April 05, 2012, 9:30 AM — Major technology vendors are financing the activities of so-called patent trolls, according to experts, court documents and patent and other legal filings, a Computerworld investigation has found.
Patent "trolls" -- more politely called mass patent aggregators, nonpracticing entities or, as the Federal Trade Commission defines them, patent assertion entities (PAEs) -- litigate more than they innovate. These companies derive the bulk of their income, if not all of it, from licensing the huge libraries of patents they hold and from the money they make by suing companies that use their patents without permission.
A love-hate relationship
Companies including Apple and Micron have historically spoken out against patent trolls, only to wind up doing business with PAEs anyway.
Recently retired Apple intellectual property chief Richard J. Lutton spoke out bitterly against the practice of patent litigation for dollars in testimony he gave before the U.S. House of Representatives in April 2005.
In that testimony, Lutton said, "The IT industry, like so many others, is encountering the enormous costs of dealing with poor quality patents. We are also faced with a growing cottage industry of patent assertions, orchestrated by entities with no business other than acquiring and asserting patents."
He went on: "Increasingly, [these companies] use the uncertainties of the civil litigation system as their primary bargaining chip. The result is that bad patents can cause... substantial litigation risks and costs. Defendants in these suits now must spend an average of $5 million defending themselves and, in some courts, the average is more like $8 million."
Yet patent records show that Apple later provided at least two patents -- via a company named Cliff Island -- to Digitude Innovations , a Virginia-based patent aggregator that has as its major stakeholder Altitude Capital Partners, a New York-based venture capital firm.