Exclusive: Intellectual Ventures curbs patent buying amid fund-raising effort

 Intellectual Ventures, a multi-billion-dollar firm that virtually invented a new market for patents and inventions, has curtailed its patent buying in the past few months, according to sources familiar with its patent market activity, as it seeks to raise new funds.

Created in 2000, Intellectual Ventures to date has raised about $6 billion and acquired 70,000 patents and other intellectual property assets.

The company is currently attempting to raise $3 billion more, according to an investor presentation reviewed by Reuters. Its last major investment fund closed in 2008, and it can no longer use that capital to buy new patents, say three sources with direct knowledge of that fund's terms.

Without a new fund in place, Intellectual Ventures has pushed back the closing dates on some patent deals in recent months and bowed out of others, according to IV purchasing contracts and half a dozen sources involved in patent transactions.

The company's buying slowdown has not damaged the overall patent market because other buyers have picked up the slack, said Robert Aronoff, a patent broker and managing partner of Pluritas in San Francisco. Still, "brokers will welcome them back in," Aronoff said.

Intellectual Ventures declined to comment on any aspect of its fundraising or business operations.

IV's fundraising comes amid a heated debate in Washington over whether current policies make it too easy for patent owners to extract large royalty payments, even in cases where the patented technology may not be central to a given product or service.

Companies like IV, which amass patents but don't manufacture products, have drawn special ire from tech companies and others who believe patent protection has gone too far and is stifling innovation.

Amid the policy debate, however, there has been little focus on the business performance of Intellectual Ventures, which like most private firms discloses little about its finances.

TECH COMPANY INVESTMENTS

Early backers of Intellectual Ventures included a number of technology companies, as well as institutional investors such as endowments and venture funds. The tech company investments often included licensing agreements enabling them to use patents held by IV.

It is not clear how close IV is to completing its new fund, or which type of investors might participate. Microsoft Corp, an early IV backer, has not invested in IV's new fund "at this time," spokeswoman Jennifer Crider said.

Google Inc, an early investor that in recent years has found itself opposed to IV in the patent policy debate, also said it will not participate.

"We joined Intellectual Ventures' first fund as a way to defend ourselves against unjustified patent claims," Google spokesman Matt Kallman said. "Once we came to understand IV's operating model, we didn't join its later funds."

For years IV executives said litigation was not a major component of its strategy and that it simply sought fair licensing terms. Intellectual Ventures, however, has sued companies for patent infringement with much more frequency since 2010, including more than a dozen banks this year, according to court records.

Intellectual Ventures sued Motorola Mobility for patent infringement in 2011 after Google announced it would acquire the company. That litigation is still pending.

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(REUTERS)

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