Intellectual Ventures and Intuit Work Out $120 Million Licensing Deal, Say Sources

The footsteps of Intellectual Ventures are getting louder in Silicon Valley.

The secretive Bellevue, Wash., "invention capital company" lays claim to about 27,000 patents. And after several years of buying IP and piling up money from investors, it's starting to make tech companies that it identifies as infringing on its patents pay -- in a big way.

Its latest deal is a licensing agreement with financial software company Intuit Inc. that will bring in $120 million, according to people who have been told about the transaction. In September, The Wall Street Journal reported that IV had closed IP deals with companies like Verizon and Cisco Systems Inc. for between $200 million and $400 million apiece.

In-house patent lawyers at tech companies deal with countless demands from patent holders accusing them of infringement. But the size of the recent agreements that Intellectual Ventures has been able to extract, without ever bringing a lawsuit, makes them stand out.

"It's a significant development. To the extent they come knocking on your door, you have to take it seriously," said Fabio Marino, an IP lawyer with Orrick, Herrington & Sutcliffe in Menlo Park, Calif. "The interesting thing is who else will they go after and when ... "

Intuit, which makes the popular TurboTax and QuickBooks software, disclosed in its most recent quarterly filing with the SEC that it had "entered into an agreement to license certain technology" on May 14 for $120 million, payable over the next 10 years. In the filing, Intuit said it would be paying for past and future licensing rights. It did not disclose the technology, the IP or the licensor.

In typical IV fashion, no one involved in the deal would confirm or deny anything.

Anirma Gupta, director of intellectual property at Intuit, said she couldn't comment beyond the public disclosure. A spokeswoman for Intellectual Ventures declined to comment on the deal. Fenwick & West's David Hayes, who worked on the deal, referred questions to Intuit.

An analyst said Intuit may have evolved itself, in recent years, into potential patent trouble.

"Intuit has been moving more of their products online, and so it's conceivable that they're using a technology that someone else owns," said Gil Luria, who follows Intuit for securities firm Wedbush Morgan Securities. He noted that Intuit is rarely in that situation because it's often a "first mover" in the industry.

Tech companies license patents from holding companies like Intellectual Ventures as protection against infringement suits over IP the holder currently owns and, in most deals, over any it may later acquire. That longer-term protection is a major motivator behind such deals. Industry insiders were surprised, then, that Intuit would strike such a big deal, since it has faced very few patent lawsuits in its history. The Mountain View, Calif., company has just one patent lawsuit pending and has faced only 12 others since 1995, according to a search of court filings.

Without more details on the terms of the Intuit deal, it was unclear whether it was structured like IV's agreement with Verizon. In that deal, Verizon agreed to pay $100 million for the rights to an IV patent portfolio and then another $250 million as investment in a limited liability company that would buy and license patents.

With its huge pile of cash (reportedly $5 billion from investors) and patents, observers had wondered how Intellectual Ventures would make money if it stuck to its practice of not suing for patent infringement. But so far, all its big licensing deals have come without the aid of lawsuits.

"I think it's a little surprising that they were able to close such large deals without litigation," Orrick's Marino said.