Legal Affairs: Intellectual Property
For Sale: Great Ideas, Barely Used
Yet2.com gives companies a place to market their patents
A high-tech fiber that can stretch up to six times its original length, Lycra is the magical material that has given the world the miracle of Spandex. Invented by DuPont scientists in 1958, Lycra is adored by millions of joggers, swimmers, and heavy-metal guitarists and has produced billions in revenues for the company. Yet in spite of this success, Ben du Pont, former global-development manager for Lycra, always believed the company's patented technology had dozens of uses well beyond cycling shorts and sports bras.
Problem was, he wasn't quite sure what they might be. So in 1998, du Pont asked a group of engineers to dream up new uses for Lycra and took it upon himself to personally cold-call potential buyers. He quickly learned how daunting the task was: The only taker was a tannery that wanted to make stretchier shoe leather. "There may be hundreds of applications that a small group of people could never think of," says du Pont, a great-grandson of founder E.I. du Pont de Nemours.
Then a lightbulb clicked. Last summer, du Pont quit the company and started yet2.com Inc., a Cambridge (Mass.) Web site that du Pont hopes will be the world's first open marketplace for buying, selling, and licensing intellectual property. Yet2.com launched on Feb. 7 and has a heavy roster of corporate backers that have agreed to list patents on the site, including DuPont, 3M, Boeing, Dow, Ford, Polaroid, Siemens, Toyota, Toshiba, and more than two dozen others. "There are a lot of great technologies sitting on the shelves at these companies," says du Pont. "Most companies, if they're being honest, get only a small amount of value out of the technologies they create."
For yet2.com's sponsors, the motivation for the project is simple: making more money on their patent portfolios. That may not seem like such a surprise, but it actually represents a revolution in the way some big companies think about their intellectual property. Until recently, most of them viewed patents primarily as defensive tools--government-granted monopolies that help them defend their technologies in case competitors infringe on their turf.
The game has changed. As intellectual property becomes more valuable, Corporate America is increasingly treating patents as offensive weapons. From Dow to Xerox to Pitney Bowes, companies are hiring "intellectual-asset managers," drafting patent strategies, and using new management techniques such as patent "mapping" to build robust intellectual-property portfolios (table). Merrill Lynch & Co., for instance, hired its first in-house patent attorney in 1998 and has since filed for 10 new patents covering everything from securities derivatives to a check-fraud detection system.
Yet2.com is hoping to play a critical role in this intellectual-property gold rush by giving companies an outlet for underused, or "sleeping," patents. At most corporations, only about 3% of their patents are ever used. The remainder sit quietly, generating little or no income. And even grand slams, such as Lycra, are frequently underexploited.WIDER REACH. Consider Rockwell International Corp. It has a portfolio of more than 5,000 patents, some of which have potential applications in everything from mobile phones to TV cameras to appliances. But as an aerospace-and-defense contractor, the company lacks the time and expertise to develop applications so far from its main line of business. "We don't have the resources to manufacture a cell phone," says intellectual-property counsel James P. O'Shaughnessy. Now, Rockwell plans to market some of these underused patents on yet2.com.
Similarly, Polaroid Corp. is planning to list as many as 900 of its 1,500 patents on the site. One example: a new technology for expanding the capacity of fiber-optic networks that is of little use to Polaroid but quite valuable to telecommunications companies. Indeed, the site will work something like a dating service. People can search at no cost through the site's database, which includes short descriptions of hundreds of patents. If they find something intriguing, paying a $25 fee will get them a fuller description of the invention--though the owner's name isn't disclosed. Should customers want to go further, they can pay $1,000 for an introduction to the patent holder. If a licensing agreement is struck, yet2.com gets a 10% cut of the deal--capped at $50,000.
For technology buyers, yet2.com aims to simplify the inefficient process of acquiring new intellectual property. Unable to find, say, a missing molecule, many companies reinvent already existing technologies. That raises costs and sometimes prevents them from releasing new products. By improving this process, yet2.com's sponsors are hoping the site will spur innovation."KID IN A CANDY STORE." One early customer is Keith Miller. He's the founder of Touchbridge, a New York-based company that is developing a networking system to tie together computers and appliances in the home. Miller located some potentially helpful military-aircraft technology through yet2.com. He's now testing the patent to see if it works in his system. "I was like a kid in a candy store on that site," Miller says. "When you see the abstracts related to these technologies, you're like, `whoa!--what if you can do this and this and this?"'
Will there be enough Keith Millers for yet2.com to succeed? That's still unclear. Companies have traditionally been reluctant to trust technology they haven't created. Moreover, a crowd of yet2.com competitors is springing up, including Patent & License Exchange and TechExchange Online. But none of them has yet2.com's marquee sponsors.
Du Pont is convinced that he's on to something. "Up until now, trading technology was about an inefficient a market as you could find," he says. It's hard to argue with that. If yet2.com can help grease the skids for innovation, Corporate America is bound to take notice.By Pamela L. Moore in Greenwich, Conn.Return to top