Nathan Myhrvold's proposal for a market in “invention capital”

Brilliant inventor or patent troll?

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WITH his enthusiastic endorsement of nuclear power as the key to a green, energy-abundant future, Bill Gates grabbed the headlines at the TED conference, a gathering of wealthy nerds (plus a smattering of celebrities) held in California this month. What has inspired Mr Gates to give nuclear energy both his moral and financial support is a new design of reactor developed by Intellectual Ventures, a firm run by an old friend and business partner, Nathan Myhrvold. 

WITH his enthusiastic endorsement of nuclear power as the key to a green, energy-abundant future, Bill Gates grabbed the headlines at the <a href="http://conferences.ted.com/TED2010/">TED conference</a>, a gathering of wealthy nerds (plus a smattering of celebrities) held in California this month. What has inspired Mr Gates to give nuclear energy both his moral and financial support is a new design of reactor developed by <a href="http://www.intellectualventures.com/">Intellectual Ventures</a>, a firm run by an old friend and business partner, Nathan Myhrvold.

Mr Myhrvold's new method of generating power from uranium, the travelling-wave reactor, is being taken up by TerraPower, a firm in which Mr Gates is investing. One of the features of the technology he finds most attractive is the difficulty of making nuclear bombs from its byproducts. The reactor's other benefits include never having to be refuelled despite a potential lifespan of several hundred years. 

Mr Myhrvold's new method of generating power from uranium, the <a href="http://www.intellectualventures.com/docs/terrappower/IV_Introducing%20TWR_3_6_09.pdf">travelling-wave reactor</a>, is being taken up by TerraPower, a firm in which Mr Gates is investing. One of the features of the technology he finds most attractive is the difficulty of making nuclear bombs from its byproducts. The reactor's other benefits include never having to be refuelled despite a potential lifespan of several hundred years.

If Mr Myhrvold did not exist, it would be necessary to invent him—if only to show the public what a genuine inventor looks like. The former chief technology officer of Microsoft has an infectious, wonky enthusiasm and an unlimited curiosity. His projects have included trying to defeat malaria by zapping mosquitoes with lasers, seeking intelligent life on distant planets and barbecuing, a field in which he was at one point the world champion. What's not to like about him? Well, quite a lot, some people think. 

Writing in the latest Harvard Business Review Mr Myhrvold complains that his company is “misunderstood”. He says: “We have been reviled as a patent troll—a renegade outfit that buys up patents and then uses them to hold up innocent companies.” Critics of the patent system, including many who work in open-source technology, are indeed worried about the $5 billion that Mr Myhrvold has raised to buy up thousands of patents, fearing that it will throw sand in the wheels of innovation. Amar Bhidé, author of “The Venturesome Economy”, compares invention to writing a book: imagine if authors had to buy intellectual-property rights for every idea that they referred to in their work, rather than simply acknowledging it in a footnote. 

Writing in the latest Harvard Business Review <a href="http://hbr.org/2010/03/the-big-idea-funding-eureka/ar/1">Mr Myhrvold complains</a> that his company is “misunderstood”. He says: “We have been reviled as a patent troll—a renegade outfit that buys up patents and then uses them to hold up innocent companies.” Critics of the patent system, including many who work in open-source technology, are indeed worried about the $5 billion that Mr Myhrvold has raised to buy up thousands of patents, fearing that it will throw sand in the wheels of innovation. <a href="http://www.bhide.net/">Amar Bhidé</a>, author of “<a href="http://www.amazon.com/Venturesome-Economy-Innovation-Prosperity-Connected/dp/0691135177/ref=sr_1_10/105-9052959-7934049?ie=UTF8&s=books&qid=1210329431&sr=1-10#productPromotions">The Venturesome Economy</a>”, compares invention to writing a book: imagine if authors had to buy intellectual-property rights for every idea that they referred to in their work, rather than simply acknowledging it in a footnote.

Mr Myhrvold, in contrast, believes that he is helping to create a lively, well-funded market in intellectual-property rights that will help solve a problem of under-invention that he thinks even afflicts America, the world's most inventive country. The root of the problem, as he sees it, is the current reliance on a “charity model” of funding research—in particular, universities' dependence on government grants. The solution, he argues in his Harvard Business Review article, “The Big Idea: Funding Eureka”, would be a world in which inventors are encouraged to invent by the presence of investment funds that compete to buy their intellectual property and sell it on—perhaps bundled with other patents—to buyers who know how to put it to good use. 

Mr Myhrvold, in contrast, believes that he is helping to create a lively, well-funded market in intellectual-property rights that will help solve a problem of under-invention that he thinks even afflicts America, the world's most inventive country. The root of the problem, as he sees it, is the current reliance on a “charity model” of funding research—in particular, universities' dependence on government grants. The solution, he argues in his Harvard Business Review article, “The Big Idea: Funding Eureka”, would be a world in which inventors are encouraged to invent by the presence of investment funds that compete to buy their intellectual property and sell it on—perhaps bundled with other patents—to buyers who know how to put it to good use.

Some of those taking part in this market could be industrial companies—Qualcomm, a designer of microchips for mobile telecoms—already does much of what Mr Myhrvold talks about. But he foresees it being dominated by fund-management firms, such as his own Intellectual Ventures, collectively constituting a new alternative asset class that he calls “invention capital”. 

The idea of raising money to invest explicitly in creating patents is not new, Mr Myhrvold notes: that is what Thomas Edison did. But firms such as his will seek to institutionalise the process so it is not dependent only on a single inventor. Intellectual Ventures has 650 employees, not all of them patent attorneys, and as well as buying patents it develops ideas in-house. In 2009 it applied for about 450 patents for its own inventions—more than Boeing, 3M or Toyota—putting it among the world's top 50 patent-filers.

Mr Myhrvold's critics will be hard to convince

Even so, Mr Myhrvold's critics will be hard to convince. Mr Bhidé, for instance, points out that “a great many new products are combinations of innumerable ideas, some patentable and some not. ‘Creating a market' in the patentable bits (and implicitly expanding the scope of patent protection) hurts the process of creating new combinations, adding both uncertainty and expense.” Mr Myhrvold champions the software industry's conversion to the merits of patents from the 1970s as a model of what might happen in other industries. However, Mr Bhidé argues that the great breakthroughs in computer software, such as the spreadsheet, were developed when software could not be patented.

This debate seems certain to run and run, at least until Intellectual Ventures delivers proof that its approach can deliver the goods. Alas, this may take some time—as Mr Gates pointed out at the TED conference, new reactor designs like TerraPower's can take 20 years to invent and another 20 to deploy. So Mr Myhrvold may find that the suspicions against him of patent-trollery have a long half-life.

Business.view

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Brilliant inventor or patent troll?

Nathan Myhrvold's proposal for a market in “invention capital”

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