SAN JOSE, Calif. A group of 11 high tech companies that have combined their clout to buy, license and sell strategic patents may point the way for more patent pools to come in a maturing market for intellectual property.
Allied Security Trust I came out of stealth mode this week following a report Monday (June 30) in the Wall Street Journal. In an interview with EE Times Wednesday (July 2), the group's chief executive, a former vice president of IP and licensing at IBM, provided the most detailed disclosure to date about the group's goals and operations.
The group aims to lower the rising costs of patent litigation by proactively acquiring key patents as they come on the market. An increasing number of companies are asserting patents as part of their business, many of them so-called trolls who have no other products than the patents they buy, license and litigate.
"We are fundamentally a defensive agency procuring patents on behalf of our members," said Brian Hinman, chief executive of Allied. "We are not an investment vehicle, and our objective is not to make money," he added.
"I think this will start a trend of further pooling and other new models being created to address the troll threat," said Mike McLean, a vice president at Semiconductor Insights, a division of TechInsights which publishes EE Times. "It's good to see companies taking creative action to address this challenge to their businesses rather than just complaining about it being unfair," he added.
Allied's members include Cisco Systems, Ericsson, Google, Hewlett-Packard and Verizon and six other companies who do not want to be named. As many as three other companies are expected to become members in the next 30 days, said Hinman.
"I am interested in only the patents that are strategic or potentially problematic for a subset of our members," said Hinman, who refused to disclose the number of patents he has bought or sold since the group was formed with four members in March 2007.
Each company puts $5 million into an escrow account used as working capital to buy patents that members can then license.
Allied works with a network of 38 patent brokers who compile a weekly list of available patents that Allied circulates to its members. They can choose to contribute any amount they wish to buy any number of the patents on the list. Allied eventually re-sells the patents with proceeds going back to the companies who paid to buy them.
"It's a catch-and-release formula handled on an opt-in basis," said Hinman.
"Patents have to be gone is a fixed amount of time," he added. "The objective is to recoup a portion of the cost of the investments because we are not a patent-holding company."
Allied's name was deliberately generic to provide a degree of confidentiality. The company creates an independent legal entity when it buys and sells patents to further obscure its identity so that buyers and sellers do not realize its big-company backing and raise or lower prices accordingly.
To keep its costs low, Allied operates on something of a shoestring with a chief technologist and finance officer and small administrative staff but all legal and IT functions outsourced. It does plan to expand its technical staff to increase its capability for handling due diligence on patents.