Monday, November 26, 2007

Patent Firm Lays Global Plans [International]

Intellectual Ventures LLC, a low-profile investment firm run by former Microsoft Corp. executive Nathan Myhrvold, is laying plans to go global: It hopes to raise as much as $1 billion to help develop and patent inventions, many of them from universities in Asia.

The move could help the firm, formed seven years ago to purchase patents and help inventors dream up new ones, expand its already-vast store of patents. But the new push also could exacerbate concerns that Intellectual Ventures will begin launching lawsuits to pressure companies to pay for use of its intellectual property.

Mr. Myhrvold said that his firm hasn't sued anybody for patent infringement but that he can't rule it out in the future.

Intellectual Ventures, which said it couldn't comment on any current fund raising, employs about 200 people. It is also raising another, separate fund valued at more than $1 billion to buy up existing patents globally, people familiar with the matter say.

Until now, the firm has focused mainly on buying existing patents in the U.S. -- though it has done some work overseas -- and on dreaming up new inventions in-house with its own group of experts. It has bought thousands of patents but only 26 of its own inventions have been approved so far, according to a spokeswoman. The original patents cover areas such as digital imaging, medical devices and solid-state physics.

The firm had licensing revenue in the hundreds of millions of dollars last year, one person familiar with the matter said.

Intellectual Venture's business model has stirred debate. Officials from some U.S. universities -- including Stanford University and Massachusetts Institute of Technology -- say they aren't working with the firm because they worry it could use its patents for litigation or other purposes that don't promote innovation.

"We want to work with companies that are really going to develop the technology, and I'm not sure if they will or not," said Katharine Ku, who heads Stanford's Office of Technology Licensing. "They keep saying they're not a litigation play necessarily, but we'll just see."

Mr. Myhrvold noted that his firm has deals to buy or license patents with more than 80 universities, including the University of California system and Boston University, "so any reluctance to work with us is a distinctly minority view." He said that his firm simply wants to get "fair compensation" for new inventions, and help inventors do the same, and that its goal has always been to create a more liquid market for intellectual property.

The overseas effort is being bankrolled by a new fund, called Invention Development Fund I. An August regulatory filing with the Securities and Exchange Commission said the fund could raise as much as $1 billion and had already collected $355 million from several big-name investors, including the University of Pennsylvania, the University of Notre Dame and the William and Flora Hewlett Foundation. All either declined to comment or didn't respond to requests for comment.

Other people familiar with the fund said it is focused on nurturing "prepatent" ideas, particularly those coming from Asian universities. The firm would work with inventors there to develop ideas and then help to patent and license them, much as big U.S. universities do through their technology-transfer offices. Intellectual Ventures would own the patents, or have exclusive rights to them, but the original inventors would get a cut of any revenue generated from them.

Though officials of the firm declined to comment on specific funds, Mr. Myhrvold confirmed his company is pursuing a new business strategy of helping outside inventors develop ideas before they are patented. He also said Intellectual Ventures wants to work more with inventors overseas and hopes to soon open offices in China, India, Japan, South Korea and Singapore. Mr. Myhrvold's co-founder, Edward Jung, also a former Microsoft executive, recently spent a year living in South Korea to try to forge relationships with Asian research institutions.

"There are a lot of folks in the world who have the fundamental skills and educational background, and talent, to be an inventor," said Mr. Myhrvold, a mathematician and physicist. But these people "don't have a set of folks providing additional expertise and capital to help them get that traction. That's our job, to help inventors get traction."

Mr. Myhrvold said his firm wouldn't rule out doing pre-patent deals with people at U.S. universities or other institutions. But he said many American universities already have plenty of licensing infrastructure and might not need his help.

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