Two researchers say they have uncovered a bunch of new information about the world's largest patent "aggregator," Intellectual Ventures.

Founded by former Microsoft chief technology officer Nathan Myhrvold about a decade ago, the company's main business is getting patents, then using them to extract licensing fees or legal settlements from other companies.

The impolite word for companies who use patents this way, rather than in the course of making and selling products, is "patent troll."

Intellectual Ventures is secretive about how it works. Until a lawsuit last year, nobody knew exactly who its investors were, or who had licensed its patents. (Turns out that Microsoft, Apple, Sony and a ton of other prominent tech companies have invested and/or taken licenses. So have a number of universities.)

Robin Feldman, a law professor at U.C. Hastings, and lawyer Tom Ewing decided to find out more.

People told them their task was impossible. They write: "'You can’t find out anything about them; don’t even try,' is a chant that has been whispered in intellectual property circles for a number of years. It motivated us to take a hard look, and the information eventually unraveled like the yarn from an old sweater."

In January, they published a paper in the Stanford Law Review (PDF here) with their findings.

Here's some of what they wrote:

• Intellectual Ventures has between 30,000 and 60,000 patents. That's a rough estimate. But even the low number makes Intellectual Ventures (IV) the 5th largest patent portfolio of any U.S. company, and 15th in the world. Nearly all of those patents originated elsewhere. IV does very little inventing of its own.

• It uses more than 1,200 shell companies. IV's patent holdings and legal actions are hard to track because it often assigns patents to shell companies. The researchers say they discovered at least 1,276 of these, and they "have little doubt that other shell companies have been formed."

• About half its patents originated outside the U.S.  A lot of patents are not valued as highly overseas as they are in the U.S. "This suggests that Intellectual Ventures may be acting as an arbitrageur to exploit the disparities in intellectual property valuation between the United States and the rest of the world," write the researchers.

• Big companies invest, then use its patents for defense. For instance, Verizon paid $350 million for patent licenses an equity stake in one of IV's funds in 2008. When TiVo sued Verizon for patent infringement, Verizon "purchased a patent from one of Intellectual Ventures’ shell companies, which was then put to work as a counterclaim in the TiVo suit," say the researchers.

• How it gets patents from smaller companies. According to the researchers, IV has a "turnkey" method for getting patents from smaller companies. IV pays the company a one-time fee and a percentage of any profits it makes from the patents. IV then "assumes the costs of maintaining the portfolio, and gains the right to go after other companies." In the case of a company called Digimarc, IV agreed to pay $36 million over three years, plus 20% of the profits from all successful licensing and litigation.

Feldman and Ewing compare IV's activities to "privateering," a now-abolished kind of warfare from the 1800s. Countries would encourage private sailors to attack their enemies' ships and auction off the proceeds.

In IV's case, say the researchers, the company licenses some patents to more aggressive third parties, then lets them do the dirty work of licensing and suing. They speculate -- but do not have evidence to prove -- that IV could use this tactic to convince new companies to license its patents, and to make sure existing customers keep paying up.

It's an ugly business. But it's also perfectly legal.

Surprisingly, Ewing and Feldman don't think the patent system is hopelessly broken, and they do support patents for software.

But they point out that IV (and other aggregators) have created a massive unregulated market -- IV alone claims to have collected more than $2 billion in licensing fees.

"Markets require regulation," Feldman told us. "You can't just let them go -- particularly markets like this one that have characteristics of anticompetitive behavior."

A good start would be more transparency -- the SEC requires publicly traded companies to disclose all kinds of information about their businesses. But information about patent licensing deals is so closely guarded, nobody even knows what a patent is worth.

"What kind of market is that?" asked Ewing in an interview.

Ewing also suggests that the U.S. could change how damages are calculated, so that companies who win a patent infringement suit could only recover profits that had been lost as a result of the infringement. So if you don't make anything, you couldn't collect.

That would put an end to the kind of "protection racket" that Feldman says IV is running.