"Big companies aren't just doing this for troll litigation chump change," Ewing explains. "They're doing it for strategic reasons of protection... or [to] cause competitive disruption and do so in a way that avoids showing they're obviously involved." The evidence for all this is "hidden," he says, "but it is hidden in the public record in plain sight."
In that January report, Feldman and Ewing acknowledge that PAEs could "potentially have positive effects." Among other things, they say PAEs could ensure that individual inventors receive the compensation due to them, and could create "a powerful weapon stream" to deter lawsuits.
Another benefit to joining up with aggregators is the notion of cross-licensing under the PAE's umbrella -- members using each other's patents without fear of being sued.
However, the report goes on to say that "the activity of mass aggregation brings its own potential harms." Among these are "potentially reducing future innovation and productivity." Most important, the report says, "the basic business model of mass aggregation is troubling."
Under the radar
The situation is so secretive that very few sources, and especially those in companies involved directly with any PAEs, agreed to be quoted on the record for this story. Instead, almost all spoke on the condition of anonymity, but Computerworld verified information in this story by looking at court documents, applications with the U.S. Patent and Trademark Office, filings with the U.S. Securities and Exchange Commission (SEC), and other legal documents.
Corporate structure, IV-style
Intellectual Ventures (IV) conducts its business of transferring patents through more than 1,000 businesses that the company characterizes as "holding companies" but which some allege are "shell companies" specifically meant to confuse and serve to make it difficult to counter-sue IV.
Tom Ewing, a patent attorney who has done extensive research into IV's corporate structure, says, "It is one of the strangest corporate organizations ever created -- in fact, this is what IV seems to have invented that is most unique." He adds that it looks like the organization was "built to obfuscate."
An IV spokeswoman, Michelle Craig, responds: "Using distinct holding companies as a way to house investments is nothing new. The use of holding companies in relation to IV has been reported for years now... it's frankly surprising that it is still of interest."
Ewing disagrees. "Imagine if every company -- say, a fast food company -- were created in such a way. If you wanted to sue such a company for creating burgers with radiated meat," a corporate structure such as the one created by IV would provide no central entity to sue and no one individual to hold accountable, Ewing says.