Background on Intellectual Ventures:
Intellectual Ventures was founded by Nathan Myhrvold, former Chief Strategist and Chief Technology Officer at Microsoft. Myhrvold’s vision was to focus on funding, creating, and commercializing inventions. The company aims to link research to product development and commercialization.

Myhrvold’s Expertise:
Myhrvold holds a doctorate in theoretical and mathematical physics and a master’s degree in mathematical economics from Princeton University. He was a postdoc fellow at Cambridge, working with Stephen Hawking on cosmology and quantum field theory. Myhrvold has extensive experience in linking research to product development and commercialization.

Achievements and Recognition:
Myhrvold has hundreds of patents issued or pending. He was awarded the James Madison Medal in 2005, Princeton University’s top honor for alumni.

Mission of Intellectual Ventures:
Every valuable thing on earth has a capital market that supports it. Intellectual Ventures aims to connect the capital markets to the world’s innovators, providing funding and resources to bring inventions to life. The company seeks to create a positive impact on the world through technology and innovation.

Early Patent Trends at Microsoft:
Nathan Myhrvold joined Microsoft in 1986 when the company had filed only two patent applications. Myhrvold recognized the importance of patents as a form of intellectual property and advocated for increased patent filing. At the time, copyright was the primary focus of intellectual property protection in the software industry.

The Birth of Intellectual Ventures:
Myhrvold realized that there was no capital market for invention and that inventors faced difficulties in obtaining funding and monetizing their inventions. In response, he founded Intellectual Ventures in 2003 to invest in invention and create a marketplace for inventors.

Investment Funds and Structure:
Intellectual Ventures operates like a private equity or venture fund, raising capital from investors such as pension funds, university endowments, and family offices. The company has three families of investment funds: Invention Science Fund: Focused on inventing new patents through a combination of staff inventors and external inventors. Investment in Existing Inventions Fund: Purchases or takes controlling interests in existing patents from inventors or entities that may not have the resources to commercialize them. Partnership with Inventing Institutions Fund: Collaborates with tech transfer offices at universities and research institutions to support their invention and commercialization efforts.

Customer-Investor Relationships:
Intellectual Ventures has two types of investors: purely financial investors and customer-investors. Customer-investors, such as Microsoft and Apple, invest in the company and also pay for licenses to its patents. These customer-investors join Intellectual Ventures to gain on the upside potential of the company’s investments and to secure favorable licensing terms.

Addressing Rumors of Coerced Investments:
Myhrvold acknowledges rumors that some investors joined Intellectual Ventures to avoid litigation or secure favorable terms. However, he emphasizes that the company’s initial investors came on board before it had any patents, dispelling the notion that investments were made solely out of fear of legal action.

Investor Relations:
Nathan Myhrvold emphasizes that investors in his company joined prospectively and are generally content with their investment. The company also has non-investor licensees, demonstrating flexibility in partnering arrangements.

Peter Detkin and the Term “Patent Troll”:
Peter Detkin, a former co-founder or senior executive at Nathan Myhrvold’s company, is credited with coining the term “patent troll.” Myhrvold humorously notes the unintended consequences of Detkin’s colorful language, which has become associated with him and other patent assertion entities.

Current Patent Assertion Strategy:
In recent years, Myhrvold’s company has increased its patent assertion activities. This shift in strategy is not a new business model but rather a natural progression of the company’s operations.

Congressional Scrutiny of Patent Assertion Entities:
Patent assertion entities, including Myhrvold’s company, have come under scrutiny from Congress. Legislative efforts are underway to address concerns about the more egregious practices of these entities.

Defining Patent Trolling:
The term “patent troll” is used to describe those who enforce patents aggressively, often against companies that have not infringed upon their patents. This term is often used interchangeably with “plaintiff” in patent lawsuits. Companies like Apple and Stanford University have been labeled as patent trolls, suggesting that the commonality lies in their efforts to enforce patents.

The Importance of Patent Protection:
Patents are crucial in protecting innovation and ideas, which drive technological advancements. Without patent protection, companies may be discouraged from investing in research and development. Enforcing patents is essential for ensuring that inventors receive fair compensation for their creations.

Cultural and Business Factors Influencing Patent Infringement:
Certain younger technology companies may have a cultural expectation or explicit business model that disregards the importance of paying for patents. This attitude often stems from a lack of experience with patent infringement issues.

The Prevalence of Patent Infringement in the Tech Industry:
Younger companies in the tech industry are more likely to engage in patent infringement compared to established companies like Intel, Microsoft, and Apple. These younger companies may not fully understand the consequences of patent infringement or may believe that they can avoid paying for patents altogether.

Building a Patent Portfolio and Dealing with Patent Infringement:
Establishing a strong patent portfolio takes time and effort, and companies must be persistent in asserting their patents to protect their intellectual property. Engaging in friendly deals for patent infringement can be beneficial, but it can also lead to individuals taking advantage of perceived leniency. Companies must be prepared to take legal action against infringers to uphold their intellectual property rights and discourage future infringement.

The Impact of Patent Litigation on Policy Debates:
The increase in IP litigation has become a topic of policy debate, with many expressing concerns about its impact on innovation and economic growth. However, data analysis reveals that the actual number of patent lawsuits has not significantly increased. Policy debates often rely on unsubstantiated claims and misinterpretations of data regarding patent litigation trends.

Patent Lawsuit Statistics:
Approximately 2,500 patent lawsuits are filed annually, with a settlement rate of 97%-98% before trial. Only 1%-2% of patent lawsuits actually go to trial each year. A significant portion (about a third) of patent lawsuits settle after filing but before any court action, suggesting that parties often fail to convince each other of their seriousness.

Major Litigants and Targets:
Medium-sized companies are the most common litigants in patent lawsuits, not large corporations. Prolific litigants often produce niche products that are frequently imitated or knocked off, such as tanning products, sunglasses, and flashlights. Frequent targets of patent lawsuits include generic drug companies like Teva Pharmaceuticals, due to their business model of releasing drugs as soon as possible, which conflicts with patent holders’ interests. Big tech companies are also common targets due to their strategies aimed at dominating their respective markets.

Defensive Patenting Strategies:
Many companies adopt a defensive patenting strategy, filing numerous patents to protect themselves from potential infringement claims. This strategy is driven by the belief that having a large patent portfolio can deter competitors from infringing on their innovations.

Predicting Patent Filing Trends:
Researchers have found that the number of patent applications filed can be accurately predicted based on venture capital funding trends two years prior. This suggests that venture capital funding plays a significant role in driving patent filing activity.

Patent System Imperfections:
Nathan Myhrvold acknowledges that no system is perfect, including the patent system. He cites instances where the patent office issues questionable patents, but emphasizes that these are not the norm. Myhrvold argues that the assertion that the patent system is broken is often made by those with an axe to grind, typically those who do not want to pay licensing fees.

Emotional Responses vs. Fact-Based Arguments:
Myhrvold highlights the emotional nature of criticism against the patent system, rather than factual evidence. He points out that when companies claim patents are bogus, they often lose court cases, indicating that the patents are not as weak as claimed.

Patent System Avoidance:
Myhrvold reveals that some tech companies have policies prohibiting employees from accessing patent databases, to avoid potential liability. He plans to use billboards to display patent numbers in Silicon Valley, to raise awareness of the importance of patents.

Competition in the Patent Market:
Myhrvold acknowledges the increasing competition in the patent market, with more entities acquiring portfolios and asserting patents. He views this competition as positive, similar to the development of venture capital funds over time.

Patent Monetization Trends:
Myhrvold predicts the continued trend of companies monetizing and securitizing patents and intangible assets. He highlights the efforts of companies like Ocean Tomo in this area.

Intellectual Ventures’ Future:
Myhrvold expresses uncertainty about Intellectual Ventures’ position in 10 years, given the evolving landscape of the patent market. He emphasizes the value of patents, as evidenced by companies like Qualcomm.

Intellectual Property’s Value and Significance:
Nathan Myhrvold emphasizes the immense value of intellectual property (IP) in various industries, including pharmaceuticals, toys, and technology. He highlights that most toy companies license their toys from inventors, similar to how pharmaceutical companies license drugs from biotech companies. Myhrvold stresses the importance of recognizing and treating IP as valuable assets.

Investment in Individual Inventors and Companies:
Myhrvold’s company has invested over $400 million in individual inventors in the United States. He believes that supporting individual inventors is crucial for fostering innovation and making the best use of their inventions. Myhrvold also emphasizes the importance of investing in companies that hold patents, as they may not have the resources to productize their inventions.

Innovation and Research Inspired by Influential Figures:
Myhrvold discusses the impact of working with Bill Gates, Steve Ballmer, and Stephen Hawking on his perspective on innovation and research. He highlights the different educational backgrounds of these individuals and how they influenced his approach to innovation. Myhrvold emphasizes the importance of resilience and perseverance, drawing inspiration from Stephen Hawking’s unwavering spirit despite his physical challenges.

Introducing Nathan Myhrvold:
Nathan Myhrvold, a notable scholar and former Microsoft executive, shares his insights on innovation, philanthropy, and the challenges of inventing.

Stephen Hawking and the Power of Thinking Clearly:
Myhrvold recounts a conversation with Stephen Hawking, where Hawking emphasized the benefits of thinking in clear and simple ways due to his physical limitations.

Bill Gates’ Dedication to Global Good:
Myhrvold describes Bill Gates’ commitment to solving global challenges through technological advancements, exemplified by their joint efforts in the “Global Good” program.

TerraPower and the Quest for Carbon-Free Energy:
Myhrvold introduces TerraPower, a company he co-founded to develop a new type of nuclear power plant that aims to provide efficient, safe, and carbon-free electricity.

The Challenges of Battery Technology:
Myhrvold acknowledges the slow progress in battery technology and highlights the need for radical new ideas to address the world’s energy needs.

The Importance of Failure in Invention:
Myhrvold emphasizes the high failure rate in invention and compares it to baseball, where even the best batters miss 60% of the time.

Diversifying Inventions to Reduce Variance:
Myhrvold explains the importance of investing in a large portfolio of inventions to mitigate risk and increase the chances of success.

The Need for Compensation in Invention:
Myhrvold stresses the necessity of ensuring financial returns for successful inventions to sustain ongoing innovation efforts.

Nathan Myhrvold’s Contributions to Culinary Science:
Myhrvold is recognized for his extensive work in culinary science, including his groundbreaking cookbook series that explores the science and techniques of modern cuisine.

Nathan Myhrvold’s Journey:
Nathan Myhrvold’s diverse career path included working with Stephen Hawking in physics and Bill Gates in the computer industry, reflecting his passion for intellectual ventures. Myhrvold’s love for cooking began at a young age, leading him to pursue professional chef training in France during his time at Microsoft.

Modernist Cuisine Project:
After retiring from Microsoft, Myhrvold focused on cooking and initiated the “Modernist Cuisine” project. The project resulted in a comprehensive book series, with the main book spanning 2,438 pages and a smaller “Modernist Cuisine at Home” version at 700 pages. The books aimed to communicate Myhrvold’s love for cooking, explain how cooking works, and include state-of-the-art information, catering to both curious readers and experts.

Addressing the Question:
A question from the audience raised concerns about traditional financial markets not investing in patents and inventions despite potential opportunities. Myhrvold explained that this hesitation is similar to the initial skepticism faced by venture capital and private equity in their early stages. He emphasized the need for investors to understand the long-term potential of investing in patents and inventions.

Importance of Sufficient Investment:
Myhrvold highlights the significance of investing in a substantial number of patents to achieve meaningful returns. He emphasizes that limiting investments to a small amount, such as $30 million, would have resulted in skewed results and a false perception of success. Myhrvold stresses that average luck would have led to no returns, demonstrating the need for a comprehensive portfolio approach.

Venture Capital and Historical Funding:
Myhrvold draws a comparison to the traditional funding options for entrepreneurs, such as wealthy relatives or figures like old man Potter from the film It’s a Wonderful Life. He notes the absence of professional sources of funding for new companies throughout much of American history, despite the existence of numerous entrepreneurs.

Differentiation from Competitors:
Myhrvold addresses the question of how Intellectual Ventures differs from companies like Ocean Tomo, Acacia, and Intellectual Property Reserve. He clarifies that Intellectual Ventures focuses on broad investments in technology industry patents, sourced from reputable inventors with strong provenance. Myhrvold emphasizes their commitment to avoiding patents of questionable validity, ensuring the quality of their portfolio.

The Uniqueness of Patents in the Auction Market:
Patents, unlike houses, are not well-suited for auction formats due to the complex and unique characteristics of each invention.

The Nortel and Kodak Examples:
The Nortel auction was successful due to multiple bidders actively evaluating the patents’ potential. The Kodak transaction involved a different scenario and highlighted the challenges of valuing patents in an auction setting.

Acacia’s Evolution:
Acacia began as an internet technology company with its own inventions in video compression and streaming. Over time, Acacia expanded its business model to include acquiring patent portfolios from external sources and competing with other entities in the market.

The Timing Dilemma for Startups:
Startups face the challenge of finding the right moment to enter the market, balancing the need for speed with the risk of being too early.

Patents’ Longevity and Value:
Patents have a longer lifetime compared to business entities, making them valuable assets even if their applications are not immediately mainstream.

The Importance of the Rule of Law:
Commerce relies on the rule of law and respect for property, including intellectual property. Intellectual property is a sophisticated invention that facilitates innovation and economic growth.

Introduction of Intellectual Property’s Value:
Nathan Myhrvold emphasizes the significance of intellectual property, highlighting that ideas possess immense value, just like physical commodities such as gold. He stresses the importance of investing effort in intellectual property and treating it as valuable assets. Myhrvold emphasizes the need to change people’s perception of intellectual property as intangible and less valuable compared to tangible assets.

Comparison to Dining and Dashing:
Myhrvold draws a parallel between individuals in the technology industry who engage in unethical practices, such as “dining and dashing,” and the theft of intellectual property. He emphasizes that stealing intellectual property is wrong and should not be tolerated. Myhrvold stresses the importance of adhering to the rule of law and respecting intellectual property rights.

Intellectual Property and Manufacturing:
Myhrvold clarifies that even though Intellectual Ventures does not manufacture physical products, it plays a crucial role in the creation of products. He explains that companies like Apple, which hold intellectual property rights, do not directly manufacture their products but rely on manufacturers in countries like China. Myhrvold emphasizes that the 20th century witnessed the triumph of ideas, and the 21st century will continue to be shaped by intellectual property.

Conclusion:
Myhrvold concludes his presentation by expressing gratitude for the opportunity to speak and highlights the centrality of intellectual property in shaping the world in the coming century. The moderator expresses appreciation for the insightful presentation and announces a brief break before resuming the conference with three different tracks.