The digital economy is all about the content

Yesterday I and about 100 other people attended a seminar here in London, jointly arranged by Queen Mary Intellectual Property Research Institute (QMIPRI) and the Institute of Computer and Communications Law. The focus was the Digital Economy bill which is trying to address the ever-present issue of rights holders’ rights and possibilities for enforcement on internet.

However, the discussion yesterday circled much around if and how internet users could be cut off or suspended from their internet connection because they had been involved in illegal file sharing. The issue is an important one and I have trouble seeing the proportionality in restricting access to internet for what in many cases are small amounts of direct loss in sales revenue, which apparently is one of the suggestions in the bill. Jim Killock from the Open Rights Group, did also point out that downloading was more like trespassing than theft. This is true, but it is still illegal in the system that we have today. The discussion about changing the copyright system is partly a different and much bigger one.

I do however believe that the discussion we are having today about illegal file sharing and how to enforce it will pass over as a result of technical development and new ways of consuming content.

Carrot and stick
The industry representative, Richard Mollet of British Phonographic Industry (BPI), did go about quite hard on why enforcement was important. It was an expected point of view and he had a fair point in that enforcement is part of a system where that is the stick in one end and legal services, such as Spotify, are the carrot in the other end. Both sides need to exist.

Richard Mollet’s argument continued in the lines of that the rights holders were to scared to put out content in this uncertain environment without strong enforcement measures. This is where I do not agree.

Business model innovation
One of the first portable MP3 players was released some 12 years ago. Steve Jobs presented the first iPod in 2001. This is of course all known and the discussion about the rights holders not understanding the potential in the technology and that the old business model of selling content on physical carriers was and is outdated, that discussion is not new. What still surprises me however is the total lack of innovation in new business models and product offerings when it comes to rights intense industries such as publishing, film and music.

Intellectual property in the form of copyright is one of the most easily distributed forms of property. It lacks the need to be bundled with physical carriers, it can be packaged in various forms and the legal wrapping can be crafted in just any way.

To be fair, there are several services and platforms offering copyrighted material digitally and with consent from the rights holders. Spotify and Hulu are two examples of this.

I do however believe that there is much more that could be done, if just the interest was there. The technology is there, the consumers are there. The content is not nearly there.

The legal dimension
The issue has of course also a legal dimension, something the third speaker, Graham Smith of Bird & Bird, pointed out. It is far from certain from a legal perspective what is actually legal and what is not and how to enforce it. It is even harder from a consumer’s perspective to do this distinction. It is can be argued that this becomes the result if you let the development happen by itself and not being part of crafting the norms in the marketplace.

As I pointed out earlier, IP in general and copyright in particular are well suited to be developed in to new contractual models. The content can without any particular problem be packaged in just about any way. To look at the problem from the perspective of enforcement of content that has been distributed and copied by norms created by the users themselves, will probably almost always be messy. Especially when the behavior of consumers has been more or less accepted for over 10 years.

If the rights holders on the other hand are the directors on the distribution end and take advantage of the versatility of the content and distribution methods that could be used, I believe that the need for enforcement would be radically less and the revenues would be greater. It just takes someone to be brave enough to let go of the known models and revenue streams and focus on how to embrace the technology and meet the consumer need in a legal way.

Johan Orneblad
Follow me on Twitter

Business models and open IP platforms in personalized medicine

Personalized Medicine is a frequently discussed concept in healthcare thought to hold great value for the future. Since I am currently involved in a project where the technology could provide utilities for personalized medicine while at the same time co-authoring a paper on open IP platforms, I thought that a blog post that combines the two worlds could be interesting to write - so here it goes.

What is personalized medicine and why does it matter?

Medical practice relies on evidence-based medicine - the development of standards of care based on epidemiologic studies of large cohorts - a practice that has been around more than 50 years. The rationale is that a statistical approach to large cohort studies enables reduction of background noise, i.e. ignoring individual differences in the data points. Traditionally, individual care by a medical practitioner is built on the patient's family history, social circumstances, environment and behaviors - meaning that the doctor's personal observations, skills and intuition have been crucial factors.

Personalized medicine seeks to provide an objective basis for consideration of individual differences by the systematic use of genetic information about each individual patient to select or optimize the patient's preventative and therapeutic care. A simple example would be to be recommended to take a genetic test before being prescribed a certain drug to shows whether you have a genetic profile that makes you more responsive to drug A or drug B (used for the same disease). Obviously tremendous health-economic gains could also be expected where one example is hypersensitivity to gluten (for which Phadia is developing diagnostic technology) that currently takes an average time of eleven years to diagnose in the US according to Phadia.

Two examples of business models personalized medicine could enable in the future

1. Insurance model: Let's say that you consider buying a life insurance. Obviously, it is in your best interest as well as in your insurance company's best interest that you live a long and healthy life. With the latest advances in genomics your insurance company provides you with a voucher to get your genome sequenced and get access to a web portal where you can see your genetic profile - without the insurance company having any access to your data! This means that you can make dietary and lifestyle changes to improve your chances against your genetic predisposition toward obesity, diabetes, high blood pressure, dyslipidemia, etc. while lowering the risk for your insurance company. A win-win situation!

2. Diet model: Your latest cholesterol checkup suggests that you should reconsider your diet. At the dietist's office, your current diet is matched with your genetic predisposition to absorb nutrition. The results show that the diet is not the issue, it is your body that does not handle some of your daily intake very well. Consequently, your dietist recommends you to ask your doctor for drug X to enhance your nutrition absorption.

Personal Genome Project (PGP) - an Open IP Platform

The Human Genome Project provided the first drafts of nearly complete human genome sequences in 2001. This "generic" human genome sequence is now being used to advance medicine, human biology and knowledge of human origins. The available information, however, is not enough to determine individuals' risk profiles for disease. PGP - led by George M. Church, Professor of Genetics at Harvard Medical School - was launched to create a platform to do just that.

The cost to extract all the information during the human genome project was close to US$ 3 billion, which has decreased all the way down to US$ 1500 per genome by now (although most sequencing companies charge US$ 30-50k to sequence a genome). PGP aims - as its first milestone - to collect genomic information from 100 000 people together with their trait information (i.e. phenotypic data such as diseases). Sample collection is entirely built on samples contributed by volunteers all agreeing on their personal information being open for access to the public, mainly providing two utilities;

• Profiles of patients getting their genomes sequenced can compare their genetic profiles to the genotypes of risk profiles
• Statistical correlation of the data can provide novel gene-trait associations leading to new drug targets

The platform is open in multiple layers and several IP transactions take place in an open innovation fashion. Core R&D data making up the platform is - as mentioned - donated by volunteers by collecting cells that are then cultured in cell line libraries for future reference pooled together with written trait data collected via a virtual interface. Genomic data is available for download and cell lines are available to order. Analysis of the data is conducted through open source software to ensure that users can help develop the tools in case something seems to be missing. Sequencing technology and tools are inlicensed from commercial sequencing companies. PGP is conducted at nominal cost and most of the financing is raised through donations.

So what about IP ownership? The Material Transfer Agreement states that: " i) the Provider retains ownership and title to the Materials (including any Materials contained in any Modifications) and ii) the Recipient retains ownership and title to the Modifications (except that the Provider retains ownership and title to any Materials contained in any Modifications). The Recipient is free to file patent application(s) claiming inventions made by, or on behalf of, the Recipient through the use of the Materials, but agrees not to file any patent application containing a composition of matter claim on the original Materials or an Unmodified Product.".

To me, the PGP initiative exemplifies an extremely interesting example of an open IP platform with the potential to create value for both society and knowledge based companies leveraging diagnostic tools, drugs and preventative medicine and I may come back to do a deeper analysis in an upcoming blog post.

Tobias Thornblad

(Contact via Twitter)

Intangitopia Picks - Google books

Intangitopia has previously written about the Google Books project and its effort to digitize all books available. The full scale of the project is probably not seen yet, especially since Google still is in legal dispute around the digitization efforts. To me it seems quite inevitable that they will be able to digitize most books, at some point, the relevant question will then be who can get access to the information and on what terms.

The Economist has interviewed Paul Courant, librarian at University of Michigan, on the subject and the impact for research to have, at least, all orphan books digitized and searchable. One of the points he makes is that the book project gives different universities access to each other's libraries digitally, for the benefit of research. But as he also points out, Google is not doing this only to be nice, but rather to get more eyeballs to browse their webpages and adverts.



They have recently given On Demand Books access to their digital library to print books for customers. This posts interesting questions to how other actors in the digital/physical distribution of books should react. Even though the currest deal with On Demand Books only covers orphan book, books without rights holders, it is most likely that it at some point also will cover books with rights holders.

Utilization models of early-stage research

Long time no blogging...

Switching jobs makes you re-think some of your preconceived theoretical frameworks of how the world works. This was certainly the case for me when I switched from a more traditional intellectual property right (IPR) focused job to one where the core is in identifying intellectual assets (IA) and managing (IAM) these to create knowledge-based business models. Obviously still considering intellectual property and capital, but with an emphasis on the actual core of value creation (i.e. understanding the building blocks that collectively can generate IP/IPRs/IC etc.). With this as a basis, it is interesting to reflect over how early-stage research results (e.g. ideas, technology, etc) can be effectively converted into objects ready for utilization. Since there seems to be no magic recipes, my intention with this blog post is to explore some interesting models that are designed to promote societal utilization and technology dissemination of research results.

Technology Transfer Office (TTO) model

This is the traditional, often totally IPR-focused, model where universities have an internal system where they track inventions and patentable objects and have a number of strategies to ensure utilization and technology dissemination. Typically the personnel at the TTO employs a process to scan the internal R&D activity to identify research results of commercial interest. Protection strategies (e.g. patenting) can then be implemented in close collaboration with the researcher.

Exploitation strategies are then pursued where the three most common probably are;

• Licensing: A license agreement is negotiated to offer rights to the patentable invention (access/ownership) according to the claims made in the written IPR. This is sometimes complemented by a knowledge transfer model where the researcher provides consulting to the licensee to transfer required know-how.
• Spin-out: A startup is formed around the invention where often the inventor is one of the entrepreneurs managing the company or at least gets some sort of ownership stake in the company depending on the circumstances and complexity of the technology. This vehicle often relies on access to external funding, e.g. venture capital.
• Joint-venture: An entity is formed jointly between two (hopefully) complementary partners to create synergies while sharing risks and rewards.

Examples of successful technology transfer offices include; MIT Technology Licensing Office, Harvard University Office of Technology Development,

Examples of spin-out models where the created venture are managed by students educated in innovation and entrepreneurship; Gothenburg International Bioscience Business School, Chalmers School of Entrepreneurship

Cluster of specialized entities

This model can consist of;

1) one entity with multiple specialized divisions,

2) a network of specialized companies/organizations, or,

3) a combination of 1 and 2.

There must be at least one entity dedicated to research that can provide results to the others for commercialization. For utilization effectiveness, it is convenient if certain types of innovations, e.g. all results with medical applications, always goes to the same entity for commercialization. This does not have to mean that ownership is transferred but rather that rights are granted for further development and marketing. As you are probably already thinking, this model builds on proficiency in managing one's business model by using open innovation platforms and platforms can be created on all levels; international-, national-, regional-, company-, project level.

Examples of company models (1) are big corporations such as IBM that has several R&D departments and specialized units to handle commercialization through different applications with activities ranging from aerospace to healthcare.

An example of a network model (2) is SweTree Technologies: IP from 44 cutting-edge researchers is transferred to a privately held holding-company that in turn holds shares in a company specialized in commercializing plant- and forest biotechnologies.
An example of an international combined model (3) is SRI International that creates utilization through licensing, contract research and spin-outs through its specialized divisions and subsidiary Sarnoff.

Combined dissemination and commercialization model

This is a model that can be applied as a strategy to ensure technology dissemination onto the model above (i.e. as a platform strategy or business model) both on multiple and single entities. Core to this model is the separation between commercialization for-profit and technology dissemination for-societal-benefits. However, separation does not mean that only one of these paths should be pursued. On the contrary, a successfully designed model should be able to support simultaneous implementation of both. This is an interesting model from the standpoint of considering how to balance profit-making incentives with knowledge-disseminating incentives, in an ethical way.

An example of this model is the Human Proteome Resource (HPR) program publishes antibody profiles in the Human Protein Atlas based on proteins mapped in the program, while Atlas Antibodies is the commercial vehicle that produces, markets and sells antibody products developed and validated in the HPR Center.

These are all widely different models for utilization of research results but I think that it is interesting to see that some of the same underlying principles of these models can be applied in a number of different settings and contexts (e.g. universities, companies, innovation systems, individuals, networks, etc.). There is obviously also a whole range of pros and cons associated to these models but I won't go into detail in this post. Platform building, technology transfer and management of early innovation is just some of the subjects that will be discussed at CIP FORUM (6th-9th Sep) that I encourage you to register to, for a continued discussion.

Tobias Thornblad

(Contact via Twitter)

Book Review - Free by Chris Anderson

I have just read Chris Anderson’s book Free. Or to be fair, I did not actually read it. I downloaded it as a free audio book. One of the free versions of which you can reach the book Free.

Chris Anderson is, for those of you that do not know him, the author of the book The Long Tail and editor-in-chief of Wired Magazine.

Though Chris does not make any direct money on the audio book I consumed, he has a shortened (3h instead of 6h) version for sale. This is exactly his message in the book, that when the marginal cost of distribution reaches for zero, the prize will inevitably follow. This it at least true in the intangible economy where his two versions of audio books clearly show one of the several business models containing an element of free, which he lays out in the book. This model, freemium, is based on that you get something for free (the audio book) and you or someone else pays for a premium version (the shortened version).

The book Free also makes example of other ingredients in the complicated business model web. Since Chris is not only giving away the audio book, he is also giving away a pdf version, even though selling the paper book he must make money elsewhere. And yes he does, and do not make any secret of it either. One could almost see the whole book project as a conceptulizer and facilitator for his more lucrative business in selling his time. This through speeches or workshops for instance.

This brings us to one of the key factors in the (Anderson) Free model, except the zero marginal cost, the relation between scarcity and abundance. He argues that in a world, the intangible economy (or the economy of bits instead of the one of atoms), where the cost of producing one more copy of a specific product is almost none it will also be produced. So, this means that the seller has to find a business model where the scarcity comes in to play. Either if it is a constructed one as the premium service on for example FT.com or if it is the limited time of Chris Anderson.

What to learn from the book
I think the book has an interesting point in that we have to not just accept but to act on that free will be a key ingredient in many business models, and already is. This is especially interesting in relation to the new and emerging business models containing copyright, whether it is rights to music or to the written word, where I believe that the rights holders need to think hard on what they are selling. Is it a physical carrier of information or the information itself which is the valuable object?

The distinction between the physical carrier and the content becomes crucial in business model innovation and to actually see and construct the value proposition correctly to each group of customers, both in how if at all they should transfer money in return and also in what the product is and how it can be used.

Do I think you should read the book?
Well, Chris is sometimes repetitive and if you have the money but your time is limited, why not pay for the abbreviated version. The book has an interesting message and covers many innovative business models, which in themselves could be a reason to read it, but the main point might have been better off in a 30 page article.

In The New Yorker Malcolm Gladwell also writes about Anderson's Free and his conclusion is that not everything wants to be free. Chris Anderson responded to this in an interview with Charlie Rose (viewable online).

For those of you eager to know what he has to say, Chris Anderson gives an one hour presentation which is viewable through fora.tv.

[Update] Our Friend Anders Sundelin at TBMDB.com has written a post where he provides the full list of free bisiness models from the book.

[Update] For Swedish speakers, DN has written about the book here.


Johan Örneblad
Follow me on Twitter.

The Future of Books and Why Access is the Key

Yesterday I visited the Blackwell book store at Charing Cross Road in London, to have a firsthand look at their new Espresso Book Machine. It is said to revolutionize the book distribution and give readers access to out-of-print books. As Blackwell’s Andrew Hutchings puts it:

"It's giving the chance for smaller locations, independent booksellers, to have the opportunity to truly compete with big stock-holding shops and Amazon.”
"If you could walk into a local bookshop and have access to one million titles, that's pretty compelling."

Great Selection, Quite Old Though
I like the idea of having my local bookstore stock “all” books. Just pop down on a Saturday and order a book I fancy reading. This was what I tried yesterday. The book machine was all in place but what surprised me was the fact that there was no possibility for in store searching of which book I would like to get printed. I could ask the store attendant to find a book for me. But I could not browse around as I usually do in a book store, trying to find a good read.

The Blackwell book machine has access to some 500.000 titles of which most is out of copyright and therefore free for all. I was told that I could search myself at archive.org for books to be printed. Sure, it is a good way to do it. But in the same way as mp3 is a good format for music and most mp3 players are capable of playing the files in a acceptable way. It is the Apple iPod that has won in the market place. I believe that it will be somewhat the same in the book market in the, hopefully, near future. The service which offers the best integrated search and distribution model will have a great advantage.

The Long Tail
The concept of the long tail is based on that you can offer an almost unlimited range of content with electronic distribution. No shelf space to consider. When looking at the sales number of this content a curve with just a few top sellers and an unlimited tail of titles selling less and less. It has of course been a typical problem in the book store business that you only have a limited shelf space and to prioritize between titles have been hard.

My prediction of the future is that the distribution method of the content will be of declining importance. If it is a tangible book as the ones we are used to, or if the written text is distributed to a reading device will be a choice of preference by the reader. The relevant part is the content database and the size of it. In a long tail distribution model the key is the amount of titles offered and the ability to make it attractive to look through and easy to find what you were looking for, or did not know you were looking for.

This is also what was lacking in the Blackwell store. A way to actually browse through the extensive content they actually have access to. I believe that this will be even more imminent when they add titles still in copyright to the database. Especially since they most likely, to some extent will compete with the already printed books on the shelves.
Licensing Model
To be able to use the book machines I do not believe that there is that much needed to be changed in the contracts with the rights holders. The end product is still the same, even if it is produced in store instead of in larger quantities. From the knowledge I have of royalty models in publishing, it could perhaps be some other models needed to be negotiated. Especially since the risk element is somewhat limited without any large quantities printed. Differentiation between the first and the rest of the sets of printings might be of declining importance. Perhaps the first step is to introduce a clause offering a flat rate of sharing the revenues from this form of distribution.

Business Model
In the future there are several possible licensing models for this type of distribution of content. For example:

• Pay per copy
• Full access and limited prints of each

I guess that the most probable in the in bookstore book machine case will be something which have close resemblance to how you buy books today. Pay per copy will therefore be the most likely option.
Since the book content in most cases already exists in an easy to access pdf format there are initially probably no direct intellectual property issues, especially since the tangible carrier of the content is the same. Just another form of distribution.

The Future
The publishing industry is about to enter in to the stage where the music industry were some 10 years ago. The carrying media is challenged and you need to be thinking ahead and question your current business- and distribution models in order to survive. But the future looks bright and with some interesting, but also frightening creatures emerging.
Just think of the Google Book Project will reach its goal of scanning all books there are. This source of information and content will create interesting new business opportunities. Both for distributors and aggregators. Perhaps Google and the publishers need to get to an end with the current licensing issues first though.



What did I then end up buying? Well one of the books which they knew to print out fine was “Sonnets and other poems” by William Shakespeare. I picked it up still warm from the printer and paid £7.99 and went out in to the London sun to get me some culture.

Johan Örneblad
(follow me on Twitter)

Stimulus Package IP: Health IT part 1 - the new standard wars?

In the ever debated and updated stimulus plan there is a fair chunk (or equivalent to 27 % of AIG quarterly loss) of 17 billion USD for Health-IT. Read a great summary of the Helth IT implications here and find more info from initiatives here and here. Health IT in a broad sense is using IT to provide better and cheaper healthcare. In this sense it is focused on electronic medical records (EMR), earmarking 17 million in payments for hospitals and practitioners who implement it and also 2 billion for infrastrucure, admin and standardization. Timeframe is also of the essence, standards shall be set by the end of this year and payments will start in 2011.

I intend this to be a series I come back to as I find it interesting for many reasons, here are a few:
1) In my mind it is a great initiative - just imagine having all that data and using algorithms to compare MD's thoughts
2) Interesting to see how governement handles standard setting in just 9 months.
3) There is a provision that an open source initiative must be investigated.
4) Two very interesting and in many ways opposite players, Google and Microsoft, have already started working on this
5) It is a hot topic as it is very much intertwined with ethics, data protection and privacy

Before starting of, I wish to say that I am no expert in EMRs so comments are very welcome and I look forward to learning from them AND updating the series with good thoughts / ideas. I honestly think this is one of the most intertwined tech/legal/business/ethics/IP/standards issues of today.

Part 1 - The new standard wars?
The first thing that brought my attention was the fact that standardization plays such a crucial role in this and also that the government is the one pulling the strings. As this is no new field there is lot of IP already out there and also lot of unconnected systems. This leave to rather large questions regarding standards: "what" and "how". At time of writing I have yet not heard of a czar or some concrete measures being done, but I see endless possibilities for how this can be solved - let me share som toughts on scenarios.

How to set the standard:
* Patent pool with free access
Governmental control of IP through acquisition of key patents related to largest / fastest / best system and then labellig that as the standard and through monetary incentives make it the prevailing one. Could (should) grant free access to the patents and also has funds to do so. Likely subject to heavy lobbying activity prior to choice and thus could suffer critique and in worst case low market penetration.
* Standards Organization
There is nothing ruling out the formation of an "ordinary" standards agency like in many other fields. Relying on market powers, corproate negotiations and wealth redistribution to settle the issues. Risks are of course royalty stacking and an immediate 17 bililion dollar mark-up on total revenues generated until end of stimulus package

What to standardize:
* The whole nine yards
Just choosing one EMR option and then once again using monetary incentives to make in prevail. In theory (as always) this is easy, but in practice some MDs want one kind, some the other, some want voice control, some touch screen interfaces etc. etc. This could be full of criticism as the penalties for not adopting the systems are likely not as high as the pain and frustration for practitioners to us a system they dislike.
*Software
Scalable and quick model, but with less IP possibilities. I would draw the analogy to having all EMR's report in one certain file type so that all data would be imported in one large database (n.b. I'm no computer scientist). I'm also assuming that with software only, there are many privacy issues to consider.
* Interface
Safe but expensive, time consuming and full of interoperability problems. In my mind, given a longer time frame, it could be a safe way to develop a new interface only for EMRs, but in todays wireless world and it's encumberances that could be a monumental task.

Another interesting thought would be if whatever system is chosen then turns into a lawsuit (patent or copyright), which also needs some careful thought. Would the government be ready to tackle trolls or are they more keen on just developing an SOP and suddenly having the EMR market boom only to realize it is totally encumbered.
One final thought, with the blu-ray wars in mind, meaning that blu-ray community was so keen on winning just to make sure. their hardware would be in everyone's home with an ethernet port once we all start downloading movies. One could hope that whoever makes these decisions also thinks one step ahead and try to figure out what long term effects there are of digitising healthcare and having that data, not only focusing on choosing the short term solution best fitting the public opinion.

Marcus Malek
Follow me on twitter

IDsoftware is reinventing virtual products: Quake Live

IDsoftware has with its latest product surely taken the way of how gamers are able to play a full-scale 3D game to the next level. The provided Quake live platform enables players to play their favorite game directly through the web browser. Once the game is set to full-screen mode, the player will not be able to distinguish the online game from the original game Quake 3 which Quake-live is built upon. More information for the less informed reader could be found here, here and here.

Revenue stream
This brings us to the key question of how a company can keep a game alive and have a revenue stream when players do not follow the conventional pattern of buying new games in order to satisfy their hunger for challenges. Game companies have since long realized how important it is to keep the customer base once they have released a blockbuster game. The enormous online society of World of War Craft is probably the best example in how to keep customers close. The difference between WOW and Quake3 is extensive, not only are these completely different games but that WOW players still expect new features and updates whereas the Q3 players do not.

Shifting focus from hardware to bandwidth?
IDsoftware seems to have a good approach to the solution which is a quite remarkable one. As of today, they are still looking for beta-players to test the game and the potential of the site. More than 1.200 players are already testing the game which only requires a small client-program. It should be highlighted that the game in question, is a full scale 3D-shooter game looking just like Quake 3 which back in 2001 required the best hardware available. I dare to say that this is truly revolutionary if they succeed to accomplish to provide a service where the game floats without delays, which is the most crucial performance parameter within this game genre. As of today, there are no indications of such drawbacks. This unique platform will enable players to compete against others, participate in tournaments and track their game statistics.

What will the business model look like?
The concept is clever in many ways from a business point of view. The company will be able to establish technical control since the players will only have access to the game through their site and since the game is run completely on the server provider’s side, the possibility to cheat are close to zero and facilitates updates. For industry actors, e.g. hardware manufacturers, the site will provide great opportunities to sponsor tournaments and brand themselves among players. The possible opportunities remind of sponsored tournaments on internet-poker sites where the sponsoring party is providing a tournament with a variable price sum. With the strong brand name Quake the future opportunities for the Quake-live platform look promising. Let’s hope that advertising will not be their only revenue strategy.

Whether Quake-live will be a success or not is difficult to say but it is still a happening worth mentioning due to the innovative nature of the concept in an already innovative industry in today’s knowledge-based economy. To re-release an old game, packaged in a new concept and technology and make it financially profitable is surely not an easy task. However, the concept opens the door for a new paradigm for how games are distributed to customers and to strengthen IPR control technically. It is really taking virtual products to its limit and further diminishes the importance of operating systems towards an increasing focus of online applications which can be observed by looking of how Google continuously works its way to move office applications into the online applications domain.



Nicolas Preisig is the second guest blogger invited to post his thoughts here at Intangitopia. He is a part of the new generation of highly talented engineers, lawyers, and business managers pursuing modern skills and tools necessary to create value for industry, universities, and society in the emerging knowledge-based economic paradigm. The ideal education to acquire this skills and tools is the School of Intellectual Capital Management at Chalmers University in Gothenburg, Sweden.

A tax we want? - the success of trolls, trolls 2.0 and why we perhaps want to keep it this way.

Recently Fred Wilson twittered and blogged, at his always interesting VC blog, about his opinion on patent trolls. He said: "Just in case you didn't know how I feel: patent trolls are a tax on innovation and are evil of the highest order"

After that there was a wonderful set of comments on the same blogpost (I encourage to read them) and two linked post found here, and here. The latter by the CEO of the Fred's portfolio companies that were infringed. Fred's expression, comments on his blog/twitterfeed among other things inspired me to write this post (which in hinsight is quite lenghty). I think that looking at NPE litigation as a tax could be a proper and viable way and actually one we should embrace. However there are many open ended issues to such a statement, so I'll try to elaborate on some of them and encourage people to contribute their view on this subject which has so many approaches and, as far as I know, no one correct answer.

A game in three arenas
In order to clearly describe what I think about this I want to look at the innovation processes as part of three arenas. The first being technology, which is all about research and free from patents and money (other than funding the research) and focuses on delivering new inventions, with a die hard race to be claimed as the first inventor. Then there is the second arena, which is the legal arena. In this arena inventors or corporations choose if and how to protect the invention, which is much more complex then binary patent/no patent. Think in terms of patent type, claim type, portfolio strategy, geography, aim of patent (e.g. standard, x-license, ensure free use) and this arena becomes just as complex as thinking of 100 researchers sequencing genes. Thirdly there is the commercialization arena, where corporations exploit these innovations and/or patents for profit through means of products, licensing schemes, services, litigation etc.

It's only business !?
NPE litigation is, in my mind, mainly in the commercial arena, which is also why it attracts so much attention and critique from people. I believe companies/managers get more upset that they might lose money (i.e. make less) rather than actually not being the rightful inventors of a technology. Along those lines I could see NPE litigation as a tax on commercialization, but not on innovation.

My maths would say that if there was a player that would purchase all garage inventors and "few-man" companies' patents - they would churn out much more patents. As this is, in small scale, what some NPE's are doing - one could argue they are creating more innovation (which is also often IV's main claim when interviewed). Naturally this logic has its' flaws as it equals more patents with more innovation and takes no consideration of innovative leap etc. One could also see companies responding and saying that the money spent on litigation would in fact be reinvested in R&D, which is really hard to judge.

My personal opinion is that for large corporations this is much more determined by other factors, in smaller companies (e.g. like Fred's example which spent 10% of VC round on litigation) it could actually be the case. However, statistics show that almost 40% of all NPE litigation 2004-2008 was with only 20 companies (accounting for 534 cases). Without double-checking I would bet a lot on all of them being Fortune 100 companies. The point I want to make is that the first and foremost targets are non-surprisingly large corporations.

Then how about innovation and all the effort put in there?
I am pro innovation in all forms and want nothing more than for new and exciting start-ups to grow and change the way we see the world. But I think we must draw the line between innovation, products and patents ( a brilliant and frequently re-tweeted example is given by Jackie Hutter, here). In the world we live in today, it is very hard to really be sure that you are the first to invent something and unfortunately a patent is no proof of that. Statistics show us that since 2000, 15 patents have made up for 1375 lawsuits with over 16000 possible parties involved. Interestingly the top 8 litigated patents only have 3 different titles and are all within telecom. Now these lawsuits are not NPE lawsuits, but all patent lawsuits since 2000.a
The point I want to make is that statistics show us the difficulty and very contextual and interpretation based nature of patents, especially in a litigation setting.

Tying things together - with an "arbitrage opporunity"
What I want to show is that it is very hard to judge the outcome of a lawsuit but also to know whether a product actually reads on a patent- bearing in mind those 97 lawsuits for a single patent. Out of this there has rissen a large amount of companies that see this as an arbitrage opportunity by acquiring patents and then finding products that read on patents and settling for an amount equaling costs of a lawsuit with the defendant. The most litiguous actor, Acacia, has filed approximately 250 lawsuits since 2003, this equals 42 lawsuits per year. In contrast, they signed 60 new licensing agreements in the first 9 months of 2008, in 2007 that same amount was 69 (source: EDGAR). Without further research it gives an estimate of their success rate, which accounted for $30 million $40 milion respectively those years.

Just taking a guess, I would say a majority are settlements. I think this could take place based on certain criteria. Firstly, Acacias patent portfolio (493 as of 1/1 2009) consists of patents that are either key inventions (success in techniological arena) or written in a way that suits litigation, e.g. broad (success in legal arena - for this purpose). Secondly and in relation to Acacias patents, the defendants have products which might read on said patents. The key here is the word might. Because, this would never be sure until proven in court (which also can be appealed) and it could also be the case that regardless of commercial success, user friendliness or anything like that, the companies product and surrounding patents perhaps just are not the same thing (similar to Jackie Hutter's example mentioned above). All in all, the companies are not willing to pay to prove that they have adequate patents, neither do the want to go to court and lose and perhaps be senteced to damages or even willful infringement. This usually results in settlements where companies agree to an Acacia license and perhaps also a down payment. Which then would lower the defendants margins on the affected product.

Trolls 2.0 - firing the legal guns
With NPE settlements being mainly in the commercial arena, I would like to attract some attention to another way of litigating - invalidating patents. Now this would be something that I, as a manager or c-level executive, would be really afraid of. Just as there are very many patents out there, there are also almost always two or three companies delivering the same type of product service, i.e. there is competition. While an action from a troll is all about getting paid a share of product revenues by the defendant, we could well se a surge in action by competitiors being all about taking all of the defendants customers. Just as it is possible for NPEs to track down profitable companies, target products and map portfolios based on public data, it's also possible to use the power of crowdsourcing to find relevant prior art. Three recent example of that are Article One Partners , the USPTO' peer-to-patent and the recent "save red hat movement".
Imagine receving notice that your competitor claims your patent(s) to be invalid and has 20 scientific articles to prove it. Now you could potentially risk much more than paying up to a troll. Imagine popular companies with a dedicated fan-base starting to use this, especially in the overcrowded telecom, hardware and software space, and just to save the company they like or a product they use often 10 000 savvy people would spend 2 hours each trying to find prior art and all of a sudden you have the workload equivalent of 10 full time employees working one year done in almost an instant.

2.0 Lawsuits - adding another 0 to the costs
Just as a reference one could think of all those extremely costly lawsuits we have seen. RIM with their $600 million, Medtronic with their $1.35 billion. Well I don't the how reasonable such figures are, but they occur. And as soon as the other party uses the legal and perhaps even technical arena to fight you - you will pay big if you lose. There is a big new initiative started by MAPP where they try to get president Obama engaged in capping damages in patent lawsuits.

Ending thoughts - maybe people should embrace the tax?
What I wanted to show with this blogpost was that the patent system is overloaded and there are so many patents out there in certain fields that they are litigated over and over. Tying that together with the cost of litigation, the NPE licensing deal has become a proven model, with acacias succes as one example.
With all the uncertainty in the patent system I honestly believe that some NPEs actually are rightful owners of some technologies that their licensees incorporate in products.
What I also wanted to say that based on this uncertainty and the new movements of crowdsourcing to reach invalidation, corporations should perhaps look at trolls as tax on commercialization, purely in business terms. And instead be afraid of their new and improved competitors - using the legal and technical arena to put them entirely out of business or if challanged ending up in multi million dollar lawsuits with a very fierce and savvy (based on all crowsourcing) competitor that perhaps could make you wish it would only have been the "good old troll 1.o"

Marcus Malek

Value creation through offered access in Biotech...

Relating back to my previous post, I would like to continue the discussion about how intangibles are made into value propositions by applying layers of control. Last time I concluded that the vast number of control systems, both contractual and technical, enables the biotech firm to create a variety of “goods” by making these into an artificial state of scarcity where they are experienced as durable and non-durable depending on the combinations of control layers. From that discussion, it can be concluded that only the creativity by the firm will restrict what is possible. This time I would like to expand upon that concept by adding another layer to the value proposition that makes the business model options for creative design even broader, which is: access.

Biotech Market Transactions
First of all, it is important to realize that the traditional model where the seed seller offers a variety or hybrid with a set of fixed traits “locked into” a germplasm is obsolete. Nowadays, a biotech firm may isolate, sequence, redesign, and make a gene proprietary only to offer it to a number of simultaneous markets (e.g. healthcare, agbio, nutraceuticals, etc.) and applications. This means that the firm selling plant varieties to farmers does not necessarily have to be the same company that owns the pest tolerant trait in that very same variety nor does the company have to rely on a single source of income. Innovations in the seed germplasms therefore often create a number of transactions that all need to be controlled in some way for value to be maintained.
This value, however, will not automatically increase as customers or collaborators’ freedom is restricted, which seems to be how many companies measure the value of their intellectual property in many cases. As an example 26 leading corn insect scientists in the US recently submitted a statement to the EPA regarding how unreasonable restrictions in technology agreements hinder their research. Patent Baristas discusses the issue and links to Monsanto’s Technology/Stewardship Agreement (and Technology Use Guide) as an example, in an interesting recent blog post.

Access as Business Model
Control can instead be used as a gatekeeper to enable access rather than restrict it. Allowing farmers to save and replant seed is an example of a light form of this “enabling” thinking in contrast to the “protect and fend off” thinking. The right to save seed varies among countries and between plant species (according to regulation, e.g. UPOV directives) but the rule, in general, is that farmers should pay a reduced royalty fee if seed is saved and re-sowed the next season (with some prohibitions, such as brown-bagging: here & here). It is quite fascinating that despite the options for farm-saved seed (FSS) are in many regards rather limited, FSS actually still has created intermediate markets in Europe where organizations collect royalties from farmers for FSS to the seed companies, e.g. SVUF. It seems a whole range of new business models would be possible if access was made the focal point in the strategies of some of these companies. It is therefore particularly interesting when access is offered openly to technology such as when the US Department of Energy Joint Genome Institute in December released a complete draft of the soybean (Glycine max) genetic code freely to the research community.

Open vs. Free
I would like to emphasize that my viewpoint is certainly not that companies should offer their services without making a profit or even less. What I am suggesting is that business owners and developers should rethink how their value propositions are constructed, to create more value for their value recipients, which could mean that they could make even more profit but from multiple revenue streams. As pointed out above, a gene technology company does usually not have to rely solely on one particular product for revenue, but can often diversify by offering the technology in many simultaneous markets. The concept of how value recipients does not necessarily have to be the restricted to be the same as a company’s current customers is eloquently discussed more in-depth by Anders in tbmdb.com this week. Genetic engineering and software programming have many structural elements in common, so if profitable in-direct business models can be generated from open initiatives in software (e.g. IBM, second life, Linux Desktop business models, etc.) wouldn’t that mean that openness, and access, also could be made profitable in biotech?

Tobias Thornblad

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.

The IP Store?

During the recent weeks there has been heavy posting in the blogosphere regarding new breeds of IP companies, where RPX (covered here and here) perhaps have gotten most attention, with their interesting business model of being an anti-NPE. Also seeing much attention is two even more interesting breeds; Article One Partners ( covered here) and its open source cousin Open Invention Network (again covered by Securing Innovaton, here).
There is however more commotion in related fields like patent valuation, where the search for the golden standards still goes on (e.g. here ) and another conceptual thought on the subject here.
Yet another interesting new breed of service is launched by Stanford (discussed here) where IP related data will be public. Last but not least, the FTC hearings some time ago, both parties (Intellectual Ventures vs. "rest of the world") agreed that more data is something they all would like to see.
These recent postings have lead me into thinking what an IP marketplace could look like.

What is an efficient IP market?
I would believe that many people want to look at the IP market the way we have looked at every other marketplace the last half century or so. Now pursuing a thesis within Patent Valuation I can also conclude that academics sometime try and fit a square peg in a round hole with applying classical financial theories to an IP setting. The most striking being that not even all authors are clear on what a patent actually is and many also dive head into the logic of patents=products. Whether you are pro or con NPEs they at least crush that myth with their business model. Looking at a (IP) market with the view that it is a means of generating revenue elsewhere (i.e. products or services), then it is not difficult to see how people are working hard to closing the NPEs "loophole".

This has me thinking, how would this be handled, would you have to be a producing company to be able to litigate or perhaps wider use of cross licenses as damages or perhaps just less damages could be solutions. Anyhow - these are all complex and strive towards "fixing" an existing loophole. Arguments are often that litigation intensity and cost have people running away from patents and keeping things secret instead. I sometimes wonder if perhaps more effort should be put into building a new marketplace suited for IP rather than trying to jam IP into the existing product market.

What if all would change and instead of buying and selling patents, companies get more savvy and leverage licensing schemes instead and remaining the owner of the patent, thus not giving NPEs enforcement options. Now I know there are inherent flaws with this, where the biggest perhaps is the difficulties to match two parties. This is why I am so glad that the "big fish" seem united in thinking that more data is needed and I am also really exited about the new Stanford service. A part from those progresses I still believe that much can be done by just trying to build such a (or any other) marketplace from scratch and having legislators set the norms proactively rather than obtaining a large backlog and reacting to whatever loopholes people find. Just look at the way Apple constantly set the norms by setting up marketplaces like Itunesstore and Appstore.
So question is - is there a Steve Jobs in any PTO?

Abbreviated pathways to drug development

Recently a study was published by Teva Pharmaceutical Industries Ltd., where Alex Brill analyzes the article recently written by Duke University economist Henry Grabowski’s which explores the number of years that a biologic drug should enjoy exclusivity before a generic equivalent is introduced. The basis for this analysis is the fact that the US Congress is considering to legislate an abbreviated pathway for the FDA to approve biogeneric therapies, much like the Hatch-Waxman Act in relation to chemical equivalents (ANDA).

Biogenerics
Generic alternative drugs (a.k.a biogenerics, biosimilars) to innovative approved drugs, in the US, are generally not required to include preclinical (animal) and clinical (human) data to establish safety and effectiveness when submitted to the FDA. Hence, the term ‘abbreviated’ pathway. The approval instead relies on data that can prove that the drug is bioequivalent, e.g. by demonstrating that the rate of absorption and the amount delivered of the active ingredients are the same as the innovator drug.

Abbreviated Pathway as Technology Platform
Conclusions suggesting an earlier introduction of competing drugs could certainly be debated when the study is sponsored by the largest generic drug manufacturer in the world (as also indicated in Patent Baristas). Generating productivity and market efficiency through competition is hardly a revolutionizing thought though, albeit an important one. However, I wonder how the concept of an ‘abbreviated pathway’ could be used as a platform for accelerating the innovative drug development process instead of ensuring that market competition is maximized.
An ‘abbreviated pathway’ for generic approval versus a new innovative drug would obviously be different than an accelerated pathway for developing completely new drugs. For instance, there exists reliable reference data for the former but no standardized reference points at all for the latter. This means that the standardization would have to be located in another layer, where in my perspective the actual methodologies and tools used would be a more relevant focus of interest, e.g. by commercializing biomarkers in different ways.

A very interesting approach is taken by the Innovative Medicine Initiative, which focuses on speeding up the principle causes of delays and bottlenecks such as; predicting safety, predicting efficacy, bridging gaps in knowledge management and bridging gaps in education and training. This not only opens up opportunities for big pharma (which optimally would increase the drug/invested R&D ratio), but also provides new markets and business models for biotech actors, small as well as larger ones, based on tools, data, and knowledge management. More exploration of this to come.

Tobias Thornblad

Business model book business model

The model where different parties collaborate on one outcome is not new but the problems with rights to the results are still there. The model with customer participation in the development is still interesting from different views.

One recent example of the collaborative model is the Business model and design blog and it's book chunk project. The readers are supposed to pay USD 24 to receive the upcoming book in small parts, perhaps every chapter. They are also asked to contribute and do some sort of "beta testing" of the book.

There are mostly positive comments on thins on the blog even though some of the readers suggest that the subscribers also would receive a copy of the finished book.

So far so good. As long as it is used in a thought through way I do only see good outcomes from such collaborations. But there might be rights issues to the end result which has to be solved in some good way.

There are already existing models for collaborative creation of software. But they are created more as licenses and perhaps not good in a situation as the one described above where two "main writers" only use the ideas of others as it fits them. Not as a main part of the whole creation process.

As I understand the Business Model book project it will only use the readers for input and not as much for contribution, but still there might be a need to think through how to construct the models for larger collaborations, online or offline.

Perhaps is it enough with some sort of acknowledgment to fulfill the rights of the contributors, but there might be cases where there is need for new models for cowriterships and how to share revenues and rights. I see the rise of crowds as creators as something which we will see more of.

One good example of how this is used is the Wikipedia book project in Germany. It is allowed under the Wikipedia agreement to reproduce but it has to be under the same terms as the basic texts. The revenues will however, as I have understood it, stay at the German publisher.

This will rise the need for a good model for revenue sharing in collaborative environments where the content is jointly created but the economic extraction is proprietary.

Have anyone good examples how this is done today, or has there not been any need for this yet?

Johan Örneblad

Bundling intellectual elements into value proposition in Biotech

In this posting I aim to begin an analysis of the dynamic nature of intellectual offerings by exploring how business models are created in intellectualized business, in particular those stemming from bioscience. There are obviously a whole range of characteristics that differ intellectual objects from physical objects demanding completely different parameters for constructing business models, but I think that it is interesting to recognize that some elements remain the same in the eyes of the receiver of the value proposition (i.e. the customer/end-user or similar). The most basic, but also in my opinion most important, aspect that remains the same is the conception of scarcity. No one is willing to pay a premium price for something that is perceived to exist in abundance and is freely available. To illustrate: this is probably the notion that has changed among the general public in relation to music which a lot of people nowadays download from the internet for free while perceiving the action as a natural, and non-criminal, way of obtaining a non-scarce object (i.e. the mp3 file). Nonetheless, the value proposition of the concept ‘music’ still can be leveraged in a number of ways by packaging it in different business models and offerings such as concert tickets, Spotify (as explored by Johan in previous postings), ring tones, etc..

So what does this have to do with business models in Biotech? It is important to realize that all intellectual objects and offerings (incl. Biotech) are relying upon the intellectual conception that they exist in limited amounts, i.e. from an economical perspective - they exist in scarcity. This can be done in a number of ways including packaging them as exclusive offerings in terms of geographical scope, field of use and/or bundling them with physical artifacts (that do exist in scarcity). All of which having an enabling and more strengthening foundation in the fact that most of them are protectable by means of intellectual property rights.

An illustrating example of a immensely successful bundling of IP and material objects is the famous polymerase chain reaction (PCR) machine which by regulating thermocycles activates and deactivates the heat-stable DNA polymerase originally isolated from the bacterium Thermus aquaticus. The effect of this bundling of intellectual objects and physical objects results in a machine which may quickly replicate a stretch of DNA, but by zooming in and revealing the intellectual nature of the objects which are actually providing the functions (thermocyclers and mechanical parts aside) it is quite obvious that the assembling of DNA building blocks resulting in an exact copy of the template DNA is a spontaneous mechanism at certain temperatures. Capturing this process through intellectual property rights and offering the concept to other actors would probably had limited success as business model, whereas packaging the process in a physical object provides a valuable turnkey solution for actors interested in amplifying DNA.

Hence, it goes without saying that the value proposition has to be accepted and experienced by the receiver to be of any value. This obviously brings up a whole range of other questions, such as “how do you measure this value” as it would be an immense difference in value when offering a description in a patent of the above biological reaction to a biotech company in contrast to provide the same offering to an actor in the IT business. Well, my intention is to keep future blog posts somewhat shorter than my previous one, so this will probably be explored more in the future by me or someone of my fellow co-bloggers.

Tobias Thornblad

Spotify premium service to promote user base

I am getting back to Spotify and their model (hopefully) changing the music industry.

It is not new with teasers or previews offered to specific audiences. Which is why it comes pretty natural when the new album with the Swedish artists Orup and Lena Philipsson, Dubbel, is offered to premium users in Sweden almost a week before the public release date. It is interesting to see how the music industry this way, sort of at least, show that they approve the new way of distributing music.

Still, I have not seen the agreements between Spotify and the record labels, it might be so that they share the different revenue streams in some interesting way. But it might also be so, which I think to be more likely, that the record company sees Spotify more as a way to promote other sources of revenues then to strengthen the Spotify model. The service is all too young to be a trusted way of income for the record labels.

It is however interesting to see that it is only the premium service which gets the early access to the preview. Could this be a sign of that it is not enough with the commercials every sixth song to differentiate the two levels of the service? It might. But I strongly doubt that it was not thought of as a way of separating the two in the planning of the business model. It will rather be a continuous process to offer good value for the around €9 the premium service cost each month. It will otherwise be easy to switch to the ad-based level.

Next interesting part in all this is of course as I wrote above, the models of revenue streams between Spotify and the rights owners. Perhaps is it more profitable for both parties to have lots of users using the ad-based one. A hint in this direction is that they only account for that between 2 and 15 percent of the users will use the subscribed versions of the service, according to Martin Lorentzon. Then, still the question is why to offer the early release to the premium costumers?

The same article in Dagens Nyheter suggest that they believe to have 20 million users in 2 to 3 years. A quite large customer base which they have pretty good user information about, due to their music preferencies. I reckon customized commercial spots can be made with quite good accuracy based on that information which makes the community pretty valuable for advertisers. Or perhaps third party use in some way.

For now I still think it is safe to assume that Spotify will continue to offer premiums to the subscription service, in one way or another. Mostly I base this on that you as customer are more eager to use a service which you have actively decided to use. You are also probably more interested in talking to and inviteing your friends to the service as long as it offer good value. This way creating a stable base of users subscribing and becomming part of the "Spotify tribe". The same tribe inviting their friends and promoting Spotify.

But the most important part is however the diversification of the offer towards the costumers. In order to fulfill the diversification needs, there has to be differnet values assigned to the different alternatives. Which is why we will see more early releases and designated content in the premium level of Spotify.

Johan Örneblad