* June 25, 2010, 11:49 AM ET
Iridium Patents Soar Anew in Licensing Deal
By Don Clark
A collection of satellites called Iridium became a symbol in the 1990s of overambitious engineering, and later a turnaround story. Now the network may also be linked to the imaginative financial engineering going on around patents.
Rendering of an Iridium Near Earth Satellite.
Intellectual Ventures, a Seattle firm known more for acquiring patents than dispensing with them, announced a deal this week to sell rights to a large portfolio of satellite communications patents to Thales Alenia Space, a Franco-Italian joint venture that recently won a contract to supply a new fleet of satellites to Iridium Communications. Where did the inventions come from? Mainly the original Iridium project.
The man who can explain this circular-sounding process is Vincent Pluvinage, a veteran in patent-trading circles who runs a unit of Intellectual Ventures in Silicon Valley. His six-person team focuses on what he calls “strategic” acquisitions–pools of patents costing $10 million to $50 million or so–that can be repackaged and bring a return to the firm widely known as IV.
A key focus for the group is large technology-development efforts that churned out a large number of patents, whether or not the companies developing the technologies were successful. “If we find a situation like that, what we ask ourselves is, what other assets could we assemble that would be synergistic–then where could we redeploy the assets and create a return,” he says.
Pluvinage says his group was involved in a deal that in 2008 wound up giving IV rights to patents developed by Transmeta, a chip maker that made little headway in the market but got some big payments for patent licenses from companies such as Intel. The team also began focusing on the satellite development efforts of the 1990s, which generated a large number of patents.
Iridium, believed to have spent about $5 billion in its first incarnation, ended up in bankruptcy proceedings and was later restructured. Much of the original investment came from Motorola, which wound up with many patents related to the project. IV cut a deal to buy them about two years ago, Pluvinage says. It acquired rights to others as well, including patents related to Teledesic–another once-ambitious venture with investors that included Microsoft’s Bill Gates and cellphone pioneer Craig McCaw.
The IV team took about two years to analyze the patents and figure which would be most useful to potential buyers, Pluvinage says. One key bet, he says, was the expectation that Iridium’s 66-satellite network would need to be upgraded–and whoever would build the next generation of satellites might want patent rights to key technologies associated with such services. Hence the licensing deal with Thales Alenia Space; Iridium will also receive license to inventions for other parts of its planned next-generation network, IV says.
Financial terms weren’t disclosed. But given that the contract to Thales Alenia Space was $2.1 billion, the dollars involved could be sizeable.
Anything IV appears to be doing with its patents tends to attract attention. The firm, founded by former Microsoft technologist Nathan Myhrvold, is often lumped derisively with so-called “patent trolls” that buy up patents to sue other companies. IV, which has acquired a huge portfolio of patents, hasn’t filed any suits itself–but set off tremors in some circles when it sold some patents to other patent-licensing firms, in deals that could give it part of the proceeds if money was recovered from litigation.
Mr. Pluvinage certainly seems to have no problem parting with patents if the return is attractive enough. “We have the scale to make bets,” he says. “The interesting part is to make large bets.”