Genetic Engineering: Innovation and legislative landscape

As I mentioned in the first blog post this year, I am currently writing my master’s thesis together with my colleague Sina Keshavarzi in Indianapolis, USA. We are exploring the biotech sub-market of biofuels where genetic engineering of organisms provides tremendous potential for leverage. As a part of this study, I have today mapped out the innovation and legislative landscape for genetic engineering in a diagram that I thought that I would post here hoping for some feedback on what else to include. Click on it for better resolution. Please let me know what you think!

Tobias Thornblad

The diagram in this blog post is distributed under a Creative Commons (CC) license. This doesn't replace copyright – which remains undivided with Tobias Thornblad – but it makes the terms more flexible. Anyone is free to download the the diagram; share it with friends; republish or embed it on their website or blog. But this use must be made within the terms of the CC license "Attribution – NonCommercial – NonDerivative."

This Creative Commons license allows you to reproduce, distribute, display or perform publicly the diagram as long as you follow these guidelines:
Attribution: you reference explicitly Tobias Thornblad (Intangitopia) as the original source of the material.
NonCommercial: You can't use the diagram (or any parts of it) for commercial purposes.
NonDerivative: You cannot alter the diagram in any way (edit, cut, etc). These conditions can be modified only by explicit permission of the copyright holder (Tobias Thornblad). The complete text of the license can be seen here.

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

When will Spotify’s regional restrictions be removed?

As you probably are aware of, Spotify announced last week that they were about to apply the regional restrictions which were part of the license agreements with the record companies. This is not such a surprising step though it might be annoying for us users.

Using the function to show unplayable tracks give me this image of one of my playlists. The red/brown tracks cannot be played. I am in the UK at the moment and since it is country specific restrictions they might very well vary. It might seem as a significant part, and I guess it is. But I also imagine that they will try to include them in the 10000 tracks added each day.

The discussion around regional restrictions should definitely be held but it must be around having them as a general phenomena and not whether or not Spotify should apply already agreed upon contractual regulations.

When it then comes to the record labels and they applying restrictions to music based on geographic territory I think it makes sense in the old economy thinking. When music mainly was (intended) to be sold on physical carriers such as CDs having regional limitations and using different distributors in different areas made perfectly sense.

But today, when music as easy could be downloaded in Gothenburg, London or Doha the restrictions makes less sense. The user will most certainly want to hear the same music independent of where in the world she is at the moment. As well as she would like to share the playlists or suggestions of interesting songs with friends around the globe.

When it comes to Spotify I am not sure if they will be the force that will change the thinking of the whole music industry. But they might at least change the customer behavior which eventually will change the labels, even if it probably will take some time.

Johan Örneblad

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

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.

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

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

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

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.

Conclusion
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

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

Symbiosis in open biotech constructs

In Marcus’s last posting he discusses the need for a new type of market rather than trying to jam a square peg into a round hole. I couldn’t agree more, and there are some clear examples in the biotech industry where there is a lot of talk about how new biomarkers will revolutionize the market and make the proprietors rich through licensing structures, while in reality there still is a lack of IP infrastructure to value, price and leverage these intangibles with the same effectiveness as tangible goods are handled in the material value chain. It seems distant to imagine that this will ever be the case, but history tells us that the future usually has a tendency to surprise us.

My hypothesis is that effective valuation and pricing to a large extent relies on a detailed understanding of how value propositions are packaged and how the underlying assets are discovered, developed and combined. Hence, I find it very interesting to follow how technology platforms are developing in the biotechnology field as these hopefully will provide a greater understanding of how assets may be transformed into property and capital. Many of the currently existing platforms that are claiming to be ‘open’ (e.g. ‘open source’, ‘open standards’, ‘open platforms’, etc.) still seem to be more in a visionary stage than actively managed structures and systems enabling collaborative value to be created. The biotech industry has seen a whole spectrum of these as of lately, e.g. Open Wetware, Biological Open Source (BiOS), Predictive Safety Testing Consortium, SNP consortium, Human Genome Project, etc.

Open platform: IMI
Innovative Medicine Initiative (IMI) is one of the more advanced examples that I have found among the existing open platforms. The initiative, as I brought up in one of my earlier blog posts, focuses on targeting the biggest bottlenecks in the drug development process. IMI is interesting from a number of perspectives as it is driven by the founding members, EU Commission and EFPIA, to create a competitive edge for the EU industry while making the drug development market work more efficiently. The beauty, in my opinion, of the constructed platform concept is the so-called “Research Use” in their IPR Policy. At a quick glance the Research Use clause appears to be just an alternative way of using the Foreground which excludes Direct Exploitation. However, the footnoted example describes application of the generated results “as a tool for research and clinical research in the discovery, development or commercialisation of pharmaceutical products by for-profit institutions and organizations”, which I interpret as a form of intellectual creation of an ‘open standard’ for the pharmaceutical industry. The result seem to be that innovations that fall within this definition can be accessed and utilized under fair and reasonable terms on a non-exclusive basis, for both platform participants and third parties.

However, it should be mentioned, that this is made possible partly on the expense of the long-term value visions of the participating biotech firms as these, from the build-up of this construct, will not be able to offer pharmaceutical products nor diagnostic tools as value propositions. The businesses of the biotech firms therefore will have to rely on the commercialization of earlier-stage technologies such as screening- and research tools instead. Hence, biotech SMEs will need to ask themselves where they see the highest probability that the highest value will be attained (research tool versus diagnostic tool) before deciding to join as there is a huge difference in developing something risky of high value on your own as opposed to share the risk in IMI at the cost of a lower return-on-investment in the end. Moreover, the two alternatives require completely different capabilities and tools to be successfully achieved.
It is simple to be critical to created constructs such as the IMI platform, but it is extremely difficult to creatively innovate sustainable solutions that both provide incentives for the small inventive actors while keeping up attractive incentives for the large financially secure actors. So, the question remains; is it possible to create efficient biotech open innovation models where all parts work symbiotically?

Tobias Thornblad

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?

Obama message is shared under Creative Commons

The president-elect of the US, Barack Obama, has released the office of the president-elect webpage change.gov under a Creative Commons 3.0 Attribution License. Meaning that you are free to copy, distribute and remix the work, as long as you mention the source.

It is of course so, as IPKat writes, that politicians have an inherent interest to have their views spread to as large audience as possible. But, one really important thing is, to keep some level of control over the message you communicate. I do not think that this license issue of the website content will affect his presidency in any major way. It can and could very well be so that the collaborative nature of this has made him more popular.

There is however an interesting difference in the copyright statements on the official campaign site barackobama.com since it there is not explicit if you are allowed to remix the content. That you can print and distribute is ok, as long as you mention the source.

As I see it, there can both be good and less good aspects of giving away the possibility to use elements from websites and campaigns as the ones mentioned. Since all communication interfaces are part of the overall brand I believe that there needs to be a consistency when it comes to the message communicated. But in the age of access where the masses can, and probably will, do what they like anyway, it might be hard to control all uses.

So, it might instead be more beneficial to limit the access to some parts and use openness in other areas. Just as Mr Obama has done.

Johan Örneblad