Patent Law

The following is excerpted from a September 11, 2009 InformationWeek article by Charles Babcock:

Microsoft (NSDQ: MSFT) put 22 patents up for sale in July, listing them all as in the "open source" category, with some of them, "Linux-focused." The ultimate buyer was the Open Invention Network, a consortium of Linux backers that wanted to take them off the market.

But in between Microsoft marketing and OIN ownership there was a bit of behind the scenes maneuvering. OIN was never approached by Microsoft to buy the patents, even though it was an obvious, interested party.

And the actual bidder, Allied Security Trust, was acting as a front man for OIN as well as its own 11 members. OIN was approached by AST "early in the process and invited to be a surrogate bidder," unbeknownst to Microsoft, says OIN CEO Keith Bergelt.

When AST's bid won the auction, AST and OIN signed a deal that made OIN the ultimate holder of the patents. The irony of the maneuver is that it was an unlikely outcome.

AST normally bids for patents on the open market, licenses its members to protect themselves from them, then quickly resells the patents. By using this "catch and release" policy, it leverages its members investments and gets income that allows it to protect its small membership from more patents. One result is that many AST acquired patents end up on the open market and in the hands of patent trollers, who claim royalties from companies whose products might be covered by their patents.

Read the full article here.