A Market in Ideas

Yesterday I came across a piece on MarketWatch, “Silicon Valley woes create buyers’ market for Ideas.”

From Marketwatch:

When storm clouds started gathering over the U.S. economy last fall and the stock market’s value began vanishing, many touted the strength of one of the least-sexiest of assets: intellectual property.

But in recent months the downturn has forced many Silicon Valley start-ups built on the bedrock of patents to fold, creating a flood of freshly-available, legally-protected ideas. That’s created a buyers’ market for intellectual property, drawing in a broad range of prospective investors interested in picking up the rights to anything from corporate data center technology to a method for sending ringtones to a mobile phone.
“IP is the new gold,” said Martin Pichinson, whose firm Sherwood Partners LLC helps wind down failed start-ups and sell off their assets, including patents. Pichinson said he’s now receiving four to five calls per week from investors looking to close a company down, compared to between one and two calls per week prior to the downturn.
Meanwhile, interest in orphaned patents coming onto the market has grown. “We are getting calls from everyone,” Pichinson said, adding that a quality portfolio of patents can usually sell for between $800,000 and $1 million.
I find the intellectual capital trade very interesting.  Back at my typepad blog a while back, I posted about the intangible asset bubble, its relationship to the credit crunch and how a great deal of the IP is worthless without the actual capital behind it.  I still think this is the case and what we are seeing here is the beginning of an unwind, not the start of some “boom”.
Without enough capital to fully develop an idea, its just, well, an idea.  Sure patent trolls can scoop them up and hope to leech off of those who actually develop it, but thats not productive in an economy.
This “bursting” of the IP bubble need not be an altogther bad thing.  One idea I’ve had is a vision of an idea investment bank, where you have knowledge workers simply coming up w/ ideas and patenting them.  This bank can then go out and market these patents and knowledge workers themselves to companies who can use the ideas and either wish to execute them themselves, or contract out the bank itself (and those who developed the patent to go out and execute or set up the company to execute the idea).  This allows companies to basically outsource their R&D expenses to a shop where R&D thrives and is not caught up in the entire corporate mentality, and still hold the patent on their own balance sheet, that now has a much more liquid market.
While the awful truth is that many companies write up their intangible assets to whatever balances their books (since they are intangible and can be worth whatever you say they are), and thus capatilizing R&D comes to somewhat of an “advantage”, a more liquid market and supply chain for ideas woudl be something that would have good impact on the innovation in industry in general.   An interesting company to watch in this space is  Ocean Tomo, as they are making strides to be the “exchange” for IP.

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