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ITWorld does an intereview with Nathan Myhrvold, former student of Stephen Hawking, CTO of Microsoft where he helped develop Microsoft Research and founder of Intellectual Ventures (IV).
Myhrvold's discussion of IV is quite interesting. Myhrvold describes IV as a kind of innovation intermediary that specializes in the commercialization process, similar to more traditional entities such as venture capital firms- At IV, we invest in invention -- invention is our asset. Some of the invention we do ourselves and some we buy from others. I compare the different parts of our business to the venture capitalist and private equity models.
On the side where we are inventing ourselves, we are supplying capital and expertise much as a venture capitalist would. Only, we're doing this in order to stimulate the ideas. Essentially, we are providing capital and expertise to some of the world's greatest inventors to help stimulate new ideas....
The other side of our business is more like a private equity model. Much like private equity managers work with distressed companies that have gone adrift, we work with inventors or inventions that have gone adrift. Our approach is to take a controlling investment and manage the asset -- in this case the invention -- better than the current owner for the financial benefit of everyone involved. Compare Myhrvold's comments to Profs Allison-Dunn-Mann in their recent paper on patents, where they argued that organizational capacities offered by intermediaries support the commercialization process of small-specialized firms-
In a world of perfect markets, the conditions… would summon into existence intermediaries specializing in the particular competencies that independent inventors are likely to lack: the ability to enforce patents aggressively against incumbent firms, the ability to raise funds to support the continuing development and exploitation of the technology, and the ability to facilitate the deployment of the technology by licensing it to the firms best placed to use it.
… if there is anything odd about the situation, it is not that some firms have arisen to fulfill those functions but that they have taken so long to appear... Myhrvold also describes how IV leverages a multitude of strategies to commercialize inventions. A sector with a diversity of business models, enabled by licensing markets and strategic contracting with patents, will produce more innovation due to advantages flowing to small-specialized firms....our inventions will get to market in a variety of ways. In some cases we will do spin off companies where the invention is the core of the company. In other cases, we may license the idea to industry or interested parties; we might donate the invention to a consortium or project. By taking a portfolio approach and combining complementary inventions together, we believe we will create an interesting product for people to license. To date, we have thousands of assets. Compare Myhrvold's comments on leveraging patents for different commercialization strategies to an argument by Profs. Teece-Somaya:Without patents... market-based advantages of licensing and component modes for innovation are severely compromised due to the weak bargaining position of inventors... with stronger patents, these “incentive” advantages grow more quickly for licensing and component modes than integrated modes, reflecting their market based advantages. Without patents, we observe a net advantage for integrated modes, but as patent strength increases, licensing eventually becomes the superior mode.
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Licensing modes facilitate the independent commercialization of inventions… However, these benefits can only be reaped by licensing modes if inventions, once made, can be protected from imitation... Absent such appropriability guarantees, licensing modes are unable to access their potential market-driven advantages, while at the same time being burdened with transaction costs. A talented individual like Myhrvold will always do something amazing, thus its good to see him in the business of innovation.
posted by Noel Le @ 7:46 AM | Academia, Patents
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