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The Wall Street Journal is reporting on Allied Security Trust, a statutory trust whose 11 current members work in the high-tech sector. This afternoon I spoke with CEO Brian Hinman and CFO Jon Brandl. They told me a little bit more about what the organisation is all about.
First of all, I discovered that AST is not new – it came into being in March 2007 and has been operating since that time. Its primary role is to acquire patents on behalf of its members, essentially to prevent these falling into the hands of non-practising entities (patent trolls, though this term was not used).
Brian explained it like this: each company that joins AST puts $5 million in escrow. At the same time, AST keeps a very close eye on what patent portfolios may be available for acquisition. They do this, for example, through a network of more than 25 agents and brokers they have signed up, as well as by keeping a close eye on bankruptcy proceedings and by talking to VCs. When a potentially interesting portfolio appears on the radar, all AST members are asked if they want to get involved in a bid. AST then makes the purchase on behalf of those members who say yes. Once the portfolio comes into AST ownership, the buying members are given a worldwide, non-exclusive licence on it and the non-buying members are also given the opportunity to pay to take out licences. When all this has been done, the portfolio is put back into the open market for sale, with all AST licences guaranteed – meaning that no-one can assert against AST members who have taken up the licensing option.
What both Brian and Jon were very clear on was that, despite some similarities, AST is not a new Intellectual Ventures. Unlike IV, the trust will not acquire patents for assertion (actual or implied) against any third party or to make a profit in any other way. Instead, rights that are purchased are always resold within a specified time limit, something that may or may not allow AST members to recoup their costs. If the patents cannot be sold then another way to dispose of them has to be worked out – perhaps donation to a university or another type of not-for-profit organisation. And patents are always to be disposed of; there will be no licensing to any non-AST members. In short, AST is a purely defensive vehicle and is not designed as a revenue-generating tool.
Interestingly, since becoming active in March 2007, Brian says that the trust has already made “several strategic acquisitons”, though he would not say whether these have yet been resold. In terms of membership, the names reported in the Wall Street Journal – namely, Verizon, Google, Cisco, Hewlett Packard and Ericsson – are all accurate; while I can reveal that Motorola and Sun Microsystems are also signed up. Other members prefer to remain anonymous at this stage, though this could change. There is no limit to how many companies can join AST and I have been told to expect some further announcements within the next month.
Also worth noting is the fact that AST has come to light just a couple of months before Dan McCurdy’s PatentFreedom venture gets up and running as a wholly independent venture. PatentFreedom, you will recall, is based on the idea of companies in the high-tech space getting together and pooling information on the activities of patent trolls. Although stressing the fact that they are not linked in any way, Brain and Jon readily concede the overlap between PatentFreedom and AST – one as an information gatherer the other as a tool with which to act against trolls.
Having been frustrated at the power of the trolls to wreak havoc and extract money from them, it looks like companies in the high-tech sector are getting tools that will help them to fight back. Up to now, trolls and other non-practising entities have had a pretty clear path to acquire patents that they can assert. This is no longer the case. Now they will have a fight on their hands to get hold of potentially valuable rights. This, in turn, is going to make the strongest IP more valuable than it has been in the past – which can only be very good news for those inventors who have created it. Isn't it amazing how the patent system can reinvent itself to reward the innovators?
Defensive patent pools does not work against trolls. Everybody knows that.
And don't worry, if you look at the figures of software patent applications in the US since 2000, they are growing exponentialy.
So you can expect that in some 5 years, the situation for the software sector is gonna get much worse.Benjamin Henrion, FFII on 01 Jul 2008