Nathan Myhrvold was chief technology officer of Microsoft, but since 2000 has been building a portfolio of inventions (patents) at Intellectual Ventures. He's also a talented chef, photographer, and paleontologist. He was interviewed Wednesday at D6 by Walt Mossberg.
Walt Mossberg interviews Nathan Myhrvold at the D6 conference.
(Credit: Ina Fried / CNET)Mossberg dived into the controversy around Myhrvold's venture, which has been called an institutionalized "patent troll." Myhrvold says, "We invest in ideas, not the realization of it." He says, "We recruit inventors before they have an invention."
"And then you own it?" Mossberg asks. "Yes, but we pay the inventor."
The company, started in 2003, works on a process that takes four to five years before it has ideas that can be protected. "A lot of (the ideas) are 10 years out." The company files 500 patents a year, and has filed 1,700 in total. Only about 50 have been granted so far, he said, but as of yet none of the patents is realized in products.
Example projects include a "new kind of nuclear reactor." Myhrvold says, "We need an affordable source of carbon-free energy," and, "Maybe this is the first time that a little company could rethink nuclear power. Dramatically."
How does it work? Myhrvold believes his company's technology can run without operators, with spent fuel from current reactors and depleted uranium. "We have a wonderful containment vessel already: a Dell blade server. You really want to simulate the hell out of this stuff first."
"We're swinging for the fences," he said.
There's another part of the business, similar to the private equity model. "There are lots of inventions that people have that the owner doesn't know what the hell to do with."
It's buying patents, Mossberg said. Myhrvold agreed, but of course disputed the "patent troll" appellation. "I challenge the notion that there's something wrong with having an investable asset," he said. "We're closing the loop of capital."
Mossberg pressed Myhrvold on the issue, trying to get Myhrvold to admit that his company is happy to litigate for patent damages. Myhrvold: "There's nothing wrong with trying to get a reasonable return" on patents. Yet, he says, there are many ways to monetize patents. "We've never sent a litigation notice to anyone, and we've never filed a suit." He did not rule out the possibility in the future, however.
"Thomas Edison's business model was very similar to ours," he said. What's different, he said, is that he thinks there's a new model, called "invention capital," that's similar to venture capital in that "you create an algorithmic way that people can get funded."
See also: Myhrvold on Microhoo and his new cookbook
Click here for full coverage of the D: All Things Digital conference.
Auctioneer Charlie Ross fielding a bid. Note the totals on the board behind him. The bids can run high.
(Credit: Ocean Tomo)SAN FRANCISCO--Jonathan Bari didn't seem too nervous until the $725,000 glitch.
A woman, taking commands from someone at the other end of her cell phone, had bid $750,000 on the patent portfolio he was selling at the Ocean Tomo IP Auction last week in San Francisco. The patents covered an online authentication system for consumers devised by his old company Catavault.
The panic came because auctioneer Charles Ross registered the bid at $725,000.
"She said $750,000," he said to me. (We were sitting next to each other.) He became absolutely still. His anxiety then began to climb--not because he was going to be shorted $25,000, but because the bidding accelerated.
A remote buyer placing bids through a representative of the auction house (the buyer was speaking to the rep on a phone) raised it to $800,000. The cell phone woman laughed, talked to her client on the phone, and after a pause bumped it to $810,000. The remote bidder bumped it to $815,000.
VIDEO: Click image to see scenes from the auction.
(Credit: CNET TV)It continued on. When the bidding crossed $1 million, the 200 or so people in the room simultaneously went "Oooooohhh."
Not Bari. He started breathing audibly. "Go higher, higher," he whispered, to outer space.
The remote bidder kicked it to $1.1 million. The room paused. Cell phone lady quit. Bari shook my hand and left, happy that the winner bid far more than the $500,000 minimum he had set.
The devil's lair?
While Bari got one of the highest prices of the day, his experience reflected the overall tenor of the patent auction, in which intellectual property owners sell their goods to anonymous bidders. Internet patents--particularly the kind that could apply to vast numbers of transactions on the Net--drew a lot of attention.
Discovision Associates got $6 million for a large patent portfolio for improving bit streaming, a record for an intellectual patent portfolio at auction. Yoogli, which has a semantic search patent, received a $1.1 million bid, but withdrew the patents because it was below Yoogli's reserve.
For critics of software patents, this kind of event is the ultimate nightmare. They claim that Internet patents are dangerously broad and that auctions ultimately fuel lawsuits. It's like the Amazon one-click patent and an attack by wolves all rolled into one.
So far, Ocean Tomo says that only a few lawsuits have emerged around patents bought at its auctions. Still, some attendees represented "patent enforcement firms," which buy patents and then extract royalties from other companies. Intellectual Ventures, the large patent firm founded by former Microsoft chief scientist Nathan Myhrvold, was allegedly bidding by phone through one of the auction house reps, according to some attendees.
Or heaven's gate?
The patent holders, though, see it differently. Many are independent inventors who tried to license their products to large companies but got rebuffed. Without patents, large companies would steamroll over the little guy, many assert.
Realtor Martin Eldridge, for instance, got $1 million for a location-based application that combines GPS-like data with information services. If you walk by a painting rapidly in a museum, for example, you might just get the name of the painter sent to your cell phone. If you pause, it might forward you the date it was painted and other details.
He came up with the idea while driving down Highway 1 in California.
Taking bids by phone. Many bidders call in their bids by phone to maintain secrecy. Phone buyers, however, will also have observers in the room.
(Credit: Ocean Tomo)"I wanted to know what I was driving by," he said, elated and sipping champagne. He wrote Google, Garmin, Microsoft (all of whom have extensive patent portfolios that the rigorously defend) and several other companies about licensing. None responded. The auction gave him a way to make some money off of it.
Michael Voticky sold a voice-mail management program he came up with while on a flight from Europe, for $500,000. It was his minimum. "No complaints," he told me.
The list goes on: Videa got $700,000 for a patent for displaying video files as thumbnails. Another company got $975,000 and hearty applause from the audience for an application that ranked media files according to a user's personal profile. QSIndustries got $400,000 for a digital sound-effects app. A newsfeed aggregator patent went for $400,000.
Below that, a slew of patents that related to consumers sold in the $100,000 to $250,000 range. Under the unstated rule of auctions, the crowed applauded and ooohed only if the bidding went past the $900K mark.
Compare that with what happened with the patents for industrial users. Sun Microsystems offered a number of patent portfolios. The first three were withdrawn because bidders didn't hit the minimum or bid at all. Sun finally sold one for $325,000.
Other companies didn't see bids, or high enough bids to get past their minimums, on patents for improving cell phone antennas, engine management systems, conductive coatings for planes that make them easier to de-ice, or an application for tracking trucks in delivery fleets. Edward Hyman got $130,000 for a chip that can help control satellites, a little above his minimum expectation.
In all, Ocean Tomo CEO Jim Malackowski deemed the day a success. The patents sold generated $19.6 million in revenue. That's a record for an intellectual-property auction.
Four lots sold for more than $1 million and around 62 percent of the lots were sold overall. Ocean Tomo keeps 25 percent as a commission--10 percent from buyers and 15 percent from sellers.
Not bad for a day's work.
In two consecutive days, The Wall Street Journal presented two different answers. The first is not surprising: Intellectual Ventures, the brainchild of ex-Microsoft executive Nathan Myhrvold. It's now out "to raise as much as $1 billion to help develop and patent inventions, many of them from universities in Asia." I know I will sleep so much more comfortably knowing that IVL will be out plundering Asia so that it can turn around and plunder the rest of the planet.
The second might surprise you: the University of California. The University of California may be especially pernicious because it can sue for patent infringement but has sovereign immunity:
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