On: Nathan Myhrvold's Intellectual Ventures hides lawsuits via 1000+ shell companies

IANAL, so can somebody explain how this isn't considered racketeering (you pay IV for their promise not to sue you)?

Racketeering is the extortion of money under the threat of illegal violence: arson, injury, blackmail, etc. The payer has done nothing to harm the payee.

Patent trolling is the extortion of money under the threat of a legal action over a wrong done by the payer (ie, infringed on a patent).

If you hit me with your car, I can choose to sue your insurance company (you've paid them to take legal responsibility), or I can choose to accept a negotiated settlement from them.

Right, so then the definition of racketeering is starting to become inadequate, is the way I see it.

It is not racketeering, which concerns illegal behavior outside the law, but more closely resembles barratry, which is the use of the law to harass.

see: http://en.wikipedia.org/wiki/Barratry

Racketeering is collecting money to not commit a crime. IV suing you would not be a criminal act.