Wednesday, April 26, 2006

Intellectual Ventures - Rambus Inc's business model grande sized

Lisa Lerer writing for IP Law & Business provides An inside look at Nathan Myhrvold's $400 million IP experiment. Below are a few snippets from Ms. Lerer's fascinating article.

A $400 million investment from some of the biggest technology companies, including Nokia Corporation, Intel, Apple Computer Inc., Sony Corporation, and Microsoft, funds the shopping spree. (None of these companies would comment for this story.) Some in the IP asset management field estimate that Intellectual Ventures has amassed 3,000-5,000 patents.

As the patent stockpile grows, so does the speculation--and the fear. IP lawyers and tech executives worry that Intellectual Ventures is less interested in changing the world with big ideas, and more focused on becoming an Ÿber-troll, wreaking litigation havoc across industries with its patents.Intellectual Ventures represents a natural economic evolution, says Myhrvold. As the United States changes from a manufacturing to an ideas-based economy, making patents more valuable to businesses, a company based solely around IP seems almost inevitable.

Of course, a patent licensing strategy only works when backed by the threat of litigation. And the company's critics are only too happy to speculate about that threat. Some have theorized that Intellectual Ventures is just a front for its investors--a shield designed to protect them from patent suits. The tech giants can use Intellectual Ventures to buy small patent portfolios cheaply and pull them off the market, avoiding future litigation. Intellectual Ventures denies that its investors steer its acquisition strategy. "We are not controlled by anyone," says Frei. "We are amassing things that are valuable and going to get a market rate for them."

While not much is known about Detkin's patent shopping, the former Intellectual Ventures executive gives some details. Intellectual Ventures, says the executive, forms a new shell corporation each time it acquires a new patent portfolio. A special computer program names the companies, making them difficult to hunt down. The former executive pointed us to past monikers, including Thalveg Data Flow, Orange Computer, and Maquis Techtrix--all were traceable only to Seattle-area post office boxes

For now, patent injunctions are a theoretical matter for Intellectual Ventures, although the company isn't ruling out future patent lawsuits. "In some cases we'll have to sue," says Frei. But a suit is less lucrative, Frei maintains, than a small running royalty on a key patent paid by a lot of companies for ten to 15 years.
Read Ms. Lerer's article linked here.

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