Invention capital Intellectual Ventures and You

I really enjoyed Nathan Myhrvold’s recent piece in the Harvard Business Review (and reported in the New York Times).  Delighted to see him explaining further what Intellectual Ventures is up to.  Here are some things that struck me as I read through it.  Let me know what you think.

It’s a good point that the business of invention would function better if it were separated from manufacturing and developed on its own.  And this has been happening for quite some time in pockets, though usually constrained, as Nathan points out.  A strong capital market that funds and monetizes inventions is definitely a good option for this, but its not the only one.  For example, just looking at the other end of things for a minute, there is still a lot of work to be done in reducing the costs and risks associated with commercialising inventions on the single patent by patent scale (and by the way the quoted 1% success rate is probably optimistic).  Nathan’s model is all about reducing risk with large scale.  That’s great.  It’s not the only way.  Another way (and there will be others) is to be clever about reducing risks at the invention (or much smaller portfolio) level.

It was a bit of a shame to see Nathan’s piece so heavily oriented to the United States and one might suggest a little condescending when dealing with developing countries.  He’s clearly not only thinking about the US in IV’s business strategy, however.

A little too trite on connecting market capitalization of entities like Qualcomm to their patent portfolios but probably just that he was limited on space for the piece.

Is culture the main barrier to the emergence of a bona fide market for inventions?  Well I’m not so sure, but thanks for your thoughts.  The two cultural shifts Intellectual Ventures is looking for are: (1) product companies to see inventors as wellsprings of innovation and (2) IP rights to be respected, especially in developing economies.

This is a great quote from the world’s biggest patent aggregator: "we have never sued anybody to defend our intellectual property rights….It’s expensive, it’s unpredictable, and it takes years." 

I totally agree with the next statement and some thoughts on it will come out in a couple of interviews I haverecently done for leading IP magazines (I’ll keep you posted): "I believe the market will start functioning well and will then grow rapidly…We will see a more intricate and efficient invention industry populated by professional patent finders and packagers, appraisers and underwriters, financiers and sales agents – and other roles not yet conceived."

I can see how the Intellectual Ventures model suggests that an efficient market which extracts the full value from patents requires enormous capitalization.  I’m personally not so sure that this is the only way, though.  I am not aware of anyone who has seriously thought about attacking the cost side of things in a strategic way (please do disabuse me). 

There’s a fair bit of marketing in the Intellectual Ventures manifesto, by the way.

Intellectual Ventures’ current approaches to turning inventions into money:

  1. Package patents together to increase combined value.
  2. Launch a start up (or other special purpose vehicle).
  3. Create patent backed securities.

Nothing earth shattering there.  Which is fine.

So here’s an opportunity – go dig deep in at the other end of things.  For example, develop a process for reducing risk (of market failure) as you invent.  It’s not really our core business, but I’ve previously built one process that’s been singing along and evolving for a few years.  But there will be lots of others.

If Chris Anderson is right about the new economics of the long tail of niches.  Then perhaps instead of a few behemoths as Nathan suggests, what the world really needs (in addition) is a whole lot of much smaller, niche entities creating and adding value to invention markets.

What do you think?

 [Photo credit: Ric e Ette]

 

 

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