By Dan Levine and Miyoung Kim
SAN FRANCISCO/SEOUL, March 20 Patent competition
in the United States is usually a fierce arena for private
companies, but now the South Korean and French governments are
Both countries have launched patent-acquisition companies,
with the goal of helping domestic technology firms and possibly
making some money in the process. China and Japan are making
moves into the business too.
The Korean and French firms, dubbed Intellectual Discovery
and France Brevets, are similar to the handful of private
patent-acquisition firms in the U.S. derisively called "patent
U.S. patent aggregators such as closely-held Intellectual
Ventures - which don't produce products - are often accused of
unfairly targeting companies that actually build things by
threatening to sue unless they are paid royalties.
The aggregators say they create a more-liquid market for
valuable intellectual property, and help assure that legitimate
inventors - especially those who don't work for big corporations
- get paid for their breakthroughs. The French and Korean firms
haven't yet filed any U.S. lawsuits.
The advent of state-sponsored intellectual property dealers
adds a fresh geopolitical element to the debate about patent
trolls and how to protect legitimate inventions without stifling
innovation. It could also complicate efforts to improve global
cooperation on trade-related matters such as online piracy and
Congressman Peter DeFazio, a Democrat from Oregon and
co-sponsor of a bill designed to limit patent litigation, called
the new government-backed patent entities a form of
"protectionism" that nobody had anticipated.
"This is a whole new level of jeopardy," said DeFazio, who
had not been previously aware of them.
Government-sponsored aggregators are still comparatively
minor players in the patent deals market, and officials involved
with Intellectual Discovery and France Brevets say they have no
intention of pursuing aggressive litigation strategies.
Intellectual Discovery presents itself as a defensive
alliance: if a South Korean company finds itself targeted in a
lawsuit, for instance, it can access the patents being compiled
by Intellectual Discovery to hit back.
"It is still in an incubating stage and focusing pretty much
on aggregating IP," said Park Jong-Pil, deputy director at South
Korea's Ministry of Knowledge Economy, in reference to
Intellectual Discovery. "It is not close to a stage of earning
big revenues or identifying entities violating our patents or
taking legal action."
Intellectual Discovery has bought over 200 U.S. patents,
including one for retinal eye scan technology from Singaporean
chipmaker Avago Technologies Ltd last July, U.S.
government records show.
And in a sign that its strategy is not limited to aiding
Korean companies, it promptly sold that patent to Google Inc
, which is busy developing its Google Glass product. A
source familiar with the deal said the price was less than
Intellectual Discovery and Google declined to discuss the
France Brevets, for its part, owns only four patents in the
United States and 50 total patent "families," according to vice
president Yann Dietrich and U.S. patent records. He didn't
disclose the total number of patents worldwide.
Dietrich said the goal was investing in quality IP so
French companies can better monetize their technology.
"We are not playing with the rules to extract money,"
Dietrich told Reuters.
TROLL, OR MARKET-MAKER?
Patent reform advocates say patent aggregators have
exploited loopholes in the system and are often little more than
quick-settlement artists who threaten lawsuits with flimsy
patent claims registered years after a product hits the market.
But big players such as Intellectual Ventures, launched by
former Microsoft chief technology officer Nathan Myhrvold, say
they prevent upstart companies and independent inventors from
being ripped off and create a much-needed market for innovation.
Several tech companies, including Microsoft Corp and
Google, as well as universities and foundations, are investors
in Intellectual Ventures, according to court filings.
Companies used to deploy their patents largely for defense,
and big tech firms routinely entered into broad cross-licensing
agreements enabling them to use many of one anothers'
But that equation has changed over the past several decades
as the value of breakthrough inventions in digital technology
has soared. Tech firms began to see patents as a strategic
weapon - and entrepreneurs like Myhrvold saw a business
The result has been an explosion of patent litigation -
especially in the mobile computing arena, where Apple has filed
numerous patent infringement lawsuits against its major rivals,
with mixed results.
The spiraling patent litigation, which some attribute at
least in part to the aggregators, is seen by many in the
industry as wasteful, and a threat to innovation. That in turn
has attracted the attention of Congress.
DeFazio, the Oregon Democrat, has co-sponsored the SHIELD
act, which aims to deter patent lawsuits by requiring most
entities which sue over a patent they have acquired (as opposed
to going to court over an invention of their own) to pay their
opponents' legal fees if they lose. Trial lawyers have fiercely
opposed the legislation, in part out of concern that "loser
pays" could spread to other areas of tort law.
Stanford Law School professor Mark Lemley said the emergence
of state-sponsored companies could drive more support for the
bill, now in committee. Legislators may view them as foreign
governments sucking away the fruits of U.S. research, Lemley
said, regardless of whether that is a realistic threat.
So far, the government-backed aggregators don't have nearly
the same scale as Intellectual Ventures, which says it has over
$5 billion in committed capital and owns roughly 70,000 IP
France Brevets was launched in 2011 with 100 million euros,
half from the state and half from the Caisse des Depots, a
publicly managed investor in French economic development.
Pascal Asselot, licensing director for France Brevets, said
that by assembling patent pools with intellectual property
bought from French and foreign businesses, France Brevets aims
to convince other companies to sign licensing deals and pay
royalties. If France Brevets can show a healthy revenue stream,
the hope is to attract sustainable private investment, Asselot
Korea's Intellectual Discovery, which was started in 2010
amid government fears that domestic companies were losing key
patents that could be used against them by foreign companies,
has a $140 million government commitment.
Prominent South Korean companies like Samsung Electronics Co
Ltd and LG Electronics have signed up as
"shareholders," providing Intellectual Discovery with additional
revenue in exchange for a license to its patent portfolio.
Intellectual Discovery chief general manager Chant Kim
compares the company to San Francisco-based RPX Corp,
which acquires patents to protect its members but doesn't
Edward Jung, chief technology officer at Intellectual
Ventures, said his company hasn't competed with Intellectual
Discovery on as many patent acquisition deals as he had thought
"It's a more difficult business model than they initially
expected," he said.
TAIWAN AND CHINA
Countries around the world are eager to strengthen their
patent punch. The Innovation Network Corp of Japan, a joint
public-private investment company, launched a fund in 2010 to
acquire and license life sciences patents. Officials there were
unavailable to comment.
China, meanwhile, has plans to set up around 20 IP
"investment service platforms," along with exploring a joint
government-industry-university patent funding model and
extending pilot programs for patent insurance, according to a
2013 strategy plan from the state intellectual property office.
It's unclear from the document whether any of these programs
will be similar to South Korea and France, and government
officials did not respond to requests for comment.
Taiwan's national research lab set up an "IP service
company" but it is not government funded, said Sean Wang, a
representative for the lab in the United States in an email to
Reuters. He did not respond to follow-up questions.
Stanford's Lemley said the ultimate method of judging these
new players will be who they target. If Intellectual Discovery
only uses its patents against companies who already sued Korean
businesses - but leaves everyone else alone - then the company
is a simple extension of Korean trade policy, Lemley said.
However, they might decide everyone is fair game.
"Then it really does look more like an effort by these
foreign governments to get in on the boom business model of the
last decade," Lemley said, "which is patent trolling."