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November 12, 2007

Venturing?

The Wall Street Journal today posted a mixed message and a Milquetoast blog entry on Intellectual Ventures, itself an ambitious and ambivalent player in the patent game. What Intellectual Ventures most clearly lacks is the ability to project that it possesses a sound business model.

Intellectual Ventures (IV) calls itself an invention company. After being around for four years, with "a world-renowned staff of internal and external scientists," it's reputedly managed to scratch out 26 patents, with but four presently-published US applications pending; not exactly an earth-shattering track record for such a world-renowned crew.

Intellectual Ventures tries to buy patents on the cheap from inventors. Such low-balling is common; but, if anything, brings to mind the adage that "you get what you pay for."

Intellectual Ventures has yet to put the hard word on anyone for patent infringement. The result has been... well, that's hard to say. IV is a private company. According to WSJ, "the firm had licensing revenue in the hundreds of millions of dollars last year." Not shabby, if true. But, given its patent purchasing strategy, and its lack of assertion, Intellectual Ventures smells more like a missed opportunity than anything else.

The press invariably reports IV founder Nathan Myrvold's claim to fame as erstwhile Microsoft research head. This at a time when Microsoft had nearly zip for a patent portfolio, and its best-known intellectual ventures were stealing technologies from small companies like Stac Compression, and having lifted its Windows user interface from Apple, who had borrowed heavily from Xerox Parc.

Never having sued anyone over its patents, IV has managed to spook some patent-holding hoopleheads. WSJ reports Katharine Ku, head of Stanford University Office of Technology Licensing, as spooked about Intellectual Ventures. "They keep saying they're not a litigation play necessarily, but we'll just see," she snorts.

 Mryvold retorts: "I've never filed a patent lawsuit. I hope never to file a patent lawsuit. That may be unrealistic, but it would be great if I could avoid doing it... Lawsuits are a ridiculous way to do business.... Litigation takes a lot of time, costs a lot of money, and most importantly, takes attention away from the core business." If the core business is making money on patents, Myrvold is missing the boat, as well as unrealistic on what it takes.

What IV's core business is remains a mystery to many. Being an enigma has never been known to be a viable business model.

Intellectual Ventures is trying to raise $1 billion to sally forth and foster invention internationally, particularly in Asia. Nice timing, facing what is shaping up to be something of a global credit crunch. Though it has reported raked in $355 million to date, to make the mark at the moment, IV must be smoking the good stuff; or handing it out for its donors to toke.

WSJ reports Mryvold as invention philanthropist: "There are a lot of folks in the world who have the fundamental skills and educational background, and talent, to be an inventor." But these people "don't have a set of folks providing additional expertise and capital to help them get that traction. That's our job, to help inventors get traction." Otherwise, you'd think Mryvold's job was helping Intellectual Ventures get traction.

Intellectual Ventures seems to be putting up a brave front while not exactly exuding an image of being smart money. Then again, so far it's reportedly conned Microsoft, Intel, Sony, Nokia, Apple, Google and eBay into forking over seed money, if not smart money.

Contrast this to Acacia, which has been on the rocket docket to printing money for years; getting licensing revenue for patent holders hand over fist. No squeamishness there about using the courthouse to obtain bended-knee licensing lucre. Now there's an invention company.

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The Wall Street Journal can't resist bringing up the pejorative "patent troll." Puullease. Hasn't the patent community been soiled enough by heavy-handed hypocrites like the Coalition for Patent Fairness; who have no qualms about squashing wanna-be competitors like a bug, or suing for patent infringement when they've got the cards to lay, but don't think turnabout is fair play. The purest players in the patent game are those who make no bones that patents are at their best as a revenue stream, and go about it as necessity dictates.

Posted by Patent Hawk at November 12, 2007 11:01 AM | Patents In Business

Comments

I posited over at Patently-O that IV may be creating a quasi-"freedom to operate" for future operating companies. I also listed a number of popular VC's at e^(ip) if you're interested.

(http://emgill.blogspot.com/)

Thanks,
Erin-Michael

Posted by: Erin-Michael Gill at November 12, 2007 2:09 PM

If IV is licensing IP to the tune of "hundreds of millions of dollars" that would far surpass Acacia which has revenues of less than 50mm per year.

It is also important to note that IP licensing companies have great margins usually 80-100%. Just look at Qualcomm, Interdigital, Tessera, Dolby, and Microsoft. These companies literally print money and throw off massive amounts of free cashflow.

Remember Nathan compares IP market today to the software market of the early 80's. That is that people fail to see the value of IP decoupled from a product. Just as IBM failed to see the value of Microsoft's software absent their PC's.

As the market developed there, just as the IP market will develop here, people will come to realize that the underlying IP is actually the most valuable and profitable asset.

Posted by: IP Investor at November 12, 2007 5:20 PM