Trolls and tribulations -- or Lovers and Licences? IV, LG tie the knot

"LG signs deal with patent giant Intellectual Ventures" is the title of a news item on the BBC this morning. It's not often that patent licences occupy the Beeb's attention, so the IPKat thought he'd take a look.  According to this feature:

"LG Electronics has become the latest smartphone maker to sign a deal with the patent house Intellectual Ventures. IV licenses out its huge library of innovation rights rather than using them to build products of its own. LG will be able to access IV's patents to threaten counter-attacks against any firm planning an intellectual property lawsuit [Aha, says  Merpel: now I understand.  If A buys a licence from B so that B won't sue A, B is a troll -- but if A buys a licence from B so that he won't be sued by C, D or E, that's a policy of prudent defence]. Industry watchers say other businesses are likely to strike similar deals over the coming years [presumably, the closer IV's portfolio resembles necessary patents for achieving technical standards, the more licences will be struck -- but the more FRAND-ly the negotiations will have to be].

"With companies claiming breach of patent across the board, firms can either defend every case that comes in or try to limit their exposure," said Chris Green, technology analyst at Davies Murphy Group Europe. "Doing deals with big patent houses allows them to do the latter [-- but only up to a point. They will still need to defend or pay off patents owned by parties outside the large patent house(s) from whom they take their licences]. [IV] ... acquires patents and does some R&D of its own. But the vast majority of its patents are bought on the secondary market” [Does any reader know how much IV's R&D spend is? Presumably, since it takes time to develop and patent innovations, much of its own R&D and that which it has funded for third parties won't yet have reached the stage of being licensable technology] ...

Patent experts say the deal may allow the firm to become more adventurous.

"LG now has the opportunity to leverage IV's large patent portfolio and more aggressively expand product offerings in novel directions," said Andrea Matwyshyn from the University of Pennsylvania's Wharton School. ...

Over the past 11 years [IV]has built up a portfolio of more than 35,000 patents covering areas such as text messaging and internet security. The firm has signed licensing deals with HTC, RIM and Samsung among others. However, it has also filed lawsuits against Motorola, HP, Dell and Hynix Semiconductor alleging they have infringed its rights [at least it's picking on some big players to sue, who are quite able to look after themselves].

"Its business model is that of an aggregator," said Florian Mueller, a patent consultant whose clients include Microsoft. "It acquires patents and does some R&D of its own. But the vast majority of its patents are bought on the secondary market, and its business model is to license them. "But that's not necessarily a bad thing if the technology involved is a legitimate innovation deserving patent protection."

However, others are more critical of patent owners who sue others but do not produce their own goods, describing them as "patent trolls". A Boston University study recently claimed such organisations add over $30bn in costs to industry each year and contribute little in return [on which see IP Finance blogpost here and some very interesting comments from readers].

However IV defends its business model. "Our goal is to reach productive licence agreements that give our customers access to the patents that will help them minimise risk and stay competitive," said Andy Elder, the firm's executive vice president of global licensing. "That's especially important in crowded markets like the mobile industry. Litigation is an option we have, but we prefer to negotiate a licence that's beneficial for both companies"".

The IPKat has never been enthusiastic about the term "troll", which is used as a disparaging defining term that is in danger of covering perfectly innocent folk like university research institutions which lack the funds, the motivation and the know-how to manufacture their own inventions. It's also an awkward term to use within the context of complex industries such as mobile telecommunications, where a large number of patents exist which don't actually relate to a specific product that someone can make and sell.  He prefers to judge patent owners, like their competitors, on the basis of their actual behaviour.  What do readers think?

Some favourite Intellectual Ventures here and here