I just ran across a fascinating description of the impact of smiling on sports performance, success and even life expectancy.   I know that smiling make me feel better and that is likely good enough though.

Here are my top 4 reasons

1) the science.  Usually you are trying to get an answer to some technical question.  Will my product work in a new environment?  How to I overcome this particular challenge?  etc.  A CRADA will help you get toward that answer.

2) the cost.  Typically CRADAs provide you access to expertise or facilities that is hard or impossible to come by.  In many cases, the absolute cost is nominal and it will reduce development time (yes, working with the government will SPEED your development).

3) credibility and validation.  Just by having an agreement with the government you have shown you have a reasonable amount of business acumen.  In particular, as a startup, it will get a moment of pause from investors. Enough time to show that you are resourceful in leveraging engineering dollars.

4) Nose in the tent.  In the case of the DoD (a procuring agency), getting your nose in the tent with the researchers who are tasked with solving a problem has always seemed like a good idea.  They are not in the procurement process, however if asked they can confirm that your solution works.   More importantly, if you are in the tent, you can effectively limit other occupants.

Like many interactions with the government, even free comes with a cost.  In most cases I find the benefits greatly exceed the costs.

His key points

1. The government is a HUGE market.
2. They buy pretty much everything
3. Even the federal government does most of its procurement outside of DC
4. If you are just getting started.  a) get on the GSA schedule, b) expect 20 month delay, and c) expect to invest over $80K in time and other resources.

As  aside note, this is put out by Nevada State bank.  I have listened to a couple of seminars in their series and have enjoyed them.  More importantly I think this strategy is great marketing.

I had the interesting opportunity to talk with the original 3 founders (Myrhvold, Jung and Gorder) when they were just starting out in class B office space next to a motorcycle repair shop.  Though my viewing with Nathan Myrhvold must have been on an off day, I was intrigued by what they were trying to put together, but at the same time could not get a grip on their direction.  I left with a clouded understanding of  what they were up to (It is possible that they simply did not want to reveal this).  Ed Jung provided the most useful analogy, suggesting that they were going to bundle together IP in a similar way that Microsoft bundles IP in the operating system. This was helpful, but of course did not turn out to be 100% accurate.

I’ll admit that at the time, I had no idea that they would end up becoming a $5B behemoth, vacuuming up patents and wielding them against any who might resist.  Indeed with 30,000 patents resistance is futile.

I am not a huge fan of patent assertion firms, however I certainly think that a patent holder is well within reasonable business behavior to defend those assets.  Though they may not be able to provide VC style returns on their capital, I think they may very well have a sustainable business.  My issue with IV has been the dismissive fashion they respond to critics. Of course it is like that they are following a corporate PR strategy.  I know that this strategy has convinced some of my colleagues in the past and I’ve certainly seen more egregious bending of the truth from others.

In should note that like many, I find myself carefully editing these comments for fear of what IV may wrought upon my future ventures.  The article by NPR clearly states the business they are in and how they operate.  It is my hope that IV can come out of the closet and start calling a spade a spade.

One last funny note.  Myrhvold is not a known word for Firefox’s dictionary. Its suggested replacement is Voldemort.

One of the results of this report was Obama recently announcing a $500 million plan to deal with a couple of those areas.  Though this initiative likely touches on a number of areas in the report, the major one is on page 2 of the report (sadly the committee did not number its recommendations, however I will)

#3 Actively supporting the university technology transfer function
Moving an idea effectively across the “valley of death” requires critical programs that include funding for proof of concept research and new mechanisms within the existing grant process that help defray the costs and risks.

Indeed one way to reduce risk is move the project farther along the development path and this requires money.  Most investments follow this path (Angel, Seed, VC, even bank).  There are those who question the wisdom of government providing this money.  Personally I wish it was not necessary, however it is clear that there is a gap of chutzpa at the lab to market interface.  (Note some call this THE valley of death, however I prefer to describe it as A valley of death).

You could argue that institutions are already taking this path.  For example the University of Utah recently bested MIT in start ups.  UU’s status was not from better technology more intrinsically suited to start ups, but rather licensees do not seek out UU for technology.  This forced them to adopt a strategy similar to what Obama is implementing, namely move the product farther along to make it attractive to the next level of investor.

I believe the 6 esteemed institutions (including my alma matter – Michigan) could follow UU’s model (and I think in some cases already are), however it may be the projects envisioned are too large (risky) to be brought to fruition by the university.

So, while I remain on the fence about whether this is good public policy, I am certain that the money is needed to move these projects forward.

I’ll comment on other parts of the NAC report in future posts.

The story left a couple of key points out though.

1) Pharma loves this strategy.  They will gladly pay 50x as much for the 1 project out of a 100 that makes it through a particular gate.  These firms are even more marketing/distribution firms than R&D firms.

2) The firm profiled gets its discoveries from Univesrities (or at least it got its last one).  The point is they are taking exsiting (somewhat) proven research to the next level, not doing basic research

On this last point, there are innumerable technologies (pharma or not) within the US universities and Federal labs that are waiting for just such a product development company to come in and move the ball down the field.  Risk is the killer for all of these projects. The more risk you can remove the more reward you can get.

This represents one small (pun intended) area of research at the Air Force, which is of course only part of the DoD, which is only one agency.

Of note is even in this area the amount of science necessary to get these projects off the ground (ditto) is tremendous.  This work combines material science, electronics, mechanics, energy storage, communications, artificial intelligence, etc.

Unfortunately they got it a little wrong.

They noted that IBM and GE combined represented 60x the amount of patent applications as the entire federal government.  I am not sure if the author meant patent grants, but lets assume so because it is easier to check the numbers (plus applications is a little spurious).

The total number of patents granted to GE and IBM on the following USPTO website is about 105,000 (or 106,000 if you add GE medical systems).  If the 60x number was true, this would mean the US labs were about #245 and ahead of 266,000 others, including Mattel, Ciba Geigy, and Exxon.  In my humble opinion, still a good showing.  However the news is considerably more positive.  The same website shows US Navy with 15,000, US Army 9000, Energy 6800, Agriculture 2500,  Health and Human services 2800 , and NASA 5400; for a total of over 41,382.  Admittedly this is still less than half of GE and IBM.  However it is MORE THAN GE!  In fact this places the government’s US patent portfolio as #2 all time.

While the US government will never catch up to IBM, it is worth noting that the numbers on the USPTO site do not include a host of other agencies and they use different numbers for the Department of Energy than the agency reports (I believe the difference lies in the way the contractors that run DoE labs).  To fix for this factor I would add another 8000 to the total.

There are two answers.

1) To add the fuel of interest to the fire of genius – Abraham Lincoln.

The major reasons a corporation patents

1. exclude others from a competitive area
2. publicize corporate prowess
3. increase valuation (mostly for start ups)

An exclusive right secured by the government can be licensed to a corporation, which in turn will allow the firm to obtain capital to produce the related product.  In the case of the Department of Defense, they have a defined need for the patented product and want to put it into operation to help the warfighter.  Other agencies have similar missions.  No exclusive right greatly reduces the interest to invest.

2) To be a good steward of taxpayer assets.

If the US gov were to put all of its Intellectual Property in the public domain, then it is likely that nothing productive will result.  Prior to Bayh-Dole, nearly all government sponsored inventions went into the public domain and very few ever saw the light of day.  Since then, the results have been dramatic with vast new industries being spawned from government research.

Having come back from the Federal Laboratory Consortium national meeting, I can say that at least the DoD are now starting to formalize the process. A working group has been established to flesh out a policy that makes sense and they are currently looking for case study of success.

Even without this formal mechanism in place CRADAs have their place in business development. I’ll cover that in a later post.