Semiconductor IP News and Trends Blog

Will Patent Trolls Liquify the IP Market?

Litigation affects the selection process of design IP. Is a liquidity market for inventions the answer?

Engineers rarely worry about the business side of semiconductor intellectual property (IP). But perhaps they should, in light of the effects of recent patent litigation issues. Selecting the best IP for a System-on-Chip (SoC) may depend as much upon technical soundness as patent vulnerability.

Designers may wish for a life free from the uncertainties of IP litigation promoted by non-inventor investment groups who acquire patents for the sole purpose of suing to enforce payment on those patents. With all the attention on the negative effects of similar business models – e.g., Bain Capital Investments – one wonders if patent trolls bring any value at all to the innovative world of semiconductor technology.

Not surprisingly, the case for patent trolls comes from one of its high-profile advocates. Nathan Myhrvold, former head of Microsoft’s research arm, is the founder of Intellectual Ventures. His company invests and trades in patents registered by others.

According to a recent story in the Financial Times, Myhrvold envisions a world populated with invention capitalists who mingle with prospective investors, corporations and institutions to create a liquid market for intellectual property. He believes that such a liquidity market would encourage the growth of many more inventions and spur basic R&D. Putting actions to these words, Intellectual Ventures is taking legal action to enforce a portfolio of 30,000 patents, many in the computer architecture and solid-state physics.

Investment companies like Myhrvold’s argue that patent enforcers (trolls) help ensure that inventors get paid for their creations, whether through the direct application of their inventions, by lawsuits to collect unpaid royalties or by licensing agreements. Myhrvold’s stated that inventions were the basis of our knowledge-based economy, yet no one has a way to invest in them. He believes that a liquid capital market is needed for patents and IP, much like existing markets for real estates and masterpiece paintings.

Where would such a liquidity market emerge? Perhaps in a place where IP designers already gather?

The business side of IP and patents has a direct effect on the technical side of SoC design thanks to the constraints caused by litigation in either limiting or expanding the choice of available IP. Perhaps it makes since to use an existing marketplace for design IP as the place to begin a liquidity market for IP.  Marketplaces already exist for the selection and evaluation of semiconductor IP. This ecosystem might be an ideal place to start the business arm of IP, i.e. a liquidity market.