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Patent firm woos big-name inventors

Inventors or litigants? One thing is for certain: Intellectual Ventures is allied with blue-chip engineering figures.

Patent firm Intellectual Ventures wasn't kidding when it claimed to be linked with prominent inventors.

The company, which earns revenue from patent royalties, is developing ideas that could turn into commercially viable patents. It is working with MIT's Germeshausen Professor of Chemical and Biomedical Engineering, Robert Langer, as well as Applied Minds, a Southern California company that designs consumer products and equipment for the military.

In the past year or so, Intellectual Ventures has emerged as one of the more controversial companies in the tech industry. The company is filing patents, but also buying patents from defunct companies, independent inventors and others. It has amassed a portfolio of over 3,000 patents, according to some sources--an extremely large number for a company with only a handful of employees.

Many in the IT industry worry that the patent portfolio will become a vehicle for patent suits.

Not so, said Nathan Myhrvold, founder and CEO of Intellectual Ventures. Although lawsuits may result, the company primarily exists to devise inventions that can generate new markets.

Alliances with figures such as Langer tend to bolster that argument. Langer helped invent microspheres, tiny polymer globules in aerosols and medicines for transporting chemicals through environments where they might get dispersed. He's also invented techniques for treating alcoholism and cancer. Approximately 15 companies have been founded based on his research, and another 150 or so companies have based products around his patents. He's won a number of scientific awards and published over 800 articles. An ambulance chaser he isn't.

"He (Langer) has more patents than any other professor at MIT. He is one of the few people who could walk into any venture capital firm in the world and say 'I'd like some money. I don't have an idea yet, but I'd like some money,' and they'd probably give it to him," Myhrvold told CNET

In a brief interview, Langer discounted the lawsuit-factory theory about Intellectual Ventures. "I don't think that's the idea," he said. Still, Langer indirectly indicated that the company is trying to develop the broad type of patents that spook established companies the most.

"They are more concept type of patents. It is a very blue sky kind of thing," Langer said of the patents that Intellectual Ventures is trying to develop. By contrast, the type of patents that Langer continues to file on his own are typically based on several years of lab research and targeted at very specific ideas, he said.

Other researchers working with the firm include Eric Leuthardt, a neurosurgeon with St. Louis' Washington University, and Muriel Ishikawa, a physicist at Lawrence Livermore National Laboratory.

Applied Minds is something of a tinkerer's haven. Founded by former Disney engineer Bran Ferrin and supercomputer architect Danny Hillis, the company comes up with product prototypes. Some make it to market: A box that scrambles conversations to foil eavesdroppers is being sold as the Babble by Sonare Technologies. The company also does work under military contracts, said sources close to Applied. Kleiner Perkins Caufield & Byers and Millennium Ventures have invested in Applied. Myhrvold, Hillis and Ferrin have been friends for years.

Until recently, Intellectual Ventures has been somewhat secretive about its roster of inventors. Last year, Myhrvold said that it was working with genetics pioneer Leroy Hood, but provided no other names at that time.

Under the company's structure, inventors gather for brainstorming sessions. Subsequently, lawyers and patent experts perform the white-collar grunt work involved in transforming the more promising ideas into patents and prototypes that can be licensed to manufacturers.

"Our goal is to try to invent things. We try to do things about five years out. The reason is that almost every engineer at every company is working zero to three years out. It might slip to three to five years, but the plan is zero to three years," Myhrvold said. "We're not going to try to make products, so in order to make money we have to convince someone else to make it."

Still a mystery
A substantial portion of the angst about the company seems to derive from the fact that Intellectual Ventures continues to remain a mystery in many respects. The company is filing about 300 patent applications a year, but so far has only been granted one patent. Typically, the company will not seek royalties until the patent is granted. Lawsuits have also not been filed. Some deals may be announced in a few months.

Lawyers and executives that were asked by CNET to comment on the company have largely asserted that Intellectual Ventures would likely generate its revenue from the legal system, but also admitted they didn't have direct or exact insight into the business plan. (These sources have also requested anonymity.)

While patent suits aren't the goal, Myhrvold acknowledges that lawsuits are a chronic factor of life when it comes to the IT industry. Historically, IT companies have taken a damn-the-torpedoes approach toward patents, brushing off patent holders and requests for royalties.

As a result, licensing deals that might cost a company a few million dollars can lead to multimillion dollar verdicts. EBay, for instance, could have licensed patents for its "Buy it Now" feature from MercExchange for a few million dollars years ago, but decided to risk the lawsuits, said Myhrvold. A court eventually awarded MercExchange $25 million.

Many in the tech industry disagree with the court's decision and have filed briefs on behalf of eBay in the case. On the other hand, several pharmaceutical companies and chemical companies have sided with MercExchange.

Individuals asserting patent rights, he adds, aren't just lawyers looking for a quick payoff. Intellectual Ventures is one of the largest sources of royalties for the University of California. The pool of potential licensees for many patents is also small.

Myhrvold asserts that these complex patents are a hard sell. "We do a lot of solid-state physics patents. Even if you put a sweater on me, I don't think I am going to be able to sell them on QVC," he said.