Intellectual Ventures: Why the Patent System Needs Aggregators


Intellectual Ventures: Why the Patent System Needs Aggregators

January 9, 2013

As technologies converge and products become increasingly complex, there is a long tail of inventions that is becoming more difficult to manage. Patent aggregators like Intellectual Ventures will become more important to navigate the complexity and compensate the inventors.

The U.S. patent system borrowed from mainland Europe a concept that had evolved over hundreds of years: the “moral right” for inventors to protect their ideas. But America’s founders went even further – they also included the obligation for inventors to publish.

This extra part of the deal was ingenious: It has been key to America’s history as a global leader in innovation.

Because inventors were incentivized by protection, yet still obligated to publish, their ideas became available for everybody to see. Not only did this increase the global pool of knowledge, it also allowed follow-on developers to avoid the blind alleys experienced by the original inventor.

The published patent also provides a roadmap to further innovation: the work-around. When developers become too enamored with popular features, they stop innovating. By preventing access to such successful features, patents conversely force competitors to come up with the new ideas or workarounds that lead to fresh innovation.

But as technologies converge and the products we use become increasingly complex, the system needs intermediaries within the market – companies like Intellectual Ventures – to help sift through and navigate the published landscape. By developing focused expertise, these patent licensing entities and intermediaries can function as patent aggregators, assembling portfolios of relevant inventions and providing access through licensing.

Yes, sometimes aggregators have to go to court to protect their patent rights – and get labeled with all kinds of nasty names for doing so.

But we believe it is worth fighting for a marketplace where invention rights are respected and can be efficiently accessed. Especially in a world where the products we use every day – our smartphones, our cars, our computers, and televisions – have rapidly increased in complexity.

The Long Tail of Technology Patents

Today’s smartphone is a high-definition camera, a camcorder, a GPS navigation device, a videogame system, a calculator, and a powerful computer. It’s a text-messaging, e-mailing, VoIP-ing machine that can make calls from nearly anywhere using a complex system of cell towers, servers, routers, and fiber optics. Just a few years ago, that combination would have cost thousands of dollars – and each of those products would have been protected by hundreds or thousands of cross-licensed, exchanged, and litigated patents.

You would have needed a shopping cart to haul all of the different devices you now carry as a single device in your pocket. But with today’s technology complexity and convergence, products like smartphones incorporate more patents in a single device than their less-complex predecessors.

So there’s now a long tail of relevant technologies in these products. The inventions behind and in them weren’t only created by large companies, but by small companies as well as individual inventors. As products get more complex, this tail just gets longer and more diffuse – which makes it much more difficult to recognize (and reward) the contributions of inventors down the tail.

Despite this complexity, we must maintain the founding principle of the U.S. patent system – providing an incentive for inventors to create without fear of being ripped off. Only then can inventors continue to focus on doing what they do best: inventing. Society benefits when the value of ideas is recognized.

However, navigating the long tail of technology patents requires a significant amount of niche expertise, time, and other resources. This is where patent aggregators come into play.

Patent aggregators sift through the issued patents with an expert eye, and provide efficient access to the long tail of patents. When tens of thousands of patents touch a product, hundreds of inventors spread around the globe deserve to be paid. But in the race to market, product companies often ignore the long tail; small inventors have very little power to do anything about this unless they can enlist the help of patent aggregators.

Perhaps more importantly, patent aggregators can provide a certain “objectivity” that other players in the patent ecosystem cannot. Product companies, for example, are incentivized to exercise their patent rights to exclude – leading the market throughexclusion rather than innovation.

But aggregators, in order to maximize returns from the patents they’ve acquired, are incentivized to package and license patents as broadly as possible. If patents are available to all-comers, not just used to exclude, companies can focus on improving their products and competing through innovation.

Aggregators also provide a signal to the market as the debate around patent quality continues. Every time Intellectual Ventures purchases a patent, we are making a bet that it is a quality patent. We purchase only 15 percent of the tens of thousands of patents we review, drawing on and continually building the expertise of our acquisitions team. Sometimes patents come as a package deal so we have to buy 10 to get the six or seven we really want, which is why only 40,000 of our 70,000 assets are in active licensing programs. But we continuously prune our portfolio to maximize quality – thus helping the market navigate the long tail of patents.

The many great – and complex – technology products we have today have created the tumultuous situation we’re in. Patent aggregators provide an economically feasible system for compensating the inventors in the long tail. But they also provide rights to the companies making the complex products and inventions we rely on.

Ultimately, the users of those products – you – are the ones who benefit.


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