Winning the Hardware Software Game Winning the Hardware-Software Game - 2nd Edition

Using Game Theory to Optimize the Pace of New Technology Adoption
  • How do you encourage speedier adoption of your product or service?
  • How do you increase the value your product or service creates for your customers?
  • How do you extract more of the value created by your product or service for yourself?



  • Creating Capital Markets for Patents

    Myhrvold’s Business Model

    Historical Trends in Industry Funding for R&D and Patenting

    Will Myhrvold’s Model Work?


    In recent articles in both the NYT and the Harvard Business Review, Nathan Myhrvold, former CTO of Microsoft and current Founder of Intellectual Ventures (IV), defended his company against being labeled a “patent troll” and described the actual intent of IV:

    What weʼre really trying to do is create a capital market for inventions akin to the venture capital market that supports start-ups and the private equity market that revitalizes inefficient companies. Our goal is to make applied research a profitable activity that attracts vastly more private investment than it does today so that the number of inventions generated soars…

    I believe that invention is set to become the next software: a high-value asset that will serve as the foundation for new business models, liquid markets, and investment strategies…  like software, the business of invention would function better if it were separated from manufacturing and developed on its own by a strong capital market that funded and monetized inventions…

    A functioning invention capital market and industry can enable inventors around the globe to create hundreds of thousands more inventions each year than are being made today. Sure, some of those inventions will be silly or useless. But what matters is the top 1% that will make our lives vastly richer and better. Create an invention capital market, nurture an invention capital industry, and the resulting virtuous cycle will surely transform the world.

  • Patents vs. Prizes: Which Is Better for Inducing Innovation?

    The NYT recently published an article, “Netflix Competitors Learn the Power of Teamwork” by Steve Lohr, discussing the prize offered by Netflix for improving upon the algorithm it currently uses for recommending movies to Netflix customers and what came from the contest:

    A contest set up by Netflix, which offered a $1 million prize to anyone who could significantly improve its movie recommendation system, ended on Sunday with two teams in a virtual dead heat, and no winner to be declared until September.

    But the contest, which began in October 2006, has already produced an impressive legacy. It has shaped careers, spawned at least one start-up company and inspired research papers. It has also changed conventional wisdom about the best way to build the automated systems that increasingly help people make online choices about movies, books, clothing, restaurants, news and other goods and services…

    The biggest lesson learned, according to members of the two top teams, was the power of collaboration. It was not a single insight, algorithm or concept that allowed both teams to surpass the goal Netflix … set... Instead, they say, the formula for success was to bring together people with complementary skills and combine different methods of problem-solving.

  • Should Assets Developed using Taxpayer Funds Be Immune from Sale to Foreign Companies?

    Nortel Sale to Ericsson Stirs Protest in Canada

    Why Does Government Fund R&D?

    What Is Government Entitled to in Exchange for Funding R&D?



    Nortel Sale to Ericsson Stirs Protest in Canada

    A recent article in the NYT, “Nortel Sale to Ericsson Stirs Protest in Canada” by Ian Austen, describes a conflict over the sale to foreigners of patents that were developed with government funding: Nortel, a Canadian company, is currently bankrupt and its assets are in the process of being dispersed.In particular Ericsson, a Swedish company, is interested in purchasing some of Nortel’s patents.However, several Canadian politicians are objecting to the sale of Nortel patents to foreigners, claiming that the patents resulted from publicly funded research, and as such belong to Canada.

  • Trends in Cannabis Patents Over Time

    Patent Counts by Year

    I searched the USPTO patent database for all patents for which the patent abstract contained any of the following terms: cannabis, cannabinoid, marijuana, tetrahydrocannabinoid, or cannabinol. My search yielded 914 patents.

    As seen in Figure 1, there were only a handful of cannabis patents each year until the late 1990s. Cannabis patent activity started increasing at a roughly constant annual rate between 2001 and 2010. Patent activity leveled off between 2010 and 2015, then accelerated through to the present.

    Figure 1

    1 mj patent counts

    Patent Counts by Category

    Category Descriptions

    Based on patent descriptions, I assigned each patent to a category and subcategory. I defined the patent categories as follows:

    Delivery: Methods of or compositions for delivering cannabis into the body

    Detect: Methods of detecting cannabinoids in products samples or in people

    Extract: Methods of extracting cannabinoids from plant matter

    Grow: Methods of cultivating cannabis plants

    Package: Methods of packaging cannabis products

    Plant: Plant cultivars

    Pre-Plant: Plant genomics

    Process: Methods of processing cannabis, excluding extraction of cannabinoids from plant matter

    Receptor: Patents addressing cannabinoid receptors: CB1, CB2, agonist, antagonist, ligand

    Smoke: Devices and formulations for smoking cannabis

    Storage: Methods and devices for storing cannabis products

    Synthesis: Methods of synthesizing cannabinoids

    Terpene: Products and methods involving cannabis terpenes

    Track: Software for tracking cannabis cultivation, sales, usage, or trading

    Treatment: Cannabis compositions for the treatment of specific conditions

  • Using Patent Mapping to Manage R&D

    By Ruth Fisher, PhD and Stephen W. Cheung, PhD*


    Creating a Patent Database

    Mapping Concept Chains for Commercialized Products

    Identify Patterns or Clusters in Research

    Determine the Lay of the Land For Existing Research Areas

    Determine the Lay of the Land For Potential New Research Areas

    Determine Center Progress over Time




    Managers of research and development (R&D) centers tasked with commercializing technologies face a dilemma. Only a small portion of the center’s discoveries are patentable. And patents generate prestige for both the institute and the researchers. As a result there is a strong desire to patent any discovery that is patentable. However, filing for patents and paying maintenance fees is costly, and the great majority of patents cannot be monetized. The challenge facing center managers, then, is to direct researchers to focus their attention on new discoveries that generate patents that are more able to be monetized.

    Proper management of a center’s patents must surely start with generating a database containing descriptive elements of the center’s patents. After such a database has been created, a center manager can progress more easily into various types of patent mappings. If used effectively, patent mapping can serve as a tool for R&D center managers to effectively direct researchers to generate discoveries that are more able to be monetized.

  • Who Is the Smart Grid Technology Leader?


    One of the hot technology trends over the past many months has been development of the smart grid (SG).  Reading Smart Grid News and other industry, and even mainstream, publications reveals an enormous amount of coverage of smart grid (SG) developments, both technical and commercial. Most of the coverage seems to be focused in two areas, smart meters and the standards-setting process.

  • Why Is It So Difficult to Sell or Out-License Patents? -- Part 1: Buyer's Perspective

    A very small portion of patents generates income for it’s owners.

    Take the University of California (UC) system as a case in point.  According to the 2009 Annual Report from the UC Office of Technology Transfer, “UC has received more US patents than any other university in the world.”  During FY 2009, there were 3,617 US patents in the UC system portfolio.  Licensing income (excluding “payments from settlement of litigation”) totaled $98.7M.  Of that, $74.7M or 75.7% came from the “top 25 inventions.”  Assuming 1 invention = 1 patent, that means that during FY 2009, less than 1% of the UC system patents generated over 75% of the system’s licensing income.

    This 1% figure jibes with the statement Nathan Myhrvold, former CTO of Microsoft and current Founder of Intellectual Ventures (IV), made  that

    Statistics on the true risk of investing in inventions are sketchy, but government reports suggest that just 1% to 3% of patents generate a profit for their inventors.

    So why is it so difficult to sell or out-license patents?

  • Why Is It So Difficult to Sell or Out-License Patents? – Part 2: Seller’s Perspective

    The question is: Why does only a small portion a patents make money for their inventors?

    In Part 1 – Buyer’s Perspective, I discussed the fact that a patent is not a clearly-defined asset; that is, there is a tremendous amount of uncertainty surround what the buyer is getting with the patent.   In particular, it’s difficult to convince a potential buyer to buy a patent, because he faces so much uncertainty regarding the legal rights being gained from in-licensing the patent, as well as the resources required to get the patent in-house and adapted to meet his needs.  Given all the uncertainty involved, most buyers are better off either working around the patent or pursuing some other investment opportunity than that offered by the patent at issue.

    Here in Part 2 – Seller’s Perspective:  I discuss why patents are not usually worth as much as their inventors think.