IP Business

Just say, for instance, someone put a gun against my head and said that I had to start a serious IP services business. What would I do?

Firstly, I would bypass copyright, trademark, design – these are being rapidly disintermediated and, to a large extent, the service providers in these areas are just undifferentiated form fillers that will be replaced by technology.

Which leaves patents where, even the most sagacious judge would admit, a keen sense of intellect is needed in order to do a good job as a service provider. It’s a complex business.

Of course I could provide disintermediating services to the service providers in the area. But who wants to be serving a supply chain that lives on hot air? It could just evaporate one day. That would be too uncertain for the likes of me. Plus, as I have learned, it’s best if you like your customers.

Then there are the pirates, picking over the pile of bones in the patent world, looking for nuggets of gold. Chinese diggers and their drunken publican masters; that’s how I see these guys. Patent trolls, brokers, patent banks, patent funds, industry funds etc. They are all just arbitraging fear without no intention of creating demonstrable value for anyone but themselves.

Which would leave me with patent service providers – the patent attorneys themselves – otherwise known as dickheads, nuggets and nerds (DNR).

I have said in the past that only ca. 1% of the owners of patents have a positive IRR on their investment in patents. And only about 10% of this 1% make that positive IRR on purpose. That is, there is about 0.1% of patents that are intended to be value creating and actually are.

Who are these unicorns that own these 0.1% of patents? Well, they fall into three categories only:

1. Genuine real-tech start-ups and SMEs that have brand new technology platforms. Each of these has a CEO that knows how to make money out of patents. They have sufficient investment for IP, and a vision of a substantial market monopoly; which is the basis of their value creation whether they remain private, list or exit via M&A.
2. A cash flow positive licensing corporation that focuses on one business segment and patents the hell out of every good idea they can invent, acquires technology and patents, and then forces all industry players to pay them a license fee. Think Qualcomm.
3. Large corporates whose monopolies depend solely on patents, e.g. big pharma.

As a rule of thumb, these are the only three categories of businesses where the CEO is intimately involved in patent strategy. That is the give-away.

As a service provider, the minute you start dealing with a VP, or worse still, a sub-VP (sometimes down to shit-kicker manager) then you know that your client has absolutely no idea what or why or anything. Then you are down to having boozy lunches with the IP manager as a means for keeping your business going.

So, back to the proverbial gun against my head; my patent services company would ONLY serve the three categories of customers above, companies that have proven they are in the 0.1%, and where the CEO is one of the direct client contacts.

Do these guys have a problem with their existing patent service providers that needs solving? You betcha.

Do they know? Nope, because no one has articulated an alternative.

The problems are as follows:

1. There are good patent attorneys but there aren’t good attorney firms. That is, the really good patent attorneys are distributed randomly throughout the market.
2. Patent attorneys perform a wide range of activities but very few of them are prepared to focus on the core activities that they especially excel at. They all do it all, from business development to claim drafting.
3. I have yet to see a patent attorney firm that has the first clue about patent strategy. The reason is that all patent attorney firms are run by patent attorneys; a big mistake.
4. Which means the patent drafting ends up being separated from IP and business strategy (which takes place in the operating companies). It’s an essay, but trust me, a lot of value is being left on the table because of this.

In my service provider company I would assemble the very best patent attorneys, patent strategists, licensing experts and patent litigators. The back office would include the best analytics people available. The patent attorneys would be free to focus on what they are good at and not be forced to work on the full gamut of activities.

Of course, there wouldn’t be a patent attorney as CEO of my vehicle. They’d be very well payed employees; no more.

I would have teams dedicated to a small number of major clients. They would work from day one to map out an execute the most aggressive value creating patent plan for the clients. Patents would be acquired and patents would be filed. Licenses would be granted and received. The team would work hand in hand with the clients to play cat and mouse chess with the company’s competitors. Litigation cases would be launched to warn the market, for example.

Think of an IP investment banker, working with clients from day one. My guess is that this model would be so profitable that it could be funded under a LP model and that my service provider could then just be an equity partner in the clients.