April 1, 2014 / 10:27 PM / 4 years ago

UPDATE 1-Intellectual Ventures defeats challenge to its patent business

(Adds Trend Micro declined to comment and background, paragraphs 7-8, 11)

By Dan Levine

April 1 (Reuters) - Intellectual Ventures can seek hundreds of millions of dollars in damages on a patent it bought for less than $1 million, a federal judge ruled on Monday, handing the patent acquisition firm a victory in a key attack on its business model.

A multibillion-dollar company that virtually invented a new market for patents, Intellectual Ventures accused Internet security companies Symantec and Trend Micro in 2010 of infringing its intellectual property. The lawsuit, filed in federal court in Delaware, includes a patent on technology that helps detect malicious software embedded in digital content.

IV bought the patent for $750,000 and is currently seeking at least $310 million in damages from the two companies. Symantec and Trend Micro asked U.S. District Judge Leonard Stark to bar IV from seeking such large licensing fees on the grounds that a patent acquired for so little couldn’t possibly be worth so much.

The argument threatened IV and other patent acquisition firms whose primary business depends on buying patents to win licensing fees, instead of manufacturing products.

IV argued that the figure represents fair compensation given how extensively Symantec and Trend Micro products rely on the technology. In a brief order on Monday, Stark denied Symantec’s motion to exclude IV’s damages argument from the case.

A detailed ruling from Stark was filed on the court docket but was not publicly available on Tuesday. Representatives from Symantec, Trend Micro and IV declined to comment.

Since its founding in 2000, privately held IV has raised about $6 billion from investors and argues that it creates an organized mechanism for innovators of all stripes to capitalize on their ideas. IV’s investors include major tech companies like Microsoft and Apple.

Over the years, though, IV and other firms like it have faced criticism from the technology industry, which argues that patent litigation and royalty payments have become a burdensome tax on innovation, and that firms like IV that do not primarily make products are exploiting the patent system.

The debate has caught fire in the U.S. Congress, where a proposal to make it easier to fight patent lawsuits passed the House of Representatives last year and is currently pending in the Senate Judiciary Committee.

In addition, the U.S. Supreme Court on Monday heard arguments in a case that could impose new guidelines on how the government issues software patents. [IED:nL1N0MS0S4]

Two other software security firms that IV sued, Intel Corp’s McAfee unit and Check Point Software Technologies Ltd, both settled on undisclosed terms. Symantec and Trend Micro chose to fight, though no trial date has been set.

The case in U.S. District Court, District of Delaware is Intellectual Ventures vs. Check Point Software et al., 10-1067.

Reporting by Dan Levine in San Jose, California; Editing by Eric Walsh and Leslie Adler

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