The house Nathan Myrhvold wants

If you’ve been playing with video awhile, you know all about Acacia’s lucrative web patents. Shares of Acacia have doubled to 14.70 since December 2004. The company has 47 patents (and counting) and has begun generating revenues from 17 of those so far. In fact, Acacia is expected to earn 56 cents per share on revenues of $90 million in 2007 vs. revenues of $41 million in 2006. No doubt the company has acquired a reputation for hardball tactics, ultimately settling lawsuits against more than 200 companies to protect patents that it says it owns.

Acacia’s activities have brought quite some scorn because of what various Internet rights organizations term as “laughably broad patents.” True enough. Acacia claims to have the patent on compression of video for streaming. Doesn’t matter how the compression happens. If the video is smashed to fit through a small pipe Acacia wants their money. Only one analyst, Harris Hall of Singular Research, rates the company a “buy” with a 12 month price target of 17. Acac.ia has signed 26 patents settlements since March with leading companies like GE, AMD, HGP, IBM, Intel, Nokia and others.

Most call these guys patent trolls.

Paul Ryan, CEO, has a more grand explanation: “Actually companies come to us who have patented technologies but who simply do not have the scale or the experience to license themselves, and they engage us basically on a partnership basis. We go out and perform that function and split the revenues with them. So, we’re not targeting any particular areas, it’s the companies that come to us with their patented technologies and if we feel that there’s significant opportunity for licensing for that company to generate revenues for them, then we will become their partner.”

Nathan Myrhvold seems to like this strategy. His cash-rich firm snaps up thousands of patents but fears emerge that it will become a leader in litigation—not innovation. Guess what? That’s the model! What’s so frightening about patents? Thomas Edison and Eli Whitney are American heros who are the pride of our ancestory. But lots of small companies, disparagingly called trolls, have gone into business solely to own a handful of patents. They make money suing big companies who might be in violation. “Real Business”? You be the judge.

Nathan says he’s opposed to patent litigation. In response to charges that he is a predator, Myhrvold describes himself as an entrepreneurial financier, somebody who is devising new ways to fund innovation. Here I think he’s being dishonest but I respect him as a businessman. Patent aggregation is ABOUT LITIGATION. Think otherwise and you’re just smoking the ganja. I too am persuing patents. I highly doubt I’ll get rich charging HP millions for the use of my patents but I suspect if I did make any money from the patents it would only be because I HAD to sue and not because an infringer volunteered an unsolicited check in the mail.

I’ve got news for smart entreprenuers. Get patents. Learn the difference between a utility and a design patent. Get your provisional application which establishes a filing date but does not begin the examination process. It provides the inventor with a one-year period to further develop the invention, determine marketability and seek licensing agreements. It’s inexpensive but can be a great deterent. At a greatly reduced cost, you can have “patent pending” on your basic idea/invention while still preserving your right to a non-provisional application, thus obtaining a degree of invention protection. The less detail about your patent you provide, the more the attorney will charge to help you get the details right. It comes down to how you value your time.

This is the age of patents. If you really do have a concept you believe in, most patent attorneys will give you a free consultation. Above all else, expect to mostly waste money on your patent so play it smart. Most patents DO NOT make inventors money. A good attorney will tell you what they really think about the viability of your patent concept. Here’s a little side tip: most good patent lawyers outsource the discovery process. You can search your own patents for free. It comes down to how you value your time. But it can be done. Remember, a US patent is for USA only. There is no such thing as a worldwide patent.

If you are serious about your patent here’s my advice. Do your own search. Document AS MUCH as you can about the patent. Then, engage the best patent specialist you can find. That will give you good quality service and will save you thousands. Great patent attorneys are not on every block so look for good referrals. I’ve got some if you need them.

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