Nothing Ventured, Nothing Gained: Intellectual Property Analysis of Intellectual Ventures v. Hynix et al

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Intellectual Ventures’ investors hold prior art and precedent innovation which, if disclosed, could vastly alter the enforceability of patents asserted in the DRAM industry. We wonder whether their IP holdings or their equity in IV matters more.

Starting a new round of litigation since its first lawsuits in late 2010, Intellectual Ventures (“IV”) recently filed a patent infringement lawsuit against fourteen companies on July 11, 2011. IV alleges that the companies are infringing on five of its patents related to computer memory devices, either by manufacturing or distributing products without license. IV is seeking royalties, treble damages and legal compensation. Among the defendants in the case are Acer, Asus, Dell, Hewlett-Packard, Logitech, Best Buy, and Wal-Mart.

In particular, IV has targeted Hynix Semiconductor (“Hynix”) and Elpida Memory (“Elpida”), two of the largest manufacturers of Dynamic Random-Access Memory (DRAM) products. IV states it approached both Hynix and Elpida numerous times before the suit (beginning with Hynix in 2008 and Elpida in 2009), and both declined to license the patents. This is the second lawsuit IV has filed against Hynix and Elpida. The first, filed in December 2010, claims infringement on a separate set of memory patents. Elpida filed suit against IV on July 14, 2011 seeking a declaratory judgment of invalidity and non-infringement with respect to three patents asserted against them in the July 11 case. In the event that the court would rule in favor of Elpida’s complaint, a finding of invalidity would significantly impact IV’s broader assertion strategy.

IV holds itself in high regard when it comes to innovation, a promotional strategy that is reinforced in the Hynix complaint. While IV has greatly ramped up its enforcement actions in the past year, it has used a variety of enforcement tactics for much longer, leveraging the anonymity provided by its cunning use of affiliated shell companies. There are many possible reasons why IV resorted to naming itself as Plaintiff more recently. Examining the recently disclosed list of IV investors, M·CAM has begun an inquiry into the degree to which IV actions may directly or indirectly benefit shareholder firms. An M·CAM DOORS™ analysis was conducted around the innovation space of the five patents in this recent suit to reveal if any investor in an Intellectual Ventures’ fund(s) may have financial interest in the outcome of the Hynix litigation. Additionally, our inquiry is considering the degree to which patents held by IV shareholder companies may serve as uncited precedent innovation which could actually be used to undermine or severely impair the enforceability of IV’s asserted patents.

An intellectual property analysis of the asserted Intellectual Ventures patents was also conducted in order to understand their strength and defensibility in the face of precedent innovation – both actively maintained and abandoned in the public domain. The innovation space surrounding these patents, in particular U.S. Patent No. 5,982,696, was examined to determine which patents may provide alternatives to or alter the value of IV’s properties.