Myhrvold Claims His Patent Purchases Benefit Small-Time Inventors

PatentSettlementGraph.gif Source of graph: online version of the WSJ article quoted and cited below.

(p. A1) Millionaire Nathan Myhrvold, renowned in the computer industry as a Renaissance man, has a less lofty message for tech companies these days: Pay up.

Over the past few years, the former Microsoft Corp. executive has quietly amassed a trove of 20,000-plus patents and patent applications related to everything from lasers to computer chips. He now ranks among the world’s largest patent-holders — and is using that clout to press tech giants to sign some of the costliest patent-licensing deals ever negotiated.
. . .
(p. A21) Mr. Myhrvold says the fact he doesn’t make actual products is irrelevant. He stresses that Intellectual Ventures helps small-time inventors by providing them with an aggressive buyer to sell their patents to.
Intellectual Ventures, which has about $5 billion under management, bears some similarities to a private-equity firm that operates investment funds for the benefit of investors. However, its largest fund has an unusual structure in which fund investors are also responsible for the lion’s share of the fund’s returns.
It works like this: Technology companies agree to pay patent-licensing fees to inoculate themselves against potential lawsuits by Intellectual Ventures. These fees are how the fund generates its returns. As part of the deal, though, these same companies also put up the cash Mr. Myhrvold uses to buy more patents, receiving an equity stake in the fund in return.

For the full story, see:

AMOL SHARMA and DON CLARK. “Tech Guru Riles the Industry By Seeking Huge Patent Fees.” The Wall Street Journal (Weds., SEPTEMBER 17, 2008): A1 & A21.

(Note: ellipsis added.)

MyhrvoldNathan2009-02-15.jpg

“Nathan Myhrvold’s message for tech firms: Pay up.” Source of caption and photo: online version of the WSJ article quoted and cited above.

Inability to Patent Sulfa, Delayed Its Marketing

When new uses of old, unpatentable drugs are discovered, there seems to be inadequate incentive to publicize them, and bring them to market. (For example, I think I have seen research suggesting that aspirin and fish oil capsules, are as effective in fighting heart disease as some newer drugs, but are nonoptimally utilized because of perverse incentives.) Maybe a revision of the patent law should be considered that permits some patenting of new uses of old drugs and substances?

(p. 172) It was wonderful that this powerful, inexpensive medicine was now available, but for a year after the Pasteur Institute announcement, no one marketed it seriously in its pure form as a medicine. Because it was not patentable, it was difficult for major chemical or drug firms to see a way to make much of a profit from it. It was not until months after the Pasteur group’s first publication on sulfa that the president of Rhône-Poulenc, an industrial supporter of Fourneau’s laboratory, visited the Pasteur Institute to hear about it. After talking with the researchers he decided to launch Septazine, a variation on pure sulfa that he felt was different enough to allow patenting—and hence profits. Septazine reached the marketplace in May 1936.

Source:
Hager, Thomas. The Demon under the Microscope: From Battlefield Hospitals to Nazi Labs, One Doctor’s Heroic Search for the World’s First Miracle Drug. New York: Three Rivers Press, 2007.

French Entrepreneur Fourneau Was Against Law, But Used It

The existence and details of patent laws can matter for creating incentives for invention and innovation. The patent laws in Germany and France in the 1930s reduced the incentives for inventing new drugs.

(p. 141) German chemical patents were often small masterpieces of mumbo jumbo. It was a market necessity. Patents in Germany were issued to protect processes used to make a new chemical, not, as in America, the new chemical itself; German law protected the means, not the end.   . . .
. . .
(p. 166) Fourneau decided that if the French were going to compete, the nation’s scientists would either have to discover their own new drugs and get them into production before the Germans could or find ways to make French versions of German compounds before the Germans had earned back their research and production costs—in other words, get French versions of new German drugs into the market before the Germans could lower their prices. French patent laws, like those in Germany, did not protect the final product. “I was always against the French law and I thought it was shocking that one could not patent one’s invention,” Fourneau said, “but the law was what it was, and there was no reasons not to use it.”

Source:
Hager, Thomas. The Demon under the Microscope: From Battlefield Hospitals to Nazi Labs, One Doctor’s Heroic Search for the World’s First Miracle Drug. New York: Three Rivers Press, 2007.
(Note: ellipses added.)

Good Laws Protect the Innovator

James Burke writes well, and what he writes is often stimulating, and thought-provoking. On the other hand, some of what he writes is exasperating—he writes in sweeping generalities, and often his ‘connections’ are exaggerations, giving no weight (or even mention) to alternative, equally plausible accounts.
But on balance, I enjoy listening to him. Here is one of the bits I especially liked:

(p. 19) Because the rule of law exists, and above all because it encourages and protects acts of innovation with patent legislation, we in the modern world expect that tomorrow will be better than today. Our view of the universe is essentially optimistic because of the marriage between law and innovation. Law gives an individual the confidence to explore, to risk, to venture into the unknown, in the knowledge that he, as an innovator, will be protected by society.

Source:
Burke, James. The Day the Universe Changed: How Galileo’s Telescope Changed the Truth and Other Events in History That Dramatically Altered Our Understanding of the World. Back Bay Books, 1995.

Controversial Patent Reform

PatentBarGraphs.gif    
Source of graph:  online version of the WSJ article quoted and cited below.

(p. A3) The sweeping patent initiative — backed by a business coalition dominated by technology companies such as Cisco Systems Inc. and Microsoft Corp. — would . . . shift the balance of power of the U.S. patent system. It would make it a bit harder for holders to protect patents.  Advocates of the legislation contend the current system encourages patent litigation and costly judgments against infringers — and stifles innovation.  They say the proposals are designed to bring patent rules in line with the rapidly changing U.S. economy, where inventions often reflect hundreds of potentially patentable ideas.

Mark Chandler, Cisco’s general counsel, dismissed concerns that non-U.S. companies might gain some advantage by the bill. He said the proposed changes would strengthen companies at “the heart of innovation in the American economy,” better positioning them to compete at home and abroad.

Opponents of the legislation argue that it would make it easier for foreign competitors to legally copy patented methods and products.

For the full story, see:
GREG HITT.  “Patent System’s Revamp Hits Wall; Globalization Fears Stall Momentum in Congress; AFL-CIO Sends a Letter.”  The Wall Street Journal  (Mon., August 27, 2007):   A3.
(Note:  ellipsis added.)

Alaska Air Used Skunk Works to Develop Check-In Innovation

 

AlaskaAirDeparturesTable.gif   Source of graphic:  online version of the WSJ article cited below.

 

The innovation described in the article excerpted below is credited as arising from a ‘skunk works’ project.  There’s a neat book called Skunk Works that describes how Lockheed set up an autonomous unit to develop the first stealth air force technology.  (Their plant was in a smelly part of town, so it was dubbed the ‘Skunk Works.’)

Clayton Christensen has recommended that established incumbent companies set up skunk works operations in order to develop disruptive technologies that would not survive if they were developed within the main corporate culture and infrastructure. 

(In the article excerpted below, it is puzzling to read that Alaska Air went to the trouble to take out a patent, even though they apparently have no intention of enforcing it.) 

 

(p. B1)  ANCHORAGE, Alaska — When the Ted Stevens Anchorage International Airport was planning a new concourse, prime tenant Alaska Airlines insisted on a counterintuitive design: "The one thing we don’t want is a ticket counter," said Ed White, the airline’s vice president of corporate real estate.

So the 447,000-square-foot Concourse C, which opened in 2004, has only one small, traditional ticket counter, even though the carrier’s 1.2 million Anchorage passengers checked in through that area last year. This unconventional approach — which uses self-service check-in machines and manned "bag drop" stations in a spacious hall that looks nothing like a typical airport — has doubled Alaska’s capacity here, halved its staffing needs and cut costs, while speeding travelers through the building in far less time.

. . .

(p. B4)  Alaska’s design in Anchorage has turned heads in the industry, and in 2006 the airline was awarded a U.S. patent for the check-in process, something it calls the two-step flow-through. Mr. White says his company isn’t trying to keep competitors from going down the same path, but pursued the patent more to reward the many employees who helped to bring the idea to fruition.

Other airlines quickly sent scouts up to Anchorage to check out the new concourse, including a team from Delta Air Lines Inc., Mr. White says. A few months ago, Delta completed a $26 million renovation of its check-in hall at Hartsfield-Jackson Atlanta International Airport, and the finished product looks remarkably similar to that of Alaska Airlines. Greg Kennedy, Delta’s vice president for customer service there, says the new layout has enabled the airline to process passengers checking in during the peak spring break travel period in 20 to 30 minutes at most, compared with two or three hours three years ago — and all in the same amount of square footage but 50% more usable space. Mr. Kennedy says he isn’t aware of a visit to Anchorage but doesn’t dispute it.

. . .  

Alaska, the nation’s ninth-largest carrier by traffic, started a "skunk works" lab a decade ago to figure out how to use technology to make air travel less of a hassle for passengers. Out of that effort came the airline’s ground-breaking ability to sell tickets on the Internet and allow fliers to check in online, developments other carriers quickly followed.

 

For the full story, see: 

SUSAN CAREY.  "Case of the Vanishing Airport Lines; Alaska Air Speeds Up Flow Of Passengers by Jettisoning Traditional Ticket Counters."  The Wall Street Journal  (Thurs., August 9, 2007):  B1 & B4.

 

  Source of graphic:  online version of the WSJ article cited above.

 

Entrepreneur Bets His Wealth on a Risky, Important Project

 

  "Alfred E. Mann, at his home in Beverly Hills, Calif., has put nearly $1 billion of his own money into developing an insulin that can be inhaled."  Source of caption and photo:  online version of the NYT article quoted and cited below.

 

(p. C1)  LOS ANGELES, Nov. 15 — Pfizer, the world’s biggest drug company, flopped miserably with a seemingly can’t-miss idea. But Alfred E. Mann is so certain he can succeed that he is betting nearly $1 billion of his own money on the effort.

Pfizer’s failure was a form of insulin that people with diabetes could inhale rather than inject. But last month, after selling only $12 million worth of inhaled insulin in the first nine months of the year, Pfizer said it would take a $2.8 billion charge and abandon the product.

Mr. Mann, the 82-year-old chief executive and controlling shareholder of the MannKind Corporation, is not deterred. He says his company’s inhalable insulin is not just a way to avoid needles but is medically superior to Pfizer’s product and to injected insulin.

If he is right, he could help change the way diabetes is treated.

“I believe this is one of the most valuable products in history in the drug industry, and I’m willing to back it up with my estate,” Mr. Mann said at his 23,000-square-foot mansion overlooking the San Fernando Valley. The interview took place on a Saturday evening, which Mr. Mann said was the only opening in his seven-day work schedule.

Despite Mr. Mann’s remarkable entrepreneurial career — he has founded more than a dozen aerospace and medical device companies — there are people who wonder whether he has so much invested in this latest effort, both financially and emotionally, that he cannot see any odds against him.

“I don’t know of an individual who has spent as much of a personal fortune on a long shot,” said Andrew Forman, an analyst with WR Hambrecht & Company. Mr. Forman said MannKind faced numerous regulatory and patent challenges, as well as possible competition from the leaders in injected insulin, Eli Lilly and Novo Nordisk, which are also developing inhalable products.

 

For the full story, see:

ANDREW POLLACK. "Betting an Estate on Inhaled Insulin." The New York Times  (Fri., November 16, 2007):  C1 & C5.

 

  "The inhaled insulin device, about the size of a cellphone."  Source of caption and photo:  online version of the NYT article quoted and cited above.