DOJ-FTC Investigation of Patent Trolls Intellectual Ventures, Mosaid, RPX in Works? Exclusive

The Federal Trade Commission and the United States Department of Justice (DOJ) are gearing up to investigate patent mass aggregators — derisively often known in tech as patent trolls — using the wide-ranging authority they get via Section 5 of the FTC Act, which prohibits unfair competition and deceptive business practices, sources close to the effort tell aNewDomain.net.

In Washington earlier this month, FTC and DOJ antitrust attorneys regulators convened on whether such patent aggregators as Intellectual Ventures, Microsoft-Nokia backed Mosaid and other firms that profit exclusively by licensing and litigating patents they didn’t themselves invent amount to anti-competitive bids that, in the end, harm consumers. A DOJ FTC investigation of patent trolls appears to be in the works. In a curious twist, outside counsel for HP attorneys at Drinker, Biddle are already trolling for antitrust clients.

Update: Are the companies who fund trolls and — or — secretly make deals that harm consumer pricing more damaging from an FTC standpoint than the trolls they criticize?  This commentary from the First Amendment Coalition’s Peter Scheer explores that issue in an intriguing piece that feeds into FTC-DOJ concerns as reported by aNewDomain.net hours earlier . A must read.

At the FTC-DOJ workshop — in the day’s final panel featuring leading antitrust experts, several pointed out Nokia’s sale of 2,000 plus Core Wireless patents to the Nokia-Microsoft controlled MOSAID appeared dangerously anti-competitive. And in his opening remarks, FTC chair Jon Liebowitz‘ planned remarks made no bones about the government’s discomfort at the issue:

Supporters of the PAE business model believe that PAEs promote invention and investment in R&D by reducing transaction costs, managing the risks of monetizing inventions, maximizing revenue, and compensating small inventors. Not surprisingly, others believe that PAE activity imposes a “tax on innovation,” undermining the incentives to engage in R&D. Detractors also raise concerns about operating companies transferring IP to PAEs as a means of raising rivals’ costs. If that is actually happening – perhaps because of (assymetries) of information and liability – it would seem, well, kind of unsavory … the FTC and DOJ value your input on these important issues. We are holding the public comment period open until March 10, and actively seek your observations.

After that, sources tell us, and even possibly before, the gloves could come off.

Here’s the big thing that should worry tech companies who are affiliated with tech trolls — and those are household names. Recall, earlier this year, this reporter revealed here at aNewDomain.net and in Computerworld that Intellectual Ventures largely is funded by big name tech companies, including the ones who complain about patent trolls the most. Those firms included Apple, Microsoft, Sony, Verizon and a long list of others. Find that list here. Google is the one company on the list that told aNewDomain it was breaking from the Intellectual Ventures multibillion dollar patent aggregation business and not feeding it with more investment due to its business practices. Google had a problem with Intellectual Ventures beginning to sue the very companies it had gotten investments from — it was displeased with Microsoft-Nokia funded Mosaid of Canada, and it told this reporter it had quite enough.

Could Google have nudged this DOJ-ITC investigation along? No telling yet. But Intelletual Ventures reps at the time told Computerworld and aNewDomain.net that the billion dollar firm’s practice of dealing in patents with 1000s of oddly-named shell companies was nothing new and certainly not illegal.

Patent trolling or litigating and licensing as a so-called privateer isn’t illegal, true, but is it anticompetitive? Some even call it Mafia-style racketeering. See below the fold for remarks from Cisco, Motorola and others that go so far as to call it racketeering under the RICO statute set up for mobsters in the first place.

But it’s legal now, and the practice is under scrutiny by Congress and others in Washington, said FTC Chairman Liebowitz in his remarks, linked in full below his name above. Representatives from Intellectual Ventures, Mosaid, Nokia, RIM, Hewlett-Packard, antitrust experts and numerous experts, including our patent expert Tom Ewing, and Matt and Irving S. Rappaport, purportedly investigators of Intellectual Ventures via their firm, IP Touch, were in attendance. Strangely so.

Joff Wild in his IAM blog just this week speculated as to whether Intellectual Ventures was somehow behind the recent publication by self-appointed Intellectual Ventures investigator IP Touch (as provided by plainsite.org for free) of a long list of 2,000 plus oddly-named trolls. Some of them, such as one associated with William Randolph Hearst, appear to not be related to IV at all. This is not clear at this writing. But we will see — is this a real list or one filled with red herrings? Questions.

Wild wrote:

“It is tempting to think that someone at IV may have provided the information in order to stymie such efforts, but that would involve believing the firm is relaxed about inviting any number of pre-emptive strikes against its portfolio from possible targets via re-exams and other routes. The alternative is that someone has been doing the donkey work anonymously for a while and is now ready to selflessly share their findings. Or, maybe, the list is completely inaccurate. One thing is for sure, there will be people poring over the information in order to see whether there is something in it. And some may well decide there is potential there to make a name for themselves and/or to drum up business.”

That article has since been removed from Wild’s site. Whether that has to do with the fact that Intellectual Ventures is a sponsor of the popular IAM IP Business Congress is speculation and nothing but. Wild has yet to return to calls for comment.

We did capture the article before it was down though, thanks to a reader who asked not to be identified. Scroll below to read the piece as it ran — before the fold.

Here at aNewDomain.net, as the journalists the world over cover IP Checkups and its so-called noble effort to out the shell companies IV uses to trade, buy and license patents under public cover, we questioned whether IV wasn’t outing itself. We speculated a link between self-appointed IV investigator IP Checkups and Intellectual Ventures when we learned that IP Checkups had links to Intellectual Ventures it didn’t reveal outright upon engaging in a crowd-sourced effort to raise 80K.

IP Checkups denied that at the time — and the money did not come in, IP Checkups recently said. But out of seemingly nowhere, this week, a list of 2,000 plus alleged Intellectual Ventures firms popped up — linked to IP Checkups and freely provided to it, the site said, by plainsite.org.

IP Checkups reps told aNewDomain.net it had no ties to Plainsite.org, which we should note at any rate is run by Facebook co-founder Aaron Greenspan. Facebook CEO and co-founder Mark Zuckerberg is the neighbor of IP Checkups’ Irving S. Rappaport. He has served as an advisor at Digitude/Altitude, a New York City-based mass patent aggregator, and sold patents to IV, information Rappaport told us he did not recall, despite a letter we published showing the knowledge.

It gets more confusing.

Check out the list of 2,000 shell companies, not yet validated in full by aNewDomain.net. We will be checking if these match up with the 1000 plus well-known Intellectual Ventures shells or if any are other shells. The odd thing is, there is no methodology yet noted for how these were found. This reporter understands the methodology — it is time consuming, expensive and tedious. Why would Greenspan do such a thing? We have a call out to him and all others mentioned in the stories.

One thing is virtually certain from our three unrelated unnamed sources who say the FTC-DOJ is about to take aim at patent trolling — beginning with multibillion dollar Intellectual Ventures — with an investigation that could force IV to reveal its deals with Apple, Sony, Microsoft, Nokia and all the other tech companies who fund it, according to a force inside Verizon, “for protection.” Google, an original funder, has since publicly backed out.

Here’s one of several videos from the FTC-DOJ workshop in Washington.

CISCO, Netgear and a division of Motorola filed a complaint under RICO statues about patent entities acting as racketeers. It includes Mosaid as an example of such racketeering. A Google source told aNewDomain.net that Google, which was an original investor in Intellectual Ventures, is at odds with IV, that it has has withdrawn from the organization and is exceptionally upset with the Nokia-Microsoft created Canadian firm Mosaid.

FINAL Innovatio_amended_complaint 10-1-12

Here’s another video from the FTC-DOJ workshop. Our patent expert Tom Ewing is on the panel.

Early Sunday a.m. in Silicon Valley, reps from the FTC, DOJ, Intellectual Ventures, Apple RPX, IP Checkups, Plainsite, et al were unavailable for comment. Breaking. Watch for updates here on the FTC investigation of patent trolls.

Joff Wild of IAM Magazine appears to have taken down his article — the reasons remain unclear — it echoed our questions earlier this quarter regarding IP Checkups and whether it was truly independent of Intellectual Ventures.

Check below the fold for a PDF of the article as it appeared before someone watching the area for aNewDomain.net deleted it.

It is noteworthy also that Google chair Eric Schmidt, recently declined a cabinet appointment (it was U.S. Treasury Secretary)  in the newly elected Obama administration. Coincidence that he is a vocal opponent of Mosaid and Intellectual Ventures – and a personal friend of the U.S. President — and that the FTC-DOJ interest is coming now?

Check this out — the removed piece from Joff Wild.

Joff-wild-12!18!2012 IV Companies List Article From IAM

More to come.