Intellectual Ventures Loses Its Shine: Will Its Business Model Ever Work?
from the sad-troll dept
Techdirt has always been sceptical about Nathan Myhrvold's business plan for Intellectual Ventures (IV) -- build up a huge portfolio of patents, simply so that it can then license them to those that will, and sue those that won't. Others, however, have been dazzled by Myhrvold's pedigree as an extremely wealthy ex-Microsoft manager, and by the fact that patents have undeniably become a central concern for the tech industries in recent years, which suggests that there is plenty of money to be made from them.
But there are signs that the IV magic is fading. Here, for example, is a report of Myhrvold's appearance at D: All Things Digital this year, under the headline "Nathan Myhrvold on Being the Most Unpopular Guy at D10":
Myhrvold made the case to the crowd, though probably unsuccessfully, that his company serves a purpose similar to that of venture capital or private equity in the process of aiding innovation.
More recently, the attacks have been less personal, but in some ways more damaging:
Myhrvold also quoted his own past statement at an earlier D conference, saying, "If people don’t find what you are doing threatening, then it is probably not very important."
Around 2008 Nathan Myhrvold, Microsoft’s former chief technology officer, raised $2.9 billion in two separate funds to invest in patents and inventions. More than four years later, those funds have returned very little cash back to their investors and the returns look lousier than ever.
The article in Forbes quoted above goes on to describe one of Intellectual Venture's more recent patent-buying funds as "a complete disaster." It also notes IV's reply to these criticisms:
the firm points out the answer is that the life cycle of the firm’s funds is longer than the ten-year period usually associated with private equity-type investments. The funds are linked to the 20-year lives of the patents the funds acquire or develop.
But there's a larger issue than what the real internal rate of return is, and that's the underlying viability of Myhrvold's model. There is no evidence that IV encourages innovation in any way, despite the company's claims that it "creates a market place" for patents.
Instead, it really seems no different from your common-or-garden troll, hoping to hit the jackpot by picking up a patent that a successful company later finds it simply must license or risk going out of business. Leaving aside the morality of such an approach, it's inherently risky: IV has to hope that enough other companies come up with the actual valuable innovations that its patents can then parasitize.
The comments above could be the first straws in the wind that business opinion is starting to turn against Myhrvold. It will be interesting to see if IV starts suing companies more aggressively in an attempt to get the money rolling in -- and what it does if that fails to deliver the kind of returns investors are presumably hoping for. That could well happen if those being sued sense that IV is under pressure, and decide as a result to opt for a long, hard -- and expensive -- fight in the courts to exploit that fact.