January 31, 2009

The infinity of biotechnological creativity

Some time ago (available here and here ), I wrote about how the coupling of intellectual property rights to intangible offers create an ‘artificial scarcity’, that makes an offering seem more valuable than an object that exists in abundance. I would like to continue in this post where I left off in November, by discussing how biotechnology can create not only nondurables but also durable goods, by creating IP strategies aligned with the goals of your company or organization. The case in point for this discussion is agricultural biotechnology, and due to the diversity of our readers, I find it appropriate to give a short introduction to some of the different types of right-based layers. I have categorized those that I could think of as 1) true intellectual property systems, 2) quasi-intellectual property systems, and 3) non-intellectual property systems.

Right-based control in agricultural biotechnology
True intellectual property rights in agbiotech are in total way too many to all be included here, especially since there are many variants for each of them, however, for the sake of discussion - some of them are; US utility patents (the right to exclude others from manufacture/ produce, use, sell and offer for sale, in addition to prevent others from importing the invention ), US plant patents (right to exclude others from asexually reproduce, sell or use protected plant varieties), EPO product patents claiming a transgenic plant (i.e. not a plant variety), EPO product patents claiming genes (i.e. traits in plants), Australian plant patents, etc.

Quasi-intellectual property rights is certainly a vague definition which is highly arguable, but I decided to place plant breeder’s right (PBR) under this category as it certainly fits into the intellectual property category from the following articles;
The status of being a holder of a breeder’s right provides the right to exclude others from any of the acts stated in Art 14 (1-4), for a duration of 25-30 years.
Art 14 (1-4) comprises;
• Production or reproduction (multiplication),
• Conditioning for the purpose of propagation,
• Offering for sale,
• Selling or marketing,
• Exporting,
• Importing,
• Stocking for any of the purposes above.

However, the reason for my exclusion of PBRs from the “true IP” category is because of the ‘Breeder’s exemption’ that states that a protected plant variety shall be available without restrictions, for use by others (e.g. re-sowing by farmers, other breeders, etc.) as starting material for the development of new plant varieties. This exemption creates many societal benefits, but nevertheless positions PBRs in a quasi-state in relation to true IP.

The last category include a number of different forms of protections many of which have very interesting features (which I may discuss more about in another post), such as; European variety registration (being listed in the Common Catalogue is a prerequisite for being allowed to market a variety within the EU) which prevents competitors to register a copy of your seed, legislation to uphold trade secrets, and contractual structures preventing farm-saving of seed (where so-called bag-tags or “seed-wraps“ are an interesting US solution borrowing its concept from the familiar shrink-wrap solution in software).

Durables and non-durables goods in biotech
The existence of so many different types of right-based systems in combination with the diversity of actual technologies and application areas (e.g. different crops/feedstocks), creates an immense potential for the creative entrepreneur when outlining an IP strategy.

Let’s then say that a biotech entrepreneur then starts out with a gene that provides an insect-resistant trait for a number of crop types. The entrepreneur could then decide that she would like to create a premium priced seed by incorporating the trait into a hybrid seed of, for example corn or sorghum, that will have a high yield, but will serve as no good for farm-saving and being replanted next season. Hence, a nondurable has been created.

On the other hand, the same trait could be incorporated into a crop planted as an open pollinated variety , e.g. wheat, soybean or cotton, which will create a self-replicating durable good that can be replanted with the trait somewhat conserved.

Finally, by applying different types of right-based protections other forms of control can be attained, such as prevention of farm-saving by having a US utility patent or a bag-tag attached to the seed bag when it is sold. The European protections could be a combination of plant variety protection (for the variety) and a patent for the specific trait. In addition to a number of right-based control layers there are also technical layers that may restrict propagation, e.g. so-called ‘terminator technologies’, and technical solutions to enable hybrid propagation, e.g. apomixis . However, this post is already way too long so I will just conclude by saying that the potential of biotech and IP seems to be endless, and I look forward to see what the future will bring.

Tobias Thornblad

January 27, 2009

Wikipedia takes a step away from openness

The open encyclopedia Wikipedia has announced a step away from its totally open model used so far. The idea is that changes to certain articles would not be visible until they have been reviewed by a "trustworthy" person. The discussion has come to life after a false death announcement on the site, which can be seen here. Though the crowd actually corrected the false statement only in five minutes Wikipedia still considers to follow Encyclopedia Britannica on having reviewed articles.

The idea is explained more here:

The FlaggedRevisions (FlaggedRevs) extension has not currently been installed on the English version of Wikipedia, though it was implemented on the German language Wikipedia for all articles in May 2008. On the English version, it is currently being discussed here, here and here as to whether or not a trial should be attempted, to try out the various options and see if this system would work here, and how best to configure it.

Shift from openness

Though I might be inherently skeptical to the idea of letting the crowd have full power over the information gathering and quality review of an encyclopedia I am still skeptical to the quality control function perhaps to be implemented. Since the basic and fundamental idea of Wikipedia is the openness and the wisdom of the crowd, straining it will most certainly take the edge away from it.

Becoming more controlled means more closely linked to the establishment and the ideas expressed under each topic will be filtered, or at least thought to be. This is the same way as Encyclopedia Britannica has made, just the other way around. They are using trusted writers really skilled in the areas in which they contribute. These writers will also start to review user contributions and then possibly adding them to the database. What Britannica has but Wikipedia lacks is, at least from my perspective, trust in the individual reviewers/contributors.

Wikipedia is using a totally open model where they take benefit from that with large enough user base at least one will know the right answer. A model which has proven to work really well over the years and the last mishaps were corrected within 5 minutes. Establishing FlaggedRevisions will probably move the use and idea of Wikipedia away from what it was intended to be in to something else.

The future

Though Wikipedia still do not have any sustainable business model I do suspect that this quality review might be a first shift in centralizing information control and also perhaps start to leverage from the huge source of information in the database. It might not be conscious shift though.

Johan Örneblad

Via dn.se and nyteknik.se.

January 21, 2009

In WoW we trust....

World of Warcraft have been the biggest success of all MMORPG ever released, by far. When thinking of Blizzard’s blockbuster World of Warcraft, or WoW as often referred to, it’s easy to see an interesting market. From my perspective it gets even more interesting since it is completly built upon intangibles.

Some general MMO market figures from:

As the charts show it has been a booming niche in video games. The second graph shows WoW's superiority compared to the other existing MMO's available. WoW had a market share of 62% in April 2008.

Some quick facts about WoW:
• Blizzard announced 11.5 million WoW subscribers in January 2009.
• World of Warcraft has been available for the Mac and PC since 2004, and has spawned two expansion packs.
• The latest extension pack sold 2.8 million copies in the first 24 hours of availability, according to Blizzard.

So my question is: How are Blizzard going to manage the development of WoW in the future?

I perceive the existing model of computer game creation to often build upon a concept, and to release disruptive games around that concept. An example of a very successful series is Grand Theft Auto where the basic concept is similar even though the game engines evolve and provides a richer computer environment. But they have not over 11 million active subscribers that pay to access and play.

So is it really possible for Blizzard to disruptively replace WoW and continue the Warcraft series in the same way they do with Starcraft and Diablo? I would argue that it is not possible; instead an incremental change of WoW is the only way.

The main reasons for this statement are the following:
WoW enjoys an extremely large user base that continuously pay subscription fees. This introduces a rather complex second best economic analysis when launching a game to replace WoW (Yearly average subscription fee X user base = ~$1.7 billion).

Users have created and institutionalized virtual property and created a market place for the transaction of virtual property into money (Google returns over 10 million hits on "wow gold"). If the virtual property (the accounts) won’t be transferred into the new game, there is kind of a lock-in and the games will cannibalize on each other.

Following this path of deconstructive thinking of the problem many more obstacles arises concerning the user base and lock-in effects. However, this arguments rests on the assumption that there another WoW-like-MMORPG will compete about the current WoW user base.

Instead, the incremental change of WoW seems to be the only way and the path chosen by Blizzard as well. When taking a closer look at the latest expansion they claim to improved graphics and details with real-time shadows, better models, and bigger draw distance. So not only expand the story and the characters.

So will we see an organic, incremental development of WoW until the day of photorealism? I guess the market and the consumer power will have to rule this one.

Mathias Hellman

January 18, 2009

3G in biofuels...

In the latest issue of Nature Biotech there is an interesting article written by Emily Waltz called Biotech’s Green Gold. The article starts by the interesting observation that more than a 100 third generation biofuel companies (so-called algae-to-fuel companies) have popped up during the last few years worldwide, but not a single commercial facility has been built.

Promising prospectives
So what is the reason for this recent trend? The main reason seems to be that algae have the potential to produce up to ten times more oil per acre than traditional biofuel crops while they are not needed for human food (such as 1st generation biofuels e.g. corn). Moreover, they have the capability to survive where most other agricultural crops could not live such as in salt water and municipal waste water. Algae are interesting from an intellectual property and business development perspective as in addition to fuels, valuable co-products, such as biopolymers, proteins and animal feed can be made during the process in addition to application potential in industries such as nutraceuticals and cosmetics.

Third generation biofuel industry
The article states that only a handful of companies are working with genetically modified algae, albeit they are some of the most serious and promising in the algae-to-fuel industry. Companies presented include Aurora Biofuels, Algenol, Sapphire Energy, Solarvest BioEnergy, Solazyme and Synthetic Genomics. However, the norms and structural claims in this industry are obviously at a very dynamic development stage due to the infancy of the industry, but there is already some interesting implicit IP activity taking place. It is stated in the article that open source sequencing and publication of the algae genomics is not being made due to the algae importance to biofuels. This could easily be interpreted as a very closed approach to innovation, but towards the end of the article there is a section stating that Ron Pate, a researcher at Sandia national Laboratories in Albuquerque, New Mexico, is trying to put together an organization of industry, academia and Universities, which in his own words is to create “an open but intellectual property-friendly environment where people can discuss technologies and report R&D problems”. This sounds a lot like an informal standardization group which hopefully leads to synergistic collective development through a more controlled structural openness.

It will be interesting to follow this industry since approximately 200 000 algae exist and less than 1/4 of these have been described and characterized at present. There is also an interesting discussion going on about where it makes the most economical sense to grow algae - in open ecosystems (e.g. oceans) or in closed bioreactors. Will this be what we will rely on when we run out of oil?

Tobias Thornblad

January 7, 2009

Approval process of generic drugs: revisited

Barack Obama has announced that he encourages the use of generic drugs, including generic biologic drugs. According to the IP Finance blog, Obama’s advisors have gone on record as wishing to speed up the FDA’s approval process of generic drugs in addition to introducing a new legislative pathway for generic biologics, which I briefly touched upon in a previous blog post.

It is obvious that Obama’s announcement is related to his increased insurance coverage plans where main focus is on the well-being of society and the individuals living there by decreasing the prices they have to pay for drugs. Much to the delight of generic drug manufacturers. I think that innovative actors need to be incentivized for innovation to continue, and I think that too generous terms for generic drugs could discourage innovative actors from taking the risk of investing in discovery rather than solely develop what already exists. The latter would obviously be a dramatic loss in value for innovative actors as well as generic drug manufacturers and society as a whole. However, automatic full exclusivity would on the other hand lead to inefficient market structures (monopolies) so it will be interesting to follow the discussions about the exclusivity terms for the new US legislation.

The IP Finance blog mentions that speeding up the approval of generic drugs and biologics is likely to lead to substantial reduction in the value of patents. I agree with this in relation to the value related to effective patent terms, but I also think that an effective system for approving generic drugs/biologics is likely to lead to higher values of the same patents for the period when exclusivity is still enjoyed. An interesting scenario, in my opinion, would be that an effective second hand market would emerge where patents having competition from parallel generic production could be either sold off or license fees securitized in exchange for lump sums which could then be used to discover innovative new drugs/biologics. If the patents would be offered to generic drug manufacturers at the same time as they would have the right to manufacture generic drugs to a reasonable price, then a whole new model could be created where these actors would not have to invent around but rather produce the “real” drugs/biologics. This would probably mean that new drugs would be even more expensive during the first years of exclusivity for innovative drug manufacturers to get their ROIs in addition to a number of other game changing factors, but I still think it is an interesting thought as intuitively this could ultimately lead to an even stronger market-pull for new innovative drugs.

I don’t envy the complex work that Barack Obama has in front of him, and I really hope that he aims for long-term stability and sustainability for the whole industry when creating new structural order rather than only “putting out fires” and provide concessions to please individual voters in the short-term. Said voters need to work somewhere, so I suggest start incentivizing companies to get the economy back on its feet.

Tobias Thornblad

January 5, 2009

A Horizontal Acquisition in the PC Industry: How to Handle Branding for Long Term Value?

Intangitopia presents it's first Guest Blogger, Jonas Nilsson.

In December 2004, Lenovo finalized the block buster acquisition of the IBM Personal Systems division. Lenovo, barely existing outside China and more known for low cost products than having a premium focus, was to nourish the world’s most premium connoted PC brands – IBM and its Think series computers. An unholy alliance according to some, but Lenovo were determined to create a pioneering collaboration between the East and the West to ultimately form a global industry giant.

My focal point on this topic is how Lenovo chose to leverage the extremely valuable IBM brand on their acquired ThinkPad and ThinkCentre computers. Lenovo were given the right to physically put the IBM brand name on the computers for up to five years after the acquisition. But in the end of 2007, Lenovo decided to drop the IBM brand – ranked among the most valuable in the world - two years before schedule. My hypothesis is that dropping the IBM brand from the Think PCs was good for Lenovo in building long term value for Lenovo from a brand perspective. The analysis is conducted from three starting points that I have determined relevant in this case.

Customers’ Trust in the Ability for Lenovo to Sustain the IBM Think Brand Value Proposition
Customers initially worried that the values that IBM and the IBM Think series represented and delivered, such as quality, innovation and support, would be lost when Lenovo took over. Lenovo had aligned the corporate culture and vision to achieve the value propositions of the Think PCs, but did it correspond to the image of the brand?

First of all, the IBM PS operation basically still existed in the new organization, why little was to actually change for the customer, which was steadily communicated by Lenovo. Also, with the IBM brand physically on the PCs, the customers could be assured that IBM endorsed the new structure. I found three main aspects that diminish the risk of customers losing trust in the IBM Think brand’s value proposition.

  1. Lenovo’s steadily increased revenues and profits indicate that the customers have trusted the new structure and shows that customers’ believe in sustained value proposition from the Think PCs.
  2. IBM PC customers have traditionally been loyal to the brand. After almost three years of having Lenovo in the picture, many of these will have gone through a computer purchase cycle under Lenovo and have therefore already acknowledged the new structure.
  3. The brand is much more than the IBM name and Lenovo have been extremely careful with capitalizing on the perception of how a Think PC should operate, look and feel but also how it should be serviced and supported. This has ensured trust in the value proposition.
These arguments in sum, suggests that sustaining the brand of IBM on the Think PCs for two additional years would not significantly have helped in preserving the consumers trust in the value proposition, since the name still have needed to disappear in two more years. The arguments would likely not have been considerably affected during that time.

Long Term Brand Building

The early removal of the IBM brand from the Think PCs was a step in leveraging the Lenovo brand in the vision of being one of the largest actors in the PC market with aggressive growth ambitions. Despite the values the IBM brand brings, it diminishes the Lenovo brand. It could also confuse the less familiar customers; “what is actually what here?”.

I have used Google Trends as a tool to illustrate how frequently “IBM ThinkPad” vs. “Lenovo ThinkPad” have been searched for on Google historically and how commonly referred the terms are in Google News (which basically summarizes news from a large pool of media channels).

First of all, it is obvious that Lenovo is in a positive and IBM in a negative spiral in terms of people’s awareness and the media attention of the brands (similar trends in search volume index is seen when comparing “IBM” and “Lenovo”). This suggests that leveraging from the IBM brand is of decreasing importance and the possibility to keep growing with the Lenovo brand is likely good. Also, after the brand change in 2007/2008, the number of news references did increase vastly compared to the previous years (even if we add the IBM ThinkPad references) creating a lot of attention of the ThinkPad, which is good for the brand building and suggests that the brand change decision was good.

Strengthening the Lenovo brand two years earlier than initially planned was likely positive, since it speeds up the process of creating a long term brand value for Lenovo.

Aligning Corporate Vision and Culture

Though the top managers all the way might have been consistent in their thinking of Lenovo as the company, it is not unlikely that the employees with such different backgrounds rather indentified themselves with their previous brands. Exclusive Lenovo branding should in the long perspective help unifying the company. Lenovo’s vision has been to communicate the beginning of something new, a pioneering collaboration between the West and the East to create “a unified global PC leader with growing market positions in developed and emerging markets”. A distinct action in order to bridge the gap between the vision and the culture is definitely to make sure that the new company operates under one name. The symbolism is great, in my view.


From the three starting points that I have analyzed, Lenovo’s decision of dropping the IBM brand earlier than initially decided, likely was the better move looking at the long term value creation from a brand perspective.

Managing the brand is of utmost importance to the technology intensive firm. In dynamic markets with rapidly changing technologies and conditions, the customers want to know that their supplier has a vision of their desires beyond the traditional price/performance aspects. The customer wants a company they can trust and the company wants recurring customers.

Jonas Nilsson

January 2, 2009

Biotechnology 2.0 in 2009

First of all, Intangitopia wishes everyone a Happy New Year! We started Intangitopia relatively late during 2008, but it seems as we already have attracted a number of regular readers which we are all thrilled to see.

Tobias’ blog focus for 2009
Many of my previous posts have been about open innovation in the biotech industry, which I intend to continue during this year. My opinion is that the future of the biotech market needs to be modified to create an equilibrium in the now asymmetric relationship between large pharma and the (often smaller) biotech players and one of the remedies, in my opinion, will be through gathering and utilizing collective intelligence in platform constructs. This will obviously not be my sole focus as I will try to stay up to date with current events in the biotech industry, and there will hopefully be some in-depth analysis of some business models since I will write a M.Sc. thesis about how roles, relationships and transactions are constructed in intellectualized bio-business fields during this spring. Marcus, Mathias, Johan and Fredrik will also write their M.Sc. theses during this spring so I am guessing that they will contribute with in-depth analyzes in areas that they probably will introduce themselves in upcoming posts.

Wikinomics and FDA’s Priority Review Vouchers
There has finally been some time to catch up with reading during Christmas, and I have read a book which I warmly recommend: Wikinomics (book & blog). The authors have looked at a number of platform constructs with different degrees of openness. Most of the constructs are from the IT market for the obvious reason that the most advanced platforms exist there, but some biotech platforms are also mentioned along with other types of platforms, such as constructs based on governmental data (pollution, crime, etc). The authors, among many other intersting things, stress the importance of managing incentives for platform participants which I think is one of the crucial points that the IMI platform (in my previous blog post) fails to fulfill for small biotech players. Wikonomics mentions Amazon as one of the more successful models where revenues from sales are shared with those joining the platform and contrasts this with Flickr which does not compensate or merit their ‘best’ participants in a satisfactory way (according to the authors).

It was therefore interesting to read the December issue of Nature Biotech (Vol. 26 No. 12 ) where FDA’s new strategy of offering priority vouchers for neglected-disease drugs was described. The new scheme, launched in October as part of the FDA Amendments Act, awards priority review vouchers to any company obtaining FDA approval for a product that prevents or treats a neglected disease. These vouchers can then be used to accelerate approval of any drug in any disease indication by placing a new drug application (NDA) on FDA’s Priority Review list. Undertakings such as this one incentivizes development of neglected-disease drugs by using existing market mechanisms in new ways. It does not feel like a farfetched assumption that these vouchers could become very valuable either as part of a biotech company’s value proposition to a pharma actor or on their own as rights to future value extraction or as negotiation tools. The articles mentions the possibility for larger biotech companies to repurpose their already approved drugs for diseases rife in developing countries, thereby gaining access to priority vouchers to be used for more lucrative programs. The problem however, as usually is the case, is that the incentive is somewhat skewed to favor large pharma more readily than early-stage biotech actors since the development time towards a voucher can be longer than what such actors often can afford.

The important thing, in my opinion, is to recognize that the market is getting ready for a shift into a knowledge paradigm where collectivization and collaboration will be the governing vehicle to sustainable development. However, the million-dollar-question still remains: how can incentive systems be managed to incentivize small and large actors in open biotech innovation platforms?

Tobias Thornblad

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