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Do you know what a patent troll is?

By Latha Jishnu
October 15, 2008 12:03 IST
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If you are familiar with Norse legends, you would know what a troll is. Trolls are supernatural beings, a race of giants in Icelandic mythology or goblins in the Scandinavian tradition, who were mostly evil although they could be extremely generous to humans who helped them. In later stories, they were depicted mostly as ugly dwarves, feared for their malicious habit of stealing babies and cattle and kidnapping princesses.

The grotesque image of the troll persisted through the ages until the internationally famous writer and illustrator of children's books Tove Jansson turned that around in the 1940s and created the endearing Moomin family. The Moomin trolls, as any well-read child would tell you, are friendly, humane creatures living in a tough world where disasters, big and small, are always around the corner.

The latest avatar of the troll lurks not in the dark forests or in caves but continues to come upon unsuspecting victims when least expected. This feared creature is a denizen of the shining new world of technology and big business and is pejoratively called the patent troll. In current folklore, a patent troll is a person (or company) who buys up patents, not for his own use but to license the intellectual property (IP) to others.

The overriding image of the patent troll is of an entity that relentlessly hounds companies, individuals and institutions that it thinks has incorporated the IP in any patents that it owns in a product without due permission. The patent troll's main activity is the business of suing and it is a creature more reviled than the troll of mythology ever was.  

So it was interesting to read a report that the biggest ands scariest one of them all, Intellectual Ventures, founded by the redoubtable Nathan Myhrvold, had come to India. Intellectual Ventures, according to the Wall Street Journal, has more than 20,000 patents and patent applications 'related to everything from lasers to computer chips.'

Myhrvold was the chief strategist and chief technology officer of Microsoft before he sent up Intellectual Ventures, an idea that he owes to Bill Gates. Microsoft had a huge patent liability problem with a seemingly endless line of people suing the company for infringement of their patents. It was then that Myhrvold came up with the idea of accumulating patents under one roof to manage them better. His rationale: it is more efficient for companies to deal with him than thousands of patent holders. The transaction costs alone make it worthwhile for companies to pay Intellectual Ventures its steep fees.

And these are as steep as they come. Reports last month said that the company had secured between $ 200 million and $ 400 million as licence fees from big names like Verizon Communications and Cisco Systems. Myhrvold's business genius extends further. He is also purported to be raising several hundreds of million dollars from such companies for an equity stake in a patent-holding investment fund. 

Are they enough pickings for an enterprise of this nature in India? Are any of our companies so well endowed as to afford his fees?

The daily Mint claims that Intellectual Ventures has struck deals with the Indian Institute of Science in Bangalore and the Indian Institute of Technology-Bombay to buy their patents. In what must be a coup, Myhrvold's company is reported to be close to clinching an agreement with the Council for Scientific and Industrial Research, the umbrella organisation of India's sprawling public research institutes. CSIR is sitting on some 3,000 patents, most of which it has not been able to monetize.

Intellectual Ventures's debut here coincides with the news that CSIR is considering a move to transfer its patent lode to an independent holding company that will manage it professionally. The patents would be monetised in various ways, licensing being one option. Could Myhrvold's firm become the first to benefit from such an initiative? Perhaps. And it is possible, too, that Indian research may benefit from the canny American's business model. 

If some of the folktales portrayed trolls in a kindly light, so do a few of today's mythmakers about the patent troll. Some academics believe trolls are actually good for the patent system because they act as dealers or market intermediaries.

James F McDonough of Emory Law School, for one, argues that patent dealers make the patent market more efficient by providing liquidity, market clearing and increased efficiency -- much the same benefits that securities dealers supply to capital markets. He stoutly refutes the common view that patent trolls stunt innovation and pile up unnecessary litigation.

He could be right in some ways. But patent trolls can never be the sunny creatures that Jansson gave us. We will have to wait to find what creature actually lurks in the patent shadows.

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Latha Jishnu
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