Charles River VC, a $300M Investor in Intellectual Ventures, Says Patents Are Huge Market, Not a “Dirty World”
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just because of the old-world view that IP is somehow dirty.”
In case you haven’t noticed, it seems like everyone is suing each other in the tech world these days—from Tippr and BuyWithMe in group-buying and daily deals, to Skyhook Wireless and Google (and many others including Nokia and Apple, Microsoft and Motorola) in mobile, to EveryScape and Adobe in graphics, and, yes, Intellectual Ventures and a host of companies in software security and hardware.
So have things changed in the world of tech intellectual property and its perception? Armony thinks so, and he has some insights into the trend. For starters, IP has taken on far more importance beyond just defensive patent protection. A decade ago, he says, “most tech companies viewed IP as a necessary evil and did not invest in IP. They almost held IP in contempt. But biotech and pharma have always understood it. Pharma has been willing to pay for IP, and that’s the whole basis for the biotech business model.”
Now, he says, the concept in the technology world has evolved. “All tech companies have a much more sophisticated view of patents and invention rights. The most sophisticated are inventing more and filing more patents [like Microsoft]. They buy defensively more, assert more patents, do more cross-licensing deals, and participate in defensive groups like RPX.”
Still, he says, “the people who are least sophisticated and most behind the 8-ball are venture capitalists. They view IP as crown jewels”—that is, as something to be protected, not really something to invest in. But big companies understand the value of IP better, he says, because “for many of them, IP is yet another discipline they have to master”—just like engineering, sales, products, marketing, and quality assurance.
Another major shift is that “an asset class has been created,” he says. “Some large hedge funds are playing in the field.” Big players in intellectual property finance now include Altitude, Coller Capital, and Fortress Investment Group. And notable public tech companies that have evolved their IP models include Qualcomm and Dolby, as well as pure IP assertion firms like InterDigital and Acacia Research, he says.
Closer to home, Armony notes, “There’s a lot to be done on the VC level as well. It’s still a super early market.” It’s not easy to understand how to invest in IP rights companies, he adds. “There are lots of misconceptions.”
Myhrvold, for his part, seems to have foreseen much of this unrest in the tech sector—and he’s just starting to reap the rewards. “The world is more than happy to risk money in crazy, risky ventures once people have established a model and established a marketplace. If we’re successful, we personally will channel billions of dollars towards invention, but if we’re really successful, people will imitate us,” he told me in 2008. “We have a venture economy, we have a private equity economy, we certainly have a public markets economy, but we don’t have an invention economy—yet. That’s our simple goal!”
Judging from the current state of affairs, that goal might be close to being achieved.