With major fanfare (front page of Financial Times and op-ed page of WSJ Europe), the top six accounting firms worldwide have released a paper outlining their recommendations for accounting overhaul. The most interesting is real-time accounting. I like it. For companies that are earning cash, we can see it pile up day after day.
Between 1976 and 1996 NASA got 2,620 patents with their 0.2% of the economy on average. That accounts for 0.3% of utility patents grants to US origin. NASA spent $40 million in R&D per patent compared to the rest of the Federal Government at $50 million per patent–20% cheaper! In those 21 years we spent $2.4 trillion on R&D in the US in 1996 dollars. That averages out to about $2.6 million per US patent granted from US sources (927,653) vs. $40 million for NASA. It only costs us 15.5 times as much as the rest of the economy to do R&D–(1450% more expensive). Claims that the private sector can do things cheaper than NASA suddenly seem more plausible.
I asked some top notch people about this 6 years ago when I was CEO of First Intellectual. They said it would never fly. Forget it. Today New York Times is worried. In Pay to Obey they say:
The broken American patent system has a knack for sanctioning the ridiculous. In the latest example, businesses are receiving patents for devising ways to obey the law — the tax code, to be more specific. What’s next, a patented murder defense?
If one can patent DNA tests and Twinkies, why not the Twinky Defense?
When I was at IBM, I helped them decide to sue Informix which resulted in a merger. I also questioned intellectual property (IP) policy with respect to the personal computer (PC) business. Now that IBM no longer has a PC business, it can more aggressively enforce its IP. With a large portfolio, IP benefits from looking tough on some of its patents. The assumptions in game theory that lead to the chain store paradox of never fighting do not apply here. It is doing that with its portfolio of non-PC patents too. IBM earned $1.4 billion from IP royalties in 2000.
I think their R&D spend is optional to support a much higher rate of patenting. That is, I think the 1.8 million they spent on R&D to get a patent was optional. Only the filing fees, incentive awards, employee hours and legal are necessary to get a valuable patent portfolio. Case in point: a patent I got for IBM on all externally adjustable medical implants. If IBM spun off its IP portfolio, that could generate billions in royalties without any risk of a countersuit. Decisive win for IBM.