FACTORY OF THE FUTURE?

But Myhrvold also intends to make money for his backers, not just to protect them. This is where the critics start to get anxious. "We're concerned that these giant pools of patent rights are going to prevent entrepreneurs from entering markets, as opposed to being used to promote innovation," says one worried Silicon Valleyventure capitalist. But Intellectual Ventures could do many things, observers say. It could demand licensing fees from its investors' rivals, companies like Yahoo and Amazon. It could also corner the market in a new technology, like a speedier silicon processor, and charge microchip makers a tithe to use it. Or Myhrvold could change directions altogether and start building actual companies around the best ideas.

Myhrvold and Jung won't exactly say. But they charge that Silicon Valley companies have stolen other people's inventions for too long while slashing their own R&D budgets. Referring to Intellectual Ventures' portfolio of patents as his own, he says, "If giant corporations are making billions of dollars off my ideas, I want something for it, and I don't think there is anything wrong with that." He expects his business plan will draw controversy, but notes, "Everything new in life is opposed by somebody." He also cites as a model the electronics companies that pool their DVD patents. Manufacturers that want to make DVD players now have to pay these consortiums small fees for the rights. Yet even with this tech tax, the cost of players has dropped sharply during the DVD boom.

Where is all this headed? Myhrvold reflects on his early days at Microsoft when he was criticized for selling pure software, a collection of ethereal bits unattached to something tangible like computer hardware. Today, this "ethereal" industry is one of America's largest, and Myhrvold repeats almost as a mantra, "Intellectual property is the next software." In other words, he expects a whole new industry of firms like Intellectual Ventures that deal only in the currency of ideas. He is so sure of it, he has even adopted a new hobby: studying for the patent bar exam.

© 2004