Ideas for sale

The International Herald Tribute is running two stories on patents and intellectual property rights. Yesterday, they ran the story Extracting gold from patents can bolster the bottom line. This was a description of how companies are using patent royalties to boost profits:

Compared with manufacturing, licensing promises lower risk and higher income. Thomson in 2004 kept 81 cents of every euro in licensing sales as profit, but only 10 cents of every euro from sales of broadcasting equipment and services.

It does contain a warning:

Danny Rimer, a partner in London at Index Ventures, a fund company that has 750 million invested in technology companies, said businesses based solely on licensing had limited futures.

"Most entrepreneurs view IP as a defensive mechanism and not as an opportunity for creating a business," Rimer said. "Companies having the greatest challenges adapting to the new world are banking on exploiting IP weaknesses."

Today's story is A new battlefield: Ownership of ideas - Technology (also available running on the New York Times website as The Idea Economy: Battle Over Right to Sell Knowledge. It is a good discussion of the issues - pro and con. I think the article gets to the fundamental point:

The real problem is how to fashion a system that promotes innovation, not mere accumulation. If savvy entrepreneurs can manipulate the system by locking down valuable ideas, true pioneers will find it too tough to win rewards for their inventions.

We need an IPR system that protects financial incentives for innovation without creating barriers. Many of us feel that the current US balance is out of kilter - a point that was raise over and over again at our briefing on the subject last summer (see Is the US Patent System Endangering American Innovation? on the Athena Alliance website). Creating the right balance will be tricky: too little control results in the protections and incentives disappearing; too much control stifles innovations. But finding that balance is absolutely critical if the I-Cubed Economy is to flourish.