Friday, May 06, 2005

The New American Business Model

After seeing Microsoft's announcement this week, I started pondering again. Could we be seeing a new way America does business?

I discuss how Microsoft is buying and licensing their intellectual property (patents) in my post here .

Is this the New American Business Model?

The Dot Com Bubble created and destroyed many business models. Strangely, however, the failure of many destroyed companies is playing a key role in the New American Business Model.

Many of these failed businesses left behind a plethora of intangible assets (patents and an abundance of intellectual property). In many instances, these patents are languishing because bankrupt companies and/or individuals lack the capital/capacity to pursue licensing deals, let alone patent enforcement.

Outsourcing by American businesses has moved manufacturing and services to countries with cheaper labor. However, American intellectual property is not outsourced and is being aggressively enforced. Hence, a new business model has developed in the venture capital and technology world. The pure patent play.

When one of the smartest guys in tech world and former chief tech officer at Microsoft (Nathan Myhrvold) starts a business you take notice. But when Microsoft starts backing a good portion of his project, then I want to get involved too.

To see what I'm talking about, do a Google on "Intellectual Ventures".

Do you see where this is headed? Intellectual Ventures is buying up patents/IP that Nathan and crew see that will/have significant value. Then Microsoft opens up their intellectual property library and licenses it out. This is another indirect way of dominating in the technology world for Microsoft.
They look like the good guy by offering up their IP for companies to create new businesses. They generate licensing revenues at the same time.

Microsoft can also afford to hire the best patent attorneys and see what companies are infringing on their patents and notify accordingly. What is a company going to do, fight Microsoft in court?

What bugs me is that Microsoft is behind the Electronic Frontier Foundation (EFF), an organization that is dedicated to stopping patents that were issued recklessly. Isn't it more of a "I wish we would have thought of that" that really bothers them?

Microsoft got their hand slapped by the courts because they felt MSFT had a monopoly in the operating system world. Isn't the EFF trying to prevent a monopolistic like atmosphere in the world of IP? And Microsoft is backing this organization. Interesting.

Intellectual property is created in America, sold in America, and now aggressively being enforced in America.

The New American Business Model is being created, and all businesses will have to factor this into all decisions.

1 comment:

Ron said...

Steve, Where IP initially was set up to inform others about the invention. IP has gone mad and agressive enforcement is a real thread for business, innovation, creativity, etc. Very unfortunate is also the difference beteen American and European law and the fact patent attorneys just really are the worst advisors I ever met and not pro active. Also not possible in Europe is IP lease.

Funny to see how in Chinese culture the word "copy" does not exist, there are 30000 (!) patent infringement cases right now against Chinese firms and the government realised this is serious and now plans 100's of patent bureau's in China.

IP has gone way out of focus of its initial purpose and became a playground of lawyers and companies with a buck to spend.....

I love and hate it but at least it keeps me challenged to be innovative and think of new things :-)

Regards, Ron