If You Can’t Beat ‘Em, Join ‘Em: Patent Strategy as a Business Model

Owning patents with the intention of suing others can be a viable business model
Owning patents with the intention of suing others can be a viable business model

In the May 12, 2008 New Yorker Magazine article, Malcolm Gladwell posits that there is no shortage of ideas. Rather, he indicates that what is needed is disciplined processes centering on invention and execution of those ideas through into the marketplace. Mr. Gladwell’s article (which I believe is a must-read for those of us in the “innovation game”), goes about proving his hypothesis by reporting on the inventive processes of the principals of Intellectual Ventures. (Intellectual Ventures website is linked here: http://www.intellectualventures.com/).Intellectual Ventures is a new type of company. Its premise is that highly skilled scientists, engineers and other types of “big thinkers” can learn enough about a technical or human problem, such as a common medical condition, to invent possible solutions when in a “brainstorming session” with other high level thinkers of varying disciplines. Intellectual Ventures then files patent applications for the most promising of those solutions, and the team goes on to the next problem. As an IP business strategist and consultant (more info here: www.jackiehutter.com), what I find fascinating about the Intellectual Ventures team is that it appears that the problems being addressed are more often than not, outside of the realm of expertise of most of the invention team members. Instead, solutions for heart conditions, for example, are addressed by someone with a Ph.D. in computer science or electrical engineering. The result of this set-up guarantees “outside of the box” solutions to problems that likely have been “beaten to death” by experts in the field. The payback for Intellectual Ventures is in potential licensing of its inventions if the patented solutions turn out to be viable in the marketplace.

Has this model paid off? Although Bill Gates is a major investor in the company, it remains to be seen what the success of this venture will be in the long term, but there is certainly no shortage of ideas from which Intellectual Ventures can potentially profit. Mr. Gladwell reports that it was originally expected that Intellectual Ventures would file 100 patents a year; instead, it is currently filing 500 a year. There are 3000 ideas waiting in t he queue to be evaluated for patenting. While the vast majority of the team’s ideas are likely worthless, Intellectual Ventures’ business model is based upon the premise that if a few ideas payoff big, the percentage of successful ideas is irrelevant. Such a model is not innovative in itself; indeed, this the payoff model under which venture capitalists have profited for many decades.

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