fuss, it's not at all clear that the company has a real business. Yes, billions went into it, but that has led toactual products, and not much return for investors.The company still may be able to find that $3 billion -- a lot of big money folks who don't really understand the nature of trolling may be dazzled by the Nathan Myhrvold charm offensive and the silly stories he likes to tell -- but perhaps we can hope that people will finally start to realize that the emperor has no clothes. Patent trolling harms the wider economy, taking money away from actual innovation and products that improve lives, while handing it off to a bunch of lawyers for no good purpose at all.

Filed Under: investment, patent trolls

Companies: intellectual ventures