August 19, 2014 / 8:46 PM / in 3 years

UPDATE 1-Microsoft-backed patent buyer to reduce workforce 19 pct

(Adds details on cuts, background)

By Dan Levine

SAN FRANCISCO, Aug 19 (Reuters) - Patent buyer Intellectual Ventures announced its second round of staff cuts this year, saying it will reduce its global workforce by 19 percent as the firm increasingly turns to litigation to generate licensing revenue.

Intellectual Ventures has raised about $6 billion and acquired 70,000 patents and other intellectual property assets, which it licenses to companies in exchange for royalties.

“We are making operational changes that are consistent with this reduction and will enable us to maintain and expand our leadership in the market for invention,” the company said on Tuesday.

The firm currently lists more than 700 worldwide employees on its website, which means the latest round of cuts will impact over 130 positions. The bulk of the cuts will come among professionals who work to license patents outside the courtroom, as opposed to its legal department, said sources familiar with the decision who were not authorized to speak publicly this week.

In February, Intellectual Ventures announced a five percent staffing reduction. A multi-billion dollar fund Intellectual Ventures launched in 2008 generated returns of 2.5 percent for investors through the end of 2012.

For years top executives at the firm, including co-founder Nathan Myhrvold, described litigation as an inefficient way to close patent deals.

“It’s always been IV’s philosophy that signing license agreements, rather than heading to the courtroom, is the best way to do business,” Intellectual Ventures chief litigation counsel Melissa Finocchio said in a 2012 blog post.

Created in 2000, Intellectual Ventures did not file any patent lawsuits until 2010. But since then it has filed 52, according to Westlaw data.

The company has achieved settlements with some chipmakers including Hynix. It went to trial against Google’s Motorola Mobility unit earlier this year which ended in a mistrial.

In addition, Intellectual Ventures filed a barrage of lawsuits against several financial institutions last year, including Capital One, JPMorgan Chase & Co and Bank of America Corp. A federal judge in Virginia dismissed an Intellectual Ventures lawsuit against Capital One earlier this year, a decision which IV is appealing. Intellectual Ventures’ claims against JPMorgan and BofA are still pending.

Some tech companies like Microsoft are also investors in the company and receive a share of the royalties. Long-time investors Apple and Intel declined to participate in the firm’s latest fundraising vehicle earlier this year.

Over the years, Intellectual Ventures has faced criticism from some in the technology industry who argue that the firm, which does not primarily make products, exploits the patent system by demanding royalties from those who do. The firm says it creates a mechanism for inventors to capitalize on their ideas. (Reporting by Dan Levine; Editing by Leslie Adler)

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