FACTORY OF THE FUTURE?

The offices of the highly secretive Seattle-area start-up, Intellectual Ventures, are filled with evidence of the multiple hobbies of its polymath founder, Nathan Myhrvold. The multimillionaire former chief technologist at Microsoft is a scientist, so there's a collection of antique microscopes in his office. He is a photographer, so striking pictures of nature adorn all the walls. He is an avid writer, so antique typewriters line the hallway. And since he is also a paleontologist, the full-scale head of a T. Rex lords it over the lobby. It's actually a replica of the model used in the second "Jurassic Park" film.

The dino's ferociously bared teeth hint at elements of Intellectual Ventures' bold business plan. Myhrvold and his partner, former Microsoft chief software architect Edward Jung, have created the quintessential company for the 21st century. It doesn't actually make anything: it outsources, offshores and offloads nearly every task performed by regular corporations. It has no factories, machine shops or marketing teams. Only patent attorneys populate the quiet hallways. The five-year-old firm's plan is to create or buy new ideas, accumulate patents--exclusive rights to use the inventions--and rent those ideas to companies that need them to do the gritty work of producing real products. Because today's businesses are constrained by their need to make money, Myhrvold says, "it is irresponsible for them to think wildly outside the box." He wants to fill that innovation gap--"We are thinking wilder, crazier thoughts than anyone else."

To generate patentable ideas, Intellectual Ventures hired a dozen top scientists as part-time consultants to participate in several all-day gabfests each month, which the company calls "invention sessions." Lawyers transcribe the discussions, which can range from biotech to nanotech to solid-state physics, and follow up on the most promising ideas with patent applications. One participant, Dr. Leroy Hood of the Institute for Systems Biology in Seattle, says: "We are thinking about how you can solve problems that have never been solved before." Since the company has been holding sessions for only a year, it has likely produced about a hundred ideas whose patent applications won't be processed--or start earning any money--for at least three years.

But spinning new ideas is only a small part of the plan. Sources familiar with Myhrvold's strategy say that he has raised $350 million from some of the largest companies in high tech: Microsoft, Intel, Sony, Nokia and Apple. Google and eBay also recently invested. With this large bankroll, the company is out buying existing patents in droves. (Myhrvold won't comment on these activities, but sources say he has already purchased about 1,000 patents.) The strategy is to set up a sort of patent marketplace. Patent owners get money upfront for the dusty ideas sitting on their shelves, the investors get the rights to use the ideas without being sued and Myhrvold gets to rent those same ideas to other companies that need them to continue creating products. Intellectual-property experts say his plan is audacious and unprecedented, customized for a new, rapidly dawning business environment.

In this new world, intellectual property is every company's most prized possession--and biggest vulnerability. It has al--ready become America's No. 1 product and export: last year in the United States, for example, movie sales in theaters and as DVDs and videos exceeded the overall sales of steel. Intellectual property is now an asset with independent value that can be bartered, sold or battled over. Large companies have always accused their rivals of capitalizing on their ideas, of course. But now companies with more patents than actual products and a few bloodthirsty lawyers on the payroll have no reason to strike partnerships; they are out to win lawsuits. And the biggest companies with the most products that conceivably trample the most patents are sitting ducks. Last year, for example, Microsoft was ordered to pay $520 million for violating the patent of one employee firm, Eolas, which claimed to own the way users could get videos or songs inside a Web browser (Microsoft is appealing).

This is where Intellectual Ventures steps in. It is buying patents from all corners of the high-tech world, including those that could pose legal threats to its powerful investors. An Intellectual Ventures e-mail sent to law and consulting firms last year, and obtained by NEWSWEEK, says the company is "interested in purchasing patents and applications in the areas of software, e-commerce, communications, semiconductors, consumer electronics and computer architecture--basically, just about anything that deals with bits." By buying all these patents, Intellectual Ventures ensures they cannot be used against its investors by gadflies like Eolas.