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Intellectual Ventures took its first steps into Asia in 2005, later securing a dedicated Invention Development Fund for its operations in the region. Questions have been raised, however, about this fund’s performance. A Forbes article in June called it a “complete disaster”, reporting: “It is yet to distribute a single penny to its investors and according to UTIMCO [University of Texas Investment Management Company – an investor in the fund], its IRR is -69.23%.” Passions run high when it comes to Intellectual Ventures, and there is something almost gleeful about the way this supposedly bad news has been reported. But on a recent visit to Japan I met up with IV’s director of international marketing Nick Gibson, and it became apparent that the story is not quite as it seems.
Gibson explained that the statistics in this report come from a time before the IV Asia fund started to monetise its assets. This has only been happening since the end of 2011. The reason that the apparently negative figures became available when they did is because UTIMCO is obliged to make all of its investments public. However, Gibson stated, investors in the IV fund are aware that it is a long-term commitment. This is because IV’s business model in Asia is quite different to their familiar patent-purchasing strategy.
When IV first moved into Asia it was with a specific remit of forming partnerships with inventors and working with them towards commercialisation; there was an express ban on purchasing patents. Investors, Gibson stated, understand that it is going to take sometime before they start to see a significant return. But, he claimed performance is actually ahead of target: “We are doing fine - we have revenue coming in, more than expected at this stage, and we are signing up new companies.”
Cynics might argue that IV is not likely to say anything else, but the facts do seem to support what Gibson says. IV has certainly been expanding its Asian operations; the Tokyo branch, for example, has already grown from a three person team to a 20-strong office. As the forerunner in the region, it has been able to act as the model for the firm’s other Asia branches in Korea, Taiwan, India and Singapore.
With the assistance of IV’s recently refurbished website, Gibson explained in detail how IV’s partnership arm operates. To start with, IV releases what it calls RFIs -‘requests for invention’ - to its global network of around 4,000 inventors and 400 universities and research institutions, in areas that the company believes are ripe for innovation. The inventors then come back with their ideas, and, for those that look good, IV starts the patent application process. “The point is we start very early stage, so it takes around three and up to five years to get most patents,” Gibson explained. “We started in Japan in 2005, so we began getting patents issued in 2008/2009. So we have had a few years of getting patents issued and we are now taking them to companies.” These patents are then either offered ‘as-is’; or they are used to build prototypes which are also offered to potentially interested parties to buy or license.
“We began the process of going out into the market about a year ago, and some of those deals are starting to close – we have successfully transferred technology to a number of companies,” Gibson explaned. He was unable to speak in detail about most of these deals, but one that is in the public domain is with a Taiwanese company called Chunghwu Picture Tubes (CPT). IV’s Asian offices are not necessarily focused on finding commercial partners just in the region; but Gibson noted that having several bases in the Asia Pacific makes it much easier to have face-to-face meetings with local companies, demonstrate how the model works, and, he wryly added, to tackle any misconceptions that they might have about what IV does.
Gibson reported that IV is making headway with domestic companies in Japan. This is significant given that conservative Japanese businesses are not noted for their enthusiasm for working with intermediaries, particularly foreign ones. “In Japan there has been a lot of attention paid to the concept of open innovation,” he said, “and they recognise that there has been a movement where companies are sourcing inventions outside more and more.” Also, it probably helps that IV’s country head for Japan, Masanobu Katoh, has a wealth of experience from his previous career at Fujitsu, where he was executive vice president of the Fujitsu Research Institute.
Yet despite its increasingly strong presence in the region, IV is probably less well known in Asia than it is in the US and Europe – even among those who work in the IP field. This low profile is surprising, and would be seen as a problem to most companies looking to expand into new markets. But for IV, preconceptions, misconceptions and negative publicity about what the company actually does is probably a greater hindrance. Starting with a fresh sheet may well turn out to be no bad thing.
IP management, IA management, IP business