"Patents are not why we are investing"

While the Supreme Court was killing off the "patents confer market power" presumption of International Salt on March 1, I was attending a meeting involving venture capitalists wherein Christopher Sugden of Edison Venture Fund (Lawrenceville, NJ) told me "patents are not why we are investing."

This assertion was directed to the IT/communication/wireless area, and it reflects a belief BOTH that patent protection is not the most significant factor considered by VCs in investing AND that the presence of patents by one's competitors does not frighten VCs. The VCs look for the three m's: market, model, and management, and there is no "m" in intellectual property.

One might think that there would be some thought about patents in view of NTP vs. RIM, MercExchange v. eBay, and Eolas v. Microsoft, but these are at best viewed as exceptions. And, separately, the VCs are usually long gone with their money before a patent litigation drains the bank of the likes of RIM. Thus, on March 1, when the Wall Street Journal was running "Patently Absurd" (about the damage that a broken US patent system is doing to the larger American economy), venture capitalists are showing themselves to be more in line with Linus Torvalds: patents, what patents, I don't read patents.

The Wright Brothers might be out of luck in this arena. One of the venture funds at the meeting does not bother to track technology, but rather tracks the records of CEOs of large companies over the past 2 to 3 years. In this vision, one is not only not looking at intellectual property, one is not looking at underlying technology, with or without patents. One is looking at the track records of various businessmen in moving technology along. Ultimately, innovation is lot more than invention, and this particular vision takes that reality to the extreme. Don't bother me with the technology; just show me someone who can move things in the marketplace.