Myhrvold introduced Intellectual Ventures as the 17th largest patent holder globally and the fifth largest within U.S., including its controlling investments in other patent holders. But Intellectual Ventures has also been described by critics as a "patent troll" for seeking to enforce patent rights it has acquired rather than developed in the course of developing original products.
At the same time however, Myhrvold also noted significant, potentially revolutionary inventions Intellectual Ventures has developed and plans to spin off as subsidiary companies, including the TerraPower nuclear reactor described as as innovative solution to the issues of perceived safety, toxic waste and limited uranium that affect existing reactors.
Myhrvold said today's reactors can only burn 7/10 of 1% of raw uranium fuel, requiring an enrichment process that results in weapons grade material. TerraPower burns the waste of conventional reactors as fuel without requiring reprocessing, so its fuel can't be used to make weapons. As such, Myhrvold referred to TerraPower as the "reactor of your dreams."
Myhrvold also touted Intellectual Ventures' invention of a new type of antenna he said would revolutionize mobile broadband. Based on the emerging technology of "metamaterials," the new super high bandwidth antenna isn't a dish. Because satellites use short wavelength, gigahertz radio frequencies that act more like light than sound, their signal must currently be focused by a dish. These are difficult to use when the dish is moving, because they require motorized tracking of the satellite in the sky.
The invention uses an "electronically steerable" panel, created with metamaterials that take on unique properties that can be changed electrically. In this case, a flat panel antenna can be programmed electronically to track and focus on the signals of a particular satellite, without motorized dish.
In defense of patents
In cases where companies develop wildly innovative new concepts, there is less criticism of the patents they develop. However, Intellectual Ventures also buys huge patent portfolios and then seeks to monetize them, a practice that has generated controversy and incited animosity among critics that charge the firm with simply being a patent troll and stifling open innovation.
Myhrvold defended Intellectual Ventures in saying, "we think there should be liquid capital market around any valuable entity," referring to patents as "invention capital" and comparing it to venture capital, private equity and public stock markets. The way our system works, Myhrvold said, is that multiple companies compete. He argued that Inventors should also get rich, be able to find funding and that the capitalist incentive should result in more invention.
Myhrvold noted that major inventions that can one can spin off as a company are rare, and that more often a patented idea relates to a component that can be licensed to others, which is what Intellectual Ventures principally does.
He referred to the lawsuits Apple filed against Microsoft in the late 1980s, noting that at the time, neither Apple nor Microsoft were patenting much of anything. In the early days of personal computing, companies focused on copyright of code, as everyone was adapting the ideas others had pioneered. But in mature industries, Myhrvold argued, companies respect patent rights, citing biotech as a primary example. Without patents, Myhrvold said, there would be no innovation in biotech because they are the incentive that allows both small and larger companies to invest in the expensive, long term research required to bring ideas to market.
All Things Digital host Walt Mossberg challenged Myhrvold's defense of aggressive patent enforcement, noting that "Apple is an active company, and its patents are reasonably related to the business it's in. How does buying up patents contribute to society?"
Myhrvold answered that lots of people own patents and aren't prepared to use them. If you don't enforce your rights, nobody will enforce them for you. Even Fortune 500 companies don't necessarily have the resources to develop patented ideas, Myhrvold said, noting that a real research group is now a rare thing.
"Most CFOs see [pure research] development as a roach motel for dollars. The dollars check in but they don't check out," Myhrvold said. However, if you can show value in the effort of inventing, it supports the idea of investing to develop new ideas he added.
Asked by Mossberg how he would you change patents, Myhrvold cited the American Invents Act, which he said had spent seven years in lobbying process, gaining both good and bad elements, but ending up "as good of a compromise as could be made." Many of the problems with patents have been and are being settled by court decisions he added.
Further challenged by Mossberg to defend the wastefulness of patent litigation in the courts, Myhrvold replied, "patents are as wasteful as any head to head competition."
Patents and paintings
Borrowing a phrase from Apple's chief executive Tim Cook, Myhrvold said, "it's wrong for companies to sign their name to paintings they didn't paint."
Myhrvold himself got started in the tech industry in the early 1980s by knocking off IBM's TopView, a multitasking environment for DOS. His company, Dynamical Systems Research, sought to produce a clone product named Mondrian, and was ultimately acquired by Microsoft in 1986. Myhrvold continued at Microsoft through the end of the 1990s before leaving to found Intellectual Ventures in 2000.
One audience member critical of Intellectual Ventures noted that "ideas are dime a dozen," arguing that it is actual execution of ideas that benefits society and that greed was stifling innovation. He further described the difference between patenting innovations in the course of internal development and simply buying patent portfolios and broadly seeking royalty fees or injunctions through the courts as being "apples and oranges," to which Myhrvold retorted, "well Apple and something. Apple and Android."
Apple and patents
As Mossberg began asking, "If you had Tim Cook's job..." Myhrvold interjected, "I wouldn't be as good as he is!"
Myhrvold noted that historically, the bulk of the money being made in mobile was made by carriers. "The miracle of Steve Jobs was to make a phone that's so cool that the carriers are not going to mess with you. You get [subsidized phone] rebates, and you get to own App Store and iTunes. Because they're so special and different, they have a fantastic business."
Myhrvold characterized the iPhone as "one of the great achievements of the 21 Century," noting that Android undercuts the specialness. "Apple doesn't want to be the R&D lab for people who give it away for free because they have a monopoly on another business."
Myhrvold also compared the hit or miss value of patented ideas with the bating average of baseball players, noting that a good batter hits 350 to 400, or in other words misses 60 percent of the time. He cited Apple's Newton project and the related patented ideas that were spun off as General Magic in the early 90s as being examples of innovation that were not successful because they were too early and ahead of their time.
General Magic's patents were subsequently acquired by Microsoft, rewarding the inventors and their investors at least to some extent. At the time, Myhrvold noted that he was surprised to see people within Microsoft expressing the idea that patents they were seeking to buy were too expensive, despite those employees being paid millions for their own ideas.
"Investing in patents," Myhrvold later said, "is no different than investing in companies."
Asked by an audience member how Intellectual Ventures values the patents it seeks to buy, Myhrvold said it's really hard because you have to understand if they are actually valid and uncontested by prior art, if they are well written, will they be relevant in an important market. "It's a difficult job," he said.
Answering why Intellectual Ventures generates so much animosity (evident in the reactions of audience), Myhrvold said it was "based on sense of entitlement," adding, "if people don't find what you're doing threatening, it's probably not very important. Things that are important are not popular at first."