When you go to Intellectual Ventures‘ website, it talks about “taking vaccines the extra mile” or “revolutionizing the dairy industry.”

Lofty words for a patent troll.

However, things may not be going so well for the firm. Reuters published an exclusive report today which said that Intellectual Ventures — the pioneer, King, and most-well known of all patent trolls — has curtailed its patent buying while it raises new funds.

Reuters reviewed an investor presentation that found that IV is attempting to raise $3 billion in new capital so it can continue its patent hoarding. Or as IV puts it, “Ensure a market for invention that continues to thrive.”

However, many of its earlier backers, including Microsoft and Google, are no longer interested in funding IV’s efforts, which is understandable considering it has sued Google twice for patent infringement. Not to mention that the returns on its fund have been going down. The IV investor presentation Reuters reviewed showed that the average rate of return for IV’s 2003 fund was 16.2 percent, while the 2008 stood at 2.5 percent.

Furthermore, it’s not the best time for patent trolls to be trolling.

The FTC announced last week that it is gathering information as part of an investigation into patent trolls — formally referred to as Patent Assertion Entities (PAEs) – which was defined as are “nonproducing” companies that buy patents with the intention of suing companies that infringe upon them.

The goal of the FTC’s investigation is to gather enough evidence that it can issue the PAEs with subpoenas, and learn more about their shadowy undertakings.

Patents are intended to protect people from having their ideas and/or work wrongfully used. The requirements to get a patent include “novelty” and “non-obviousness.” But the U.S. patent system has been referred to as “broken,” “garbage,” and “evil,” and there are some absurd patents out there, such as those for human genes, online press releases, and hyperlinking.

The ambiguity behind many of the patents means that to do just about anything in technology involves some sort of violation.

IV founder Nathan Myhrvold was the former chief technology officer at Microsoft. The firm was founded 13 years ago with the [alleged] goal of protecting inventors from patent infringement and creating a market where inventors could make money by licensing their patents out. All they had to do was sell the patent to IV and it would take care of the rest.

However, this was not the reality.

IV sued nine big technology companies in 2010 for patent infringement lawsuits, and this model spawned an outbreak of patent trolls. 

Patent trolls takes advantage of the system to extort money from legitimate businesses by suing them for infringement. Legal fees are so expensive that the defendants often choose to settle — even when the claim has no validity — in order to stay out of court. Patent trolls cost the U.S. economy an estimated $29 billion a year.

Since 2000, IV has raised $6 billion and acquired 70,000 patents and other intellectual property assets. It has amassed the fifth largest patent portfolio in the U.S., reportedly buying patents for an average of $40,000 each from companies, individuals, and up to 50 universities, including CalTech, Duke, Clemson, Brigham Young, Rutgers, and the University of British Columbia.

These patents are then held in a tangled web of shell companies, which includes over 1,200 patent holding companies, 51 shell companies that simply manage assets, and 24 executive and investment shells.

According to Reuters, the money from IV’s 2008 fund is reaching its 2008 expiration date, and as a result, IV has had to delay and pull out of deals.

Negative publicity and policy efforts could be curbing IV’s capability to raise the billions it think its needs to buy patents and prosecute legitimate businesses for “infringing”on them.

Earlier this year, two members of the U.S. House of Representatives introduced the SHIELD Act to thwart patent trolls, and in early June, President Barack Obama released five executive orders and seven legislative recommendations aimed at reforming the patent industry. One of the proposals said that if patent trolls lose in court, they would have to pay the attorney’s fees of the businesses they sue.

Companies are also getting creative with how they fight back. E-commerce startup FindTheBest is suing a patent troll under the RICO Act, which was originally used to prosecute organized crime.

Even if IV doesn’t raise the $3 billion it wants, real change is only going to come through national policy reform. Hopefully some systematic changes can happen before IV gets more money in its war chest.