IP Funds- a Potential Driver of Breaking the Radical Jinx?

Can non-industry specific IP funds help to push the innovation envelope? Can we bridge the gap between industries and geographies to provide a systematic breeding place for forward-thinking inventions? Gunjan Bhardwaj explores.

We read a lot about companies in various industries not being able to come out with radical products. Sometimes the size is questioned as a possible deterrent to innovation- perhaps wrongly so as it is not the size rather the order of complexity in large firms that impedes intrinsic radical Innovation. Sometimes however it is their inability to connect the disconnected nodes in their ecosystems as in spite of their global and technological experience as well as reach, large organizations also are the slowest to broker ideas.

For smaller organizations, it’s the scale that chalks out the downside. It is also the math of getting ideas right against them, in particular after their first successful idea. As a small startup grown from a technology they neither have the expertise across the length and breadth of technologies nor always the capacity or skills to absorb or broker. Global reach is difficult because of the stretched resources. Inattentional blindness- or management myopia explained in my last blog is even more severe as small enterprises just cannot afford to make mistakes and management eyes are hence glued to daily business. However it is good that they are not ‘used to’ the ways of getting things done in specific ways like large enterprises.

Recently a CEO of a pharmaceutical company asked me and his team members, ”If you were to head a Pharmaceutical company today, whom would you hire?”. Answers varied from a marketing person to an R&D guy to an Executive assistant. Mine was simple- ‘An IP fund manager!’ Prima facie, this answer might seem funny but the thought behind was as simple as the answer itself. If one could bring scale and professional acumen to invest in IP in a strategic manner and broker it across technology domains and geographies, one could well open a value treasure in industries living off downstream, exploiting past innovations.

One might argue this is not new as Venture Funds and Angels do it all the time. It is not true as they come a bit later in the value chain and their capabilities are also different. Also companies (usually large) who have been trying to do this using their large internal Venture Funds are also different- as they are not free of issues explained above and there is also the challenge pertaining to power in their respective industries let alone competition.

A kind of Invention arbitrage across geographies and industries that can lower transaction costs to innovate and improve effectiveness of radical technologies…

Imagine a big Pharma coming to a small Pharma or a biotech company for talks regarding a specific New Molecular Entity (NME) or a patent or two. From the onset, most of the times, the mindset at the smaller company is that of being exploited and that in the large organization of exploitation. This might be true for a big IP Fund as well but less so as an IP Fund might not be designed to have market power in a specific industry. In addition, IP Funds can also benefit researchers in universities and research organizations by providing a systematic breeding place for commercializing their inventions. Society by large would benefit as even those inventions can be brought out that don’t seem to have traditional takers with innovative business models- a kind of Invention arbitrage across geographies and industries that can lower transaction costs to innovate and improve effectiveness of radical technologies by employing the same where the most benefit.

An IP Fund called Intellectual ventures founded by Microsoft’s former chief technology officer Nathan Myhrvold, have raised capital from individual investors and large companies, including Microsoft, Cisco, Intel, Verizon, Sony and Apple and have formed partnerships with Universities and Research organizations around the world including premier institutes in the emerging countries. Intellectual Ventures describe themselves as a global leader in the business of invention and owner of one of the world’s largest and fastest-growing patent portfolios. They claim to be creating an active market for invention that connects buyers, sellers, and inventors by:

  • Employing talented inventors who work on new inventions to help solve some of the world’s biggest problems.
  • Purchasing inventions from individual inventors and businesses and combining them into market-specific portfolios, which are then licensed broadly.
  • Partnering with our international network of more than 3,000 inventors and helping them to monetize their inventions.

One could see that Intellectual ventures  goes one step beyond brokering inventions across geographies as well as technology domains and using professional acumen in accumulating monetizable IP, in also employing talented inventors for the solving world’s biggest problems- problems to be solved and backed by business models but with a larger societal benefit. There are many other IP Funds now, however mostly attached to IP in a specific industry.

The question whether IP Funds will break the radical Jinx will be answered only in some years to come, however with some regulation they are certainly a step in the right direction.

About the author:

Gunjan Bhardwaj is senior editor and a member of the review team at Innovation Management. Gunjan is presently with the Boston Consulting Group and just prior to this he was the leader of the Global Business Performance Think-tank of Ernst&Young. Gunjan is also a guest professor for Growth and Innovation management at European Business School (EBS) in Germany and a member of the scientific advisory board of Plexus Institute in the US which researches on complexity in health sciences. Gunjan has published a number of papers and articles in various Journals and magazines and has been a frequent speaker in conferences on marketing and innovation related topics. The views and ideas expressed by Gunjan on InnovationManagement.se are strictly personal and have no bearing on BCG.
  • Paraic

    Amazing – an article about Intellectual Ventures making no mention of their alleged role in “patent trolling”.

  • Gunjan

    I support ‘some oversight’ as reflected in my last sentence- notwithstanding the good has been substantial!

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