IP: novel attack on bad patents

From: Mike Linksvayer (ml@justintime.com)
Date: Fri Jan 21 2000 - 16:03:28 MST

Gregory Aharonian <http://www.bustpatents.com/> has a novel
idea for using the stock market to make money attacking bad
patents. The full article is at
<http://lwn.net/daily/patnews.html>. Here's an excerpt that
describes that the basic idea...

  ...is to find weak (portfolios of) patents for which, thanks
  to the craziness of the Internet, their assignee's stock
  price is bubble-ish to the point of having a high price and
  volume (creating liquidity and volatility to exploit).
  After very thorough prior art searches, one launches
  lawsuits to get courts to declare the patents to be invalid
  while at the same time buying put options (or just shorting
  the stocks for those more risk-adverse). With careful market
  timing and public information campaign based on the patent
  truly being crap, you could legitimately push down the price
  of the stocks and collect on your options/shorts. With
  billion dollar valuations, the profit potential would be in
  the tens of millions of dollars, if not more. By raising
  enough money to implement such a strategy against multiple
  companies, a few are bound to hit for the big bucks, given
  the statistics of invalidity of most software patents. And
  given the lengthy proceedings surrounding such lawsuits,
  there are additional profit opportunities as the stocks
  rebound then get pounded down again as some of the patents
  get invalidated in the court.

I used to think that a similar strategy could be employed
against any company whose valuation is based on proprietary
technology which could be reengineered for substantially less
money than the technology adds to the company's valuation:
reengineer the technology in secret, short the stock, give
the technology away. I'm quite skeptical of this idea now
because I think you'd need to create a perfect substitute
(bug-for-bug in software terms) and do lots of marketing to
ensure your success, both of which require lots of capital.

Mike Linksvayer

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