Nathan Myhrvold: Patent Wars “Vindication” for Intellectual Ventures

The mobile computing revolution and the latest waves of big consumer Web companies have put more muscle behind the patent wars in technology—from Steve Jobs declaring he would spend Apple dry to kill Android, to Yahoo reprising its role as IPO-eve litigant by hitting Facebook with a lawsuit.

It’s surely made money for lots of law firms, kept the tech giants at each other’s throats, and led for even more calls to reform the U.S. patent system. But former Microsoft CTO Nathan Myhrvold sees the patent frenzy as an affirmation that he’s doing something right at Intellectual Ventures, the controversial Bellevue, WA-based patent licensing firm.

Myhrvold, a co-founder and CEO of Intellectual Ventures, spoke briefly about the controversies surrounding intellectual property on Tuesday at a breakfast benefit for the Pacific Science Center. He was interviewed by Hanson Hosein, a University of Washington journalism professor and Pacific Science Center board member.

Nathan Myhrvold

Myhrvold alluded to a defense of Intellectual Ventures’ approach that he’s made before: Big tech companies used to just cozily license to each other, and ignore everybody else’s inventions unless they were sued. Intellectual Ventures, he says, is among the outsiders wanting to change that system by getting patents from smaller guys and making people pay to use the intellectual property.

“When you change the status quo, people get upset. And there are very powerful vested interests that feel threatened by the idea of people who will just go and invent a lot of new stuff,” Myhrvold said. “Here’s the interesting thing: When we started Intellectual Ventures … big technology companies were publicly saying, ‘Oh, patents are terrible,’ and ‘Isn’t this terrible, we all get sued.’ If you look today, some of the most active litigants in business are big tech companies.”

“Intellectual property is actually more important to big companies every day,” Myhrvold said, referencing Jobs’ and Apple’s fight over Android. “And I think that actually is vindication.”

Intellectual Ventures can almost be seen as two businesses. On one side, the company buys up patents and and licenses them to others, including product-producing companies. That has generated billions of dollars in revenue for Intellectual Ventures, and sent hundreds of millions to inventors who sell their intellectual property, the company says.

The other part of Intellectual Ventures focuses on in-house invention, developing new products and technologies in everything from next-generation nuclear power to malaria prevention. At least at this point, the patent-licensing side of the house is by far the larger, accounting for some 90 percent of the company’s revenue.

Myhrvold’s high-level idea for Intellectual Ventures has always been that the traditional market for intellectual property is really inefficient, and could be transformed by making patents into a more liquid asset, like other financial instruments. But the company isn’t shy about turning to the existing tools—namely lawsuits—when it thinks potential patent infringers are wrong by not paying a licensing fee.

Despite its pro-inventor, anti-establishment message, Intellectual Ventures got caught in a real bind last year when the public radio show “This American Life” dug into the company’s secretive business. The gotcha moment came when reporters asked Intellectual Ventures for an example of an inventor it had helped, and found that Intellectual Ventures had sold the inventor’s very broad patent to another company—one that appeared to exist solely for the purpose of bringing patent lawsuits. And it looked very likely that Intellectual Ventures was getting a cut of any licensing revenue.

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