Yan said that one of the biggest misconceptions about Intellectual Ventures was that it is a non-practising entity. The company is best known for acquiring for large patent portfolios and licensing out those technologies and its critics allege that its business model is built on litigation backed by patents of dubious quality.
Yan acknowledged that the company does not manufacture or produce any products but stressed that Intellectual Ventures also generates its own IP through its in-house research arm, Intellectual Ventures Labs. In addition, the company has a network of affiliated researchers of about 4,500 inventors.
It is perhaps more accurate, he argued, to say that Intellectual Ventures is a “non-producing entity”.
According to Yan, the in-house researchers try to fill gaps in the company’s patent portfolio. Most of Intellectual Ventures’ research focuses on information technology, physical sciences and life sciences.
Despite this focus on the company’s in-house research, most of Intellectual Venture’s licensing revenue comes not from exploiting this work, but rather from IP it has acquired. Yan said that about 10% of the company’s licensing revenue comes from its internally developed IP.
He also downplayed the role of litigation in Intellectual Ventures’ business plan, pointing out that the company has not received any revenue from litigation. However, he does state that the company does have revenue from settlements, and this is counted as part of its licensing revenue. The company has approximately $2 billion of annual licensing revenue.
Yan said that like any other business that relies on IP, Intellectual Ventures will never give up the option to use litigation. He added that while the company has approached companies for licences once a product is on the market, it prefers to offer to partner with businesses earlier in the development cycle, sometimes even asking another firm to begin development on a new product based on its IP.
Intellectual Ventures has seen its share of controversy. The Bellevue-based firm has been accused of employing “mafia-style” tactics to secure licensing agreements from unwilling partners. After a much-discussed National Public Radio story about its practices, one Forbes blogger even held up Intellectual Ventures as a prime example of why software patents should be abolished.
Nevertheless, Intellectual Ventures has seen considerable success and is expanding its presence in the Asia-Pacific, staffing a new office in Hong Kong. Yan said that the company’s approach in China has to be different from other regions.
“In the US and Europe, our business is pretty large company-centric, and awareness of IP is very strong, so things are relatively straightforward”, he explained.
In China, however, the understanding of the importance of IP and the protection of IP still lags behind, Yan noted. Because of this, Intellectual Ventures is more focused on smaller and medium-sized enterprises in the country. It is also working with government organisations such as SIPO to improve IP awareness and protection.
Although Intellectual Ventures’ methods might be controversial, in this one aspect it is very much like other enterprises looking to do business in China.
Yan spoke to Managing IP at the Business of IP Asia Forum, hosted by the Hong Kong Trade Development Council.
