Edward Jung is one of the co-founders of Intellectual Ventures, one of the largest patent holders in the world. Jung currently serves as chief technology officer at IV, and is responsible for setting strategic technology and new business models for the company.
Prior to founding IV, Jung was at Microsoft where he managed projects related to web platforms, semantic web technologies, intelligent operating systems, adaptive user interfaces and artificial intelligence. He holds more than 700 patents worldwide and is named as an inventor on over 1,000 pending patent applications. His inventions related to the fields of biomedicine, computing, newtorking, energy and materials sciences.
Jung will be delivering the keynote speech at the 2015 IP Dealmakers Forum in New York City on Monday, December 7, 2015. In advance of this he agreed to go on the record for an interview, which took place via telephone on November 24, 2015. What follows is the transcript of our conversation.
Without further ado, here is my interview with Edward Jung.
QUINN: Thank you, Edward, for taking the time to chat with me today. I really appreciate it. I know you’re going to be talking about the patent marketplace at the upcoming IP Dealmakers forum, so perhaps we can start there. Broadly speaking, where do you see the patent marketplace currently and how would you compare that to maybe where it was a couple of years ago?
JUNG: I think a lot of things in the patent marketplace have changed in the last couple of years. You know, it might be a little bit like asking, what do I think about the equity market, right? I think a lot of it depends on where and what more specifically we’re talking about. Like equity markets in China are really different than in the US and, pharmaceuticals are very different than Internet stocks. So it might be worth diving in a little more specifically.
QUINN: Sure. That in and of itself is an interesting answer, too. I think we kind of have this idea that the patent marketplace, whatever that really means, is this monolithic entity and it’s really not. I guess if we can maybe for a moment focus on the US market and I guess there probably is quite a difference between the software patent marketplace and the medical device marketplace, and then still from the medical diagnostic or gene marketplace.
JUNG: Yes, I think all of that is true. There are two historical and macroeconomic forces at work. One is by and large, the US has dominated the innovation landscape for over 100 years. Before that, Europe was and what we’re now seeing is the first major shift in that innovation marketplace to something that’s truly much more global because of things like the internet, the media, the spread of education, movement of capital and so on and so forth. That’s one thing that’s happening which is why I think we tend to speak much more, at least at Intellectual Ventures (IV), about different global markets. And then the second thing is, as we know from everything from say sewing machines to telephones to automobiles and so on and so forth there really is a lifecycle to getting value out of any given technology. There’s a lot of uncertainty and instability in the way that IP is managed and enforced in those domains and I don’t think we’ve seen a tremendous change in the way medical device IP has been managed until — unless we talk about this whole IPR thing, in which we can talk about in a moment, but we have seen though tremendous changes in the way software is done. So, again, one of the things I will talk about at the conference is how diversity is super important if you’re going to be involved in economics of IP in the future both diversity in geography, as well as diversity in topic.
QUINN: Yes. People really have to think about the patent market as you would the stock market, you don’t want to have all your eggs in one basket and you want to have, particularly today, some kind of foreign exposure as well because people are talking about patents overseas, in Europe or maybe in China, having far greater value in some technical areas than they do in the US, which10 years ago would have sounded foolish.
JUNG: That’s right. When I started IV and was traveling around the world we were sort of at the tail end of everybody wanting to replicate the US kind of patent policies, IP policies in general, and now I think what we’re seeing is many regions feel that it can be made into a competitive advantage for them to not replicate the system but differentiate themselves in one form or another, whether it be on – speed of patent issuance, or on the courtroom side with say greater certainty and faster litigation outcomes or, you know, actually determining patent eligibility, analysis, patent trading, et cetera. So I believe we’re seeing much more diversity in the market because of that.
QUINN: Where do you think the patent marketplace is the strongest currently?
JUNG: Oh, I actually still think it’s the strongest in the US. I mean, it’s hard to beat 100 years of legacy, as well as, you know, the tremendous R&D and innovation machine that the United States is. You know, that’s just culturally, among other things, we’re optimized to disrupt, we’re optimized to invent, we’re optimized towards science and innovation so that’s still the US’ greatest strength and in a sense that still makes it the best marketplace, particularly I would say from a sourcing side. Certainly the US is starting to lose its competitive edge in terms of, you know, funding innovative startups and being able to create deployments for innovations, particularly in the real economy and so on. And, of course, when we talk about a marketplace, you know, there’s many different parts to the marketplace so you also want to keep an eye on what parts are best where, right?
QUINN: Yes. And I also wonder, and I worry more than just wonder, how much longer can this march that the US is on go because the US has this long history of having strong rights and a good marketplace and certainty and that has led to investment in startups, investment in some highly speculative research and that has always led to great successes and paradigm shifting innovation and new economies developing around innovations and you don’t see that happening right now. I wonder with the unitary patent coming online in Europe and China becoming much more of a force in the intellectual property world, how much time do you think we have to get this ship righted before it will become a much more difficult task to do that?
JUNG: Well, that’s hard to predict. I think the best strategy is to hedge a bit by being in those local markets but I would have to say, you know, as an American, as someone who’s very much benefited from the rigorous economy and the US treatment of inventions, I’m deeply concerned. Now I guess on the positive side the US, compared to many other societies, does adapt rapidly so I expect it may change in the longer term as we start to — or at least our policymakers start to – really understand what’s going on globally. I mean, for example, compared to 30 or 40 years ago, if you had a really interesting piece of R&D, an inventive idea that came out of a university or something, you only moderately worried about it being monetized massively somewhere else in the world other than the US, but now you could definitely think that China or India could take that idea, which might have been funded by US taxpayer money, and then end up making most of their money, most of the value, not in the US. That’s a kind of threat to how we think about our R&D dollars being spent. That it isn’t as safe as 30 or 40 years ago. Likewise, at the other end of that value chain you now have some of the most valuable companies in the entire world in places like China. What stops them from taking all of the value they’ve been able to derive from their over one billion population base, which well capitalizes them, and coming in and competing in the US? The US has not seen so many threats to their industry come from outside the US as opposed to within the US so in that sense I think that’s a whole new set of interesting problems to think about. I’ve actually had encounters with Chinese companies asking if there was some kind of, you know, hidden trick in the way we appear to be opening our market for them to freely come in without any IP barriers. For example, in pairing software and IP and so on and so forth.
QUINN: I’ve heard that as well and I’ve written about this a little bit already. I just think that a lot of the companies that have been the most vocal in supporting so much patent reform and patent change in the courts are going to regret the day they went down this path because it seems to me to be a pursuit based on short-term vision. And maybe that’s all that’s possible anymore in today’s tech world where a CEO only gets a couple of years to make his or her mark. There certainly are not a lot of long term thinkers in the C-suite in many tech companies. But I think this short term thinking is ultimately going to be very dangerous because there are a lot of Chinese companies that have a lot of money. I when the Alibaba evaluation was so large that would cause people to have their eyes opened a little, and maybe it did, but I really worry about other companies from other countries just coming in without any barrier to entry.
JUNG: Where the action will start to shift to in the technology world is in real economy issues, things like agriculture and just sales — retail sales and financial services and construction and urbanization and infrastructure. These are the things that the US has been able to coast on massive investments from 70 to 30 years ago, which are starting to age, and the place where a lot of those innovations are happening are overseas right now in developing economies that grow very fast like India, China, parts of South America. This notion that foreign companies can come in and be the implementers of new technology, even here in the States, is something to be concerned about. That’s driven both by the way capital markets, especially public markets, have increasingly driven CEOs to think short-term, or at least it makes it hard for them to think long-term, but also the fact is the government has become much more short-term thinking as well. You know, the action cycle is a pretty brutal affair and it’s driven a lot by money and that means that interest in something very long and strategic is relatively more rare.
QUINN: Yes, that’s unfortunate, because I look around and it’s hard not to notice that the manufacturing jobs, by and large, have left the US and that the US economy is an innovation economy and now that we’re undercutting the strength of the rights that protect that innovation. I wonder what kind of economy we’re going be left with in say five years.
JUNG: Well, it’s an interesting question. I’ll have to say before it’s all doom and gloom the US has a lot of very positive things going for it; among other things, it tends to get quite lucky and, we now have a much better energy profile than in the past in terms of dependence and that actually brings certain kind of manufacturing jobs back. There are certain areas of the US where just due to the overheated economies of other countries we’re actually quite competitive in labor. I believe the main advantage is that we are culturally willing to innovate, we’re willing to fail and we’re willing to disrupt. I kind of look at the last part as being a bit challenged by this change in patent reform, which I really believe is a small, narrow set of incumbents that don’t want to be disrupted and maybe the government is listening to them too much but at the end of the day we still have a greater tolerance for the stuff in the incumbent than most other countries do.
QUINN: It’s interesting that you mention that. That we have the courage to fail, which in a lot of parts of the world that just doesn’t exist, right?
JUNG: It totally doesn’t exist. In fact, you’re also never given another chance if you fail once so I think for all these reasons there’s still a lot of hope here. And I think when appropriately challenged the US can respond relatively quickly, possibly because the challenge is more important than preserving the status quo or the incumbent so that’s one way that short-term thinking is an advantage. So, I’m certainly not giving up on the US. We’re still based here. I still live here. It is the greatest country to be innovating in. I just feel it’s sad that we’re taking our greatest asset and impairing it.
QUINN: I’m with you on all that, although I will say I think you’re a little bit more bullish than I thought you might be since you are such a large patent owner. I thought maybe you’d have a little bit more of a bearish view on the US market but —
JUNG: Oh, no, no, look, the last couple of years have been pretty dismal in the US.I will say it is still easy to start a new company here, which is why, at least in our US business, there’s been a bunch of shift towards doing new companies or injecting R&D into existing companies in the form of product know-how, et cetera. But on the defense side, this idea that you want to incentivize people to invent and give them protection so they don’t feel like all of their work will be stolen, that part has gotten super weak and, like I said, that may benefit a narrow set of incumbents in the software or IT industry in the short term but in the long term that’s not a good situation, particularly given that we have this global competitiveness issue. So I’m very bearish about that part but I guess the only thing I was kind of trying to put a ray of hope, or a bit of sunshine, on is that I think the US, if appropriately challenged, can bounce back relatively quickly and rely on its inherent innovation and disruption talent or accept a willingness to do so. I think that’s something we’ve got to bet on. I do believe that if people are going abroad to China and particularly places like Shenzhen , they’re really missing out on how the world is changing. I mean, the largest property developer in the world, the largest genomics company in the world, the largest agriculture distribution company in the world, the largest ecommerce company in the world, the large X, a lot of them are in China and I think one of the things to think about that’s very fascinating is they’re young companies and they’re still run by their founders, which means they can be very dynamic and they don’t have the same problem that say an older company in its third generation of CEO has, you know, where the CEO is kind of an employee of the stockholders, not really a visionary or a founder that’s seen a lot of change. And so not only are those companies very large, they have probably a greater capacity to influence innovation and they’re happy to influence it from the States, okay? They’re not as proud about this notion they have to do all their own R&D. So in that sense, you know, we’re in a very dynamic environment where getting rid of protections is like playing Russian roulette with a loaded gun.
QUINN: I would agree with that. Now is not the time to be engaging in that.
JUNG: No, if we played this kind of game 15 years ago it would be much less dangerous than now, right?
QUINN: I think that that’s right. So based on everything that you’ve said my guess is that you would probably be on the side of holding off at least for now before doing additional patent reform, right? Let things shake out a little bit first. Is that accurate?
JUNG: No, not necessarily. I guess it depends. One thing with the current kind of state of patent reform, it’s so unusual to go through so many generations of patent reform so quickly. Usually things are given a chance to shake out. However, I think this maybe is our own fault as pro strong IP— not a lot of people showed up to the fight, so to speak, and were not vociferous about their positions as the weakened patent group during the last round. And in this round I think it’s going to be a little bit more of an even game so if we can get the pendulum to swing back a bit that might be good. We’ve already seen that the new rules around IPR have some unintended consequences to various key parts of our economy like healthcare and that’s probably not a good thing and should be changed. You know, there is a whole set of things that patent reform will not change like there’s propensity for a lot of things to be decided by, you know, groups like the Supreme Court which, again, is sort of unusual and has caused some difficulty because, you know, the decisions they’re rendering are sometimes very difficult to interpret and unclear. So this is a —
JUNG: Injects uncertainty and uncertainty is always bad for a business environment so yes, on one hand I normally would say well, let’s leave it to settle out because there will be some certainty but unfortunately the last set of reforms left too much uncertainty and did not provide enough certainty and so I think maybe there’s another round that needs to happen.
QUINN: I would agree with that, but I fear the current round of patent reform pending before Congress would interject even more uncertainty into the equation.
JUNG: Yeah, you’re right. I mean, right now the way Congress seems to be acting is — well, anyway.
QUINN: When I look at the Supreme Court decisions too and what you’re saying about them being uncertain and I think one of the things that is lost on people who aren’t intimately familiar with the substance of patent law is they read these decisions and they’re like there’s not a whole lot that’s uncertain about this decision. It says this claim is bad. You know, in that sense the decisions are unfortunately clear. What makes them very difficult is that the Supreme Court does not like to overrule itself and did not overrule itself in any of its patent eligibility cases so now you have all these data points out there, which I think are largely irreconcilable.
JUNG: Well, that’s why we’re frankly seeing so many courts rule inconsistently over patent eligible matters and that’s why it’s very difficult to either tell people that they should keep doing it or totally not do it because you’re right, it’s inconsistent and uncertain, which leads to a tremendous amount of uncertainty. In my opinion the Supreme Court’s not supposed to create a ruling that causes more inconsistency among the lower courts. That is kind of the opposite of what they’re supposed to do.
QUINN: Right. It’s gotten to the point where if you can tell me which precedent they’re going to actually use, I can tell them what the outcome of the case is going to be.
QUINN: But let me ask you this. There’s a lot of time being spent discussing patent reform, should we have it, should we not have it? And usually when you talk about patent reform, as I was just referring to in that previous discussion, I’m thinking largely about what is in front of Congress right now both the, you know, the Innovation Act in the House and the Patent Act in the Senate. But I think surprisingly little amount of time is given to what kind of reform would be the type of reform that could get things to turn around and be better. And I wonder if you’ve given that any thought. What kind of changes would you like to see or what kind of changes, whether it’s in law or policy, would turn this ship around a little bit and get us heading back in a more favorable direction for innovation and maybe also for startups, particularly?
JUNG: Well, let me divide that into two pieces. One is generally businesses can be adaptable if there is some certainty and so I would like something that’s become more certain. Now even if things are uncertain the notion that they can be resolved relatively quickly is useful. We’re seeing a large flight of litigation toward places like Germany, UK, for example, and now I think we’ll start to see them in China because what you see is basically things getting resolved much more quickly and with less variable costs. For example, in Germany you don’t have jury trials and as a consequence it’s a little bit easier to run a business. You know, the worst part of uncertainty is when uncertainty doesn’t resolve forever, right? Because then your business is sort of stuck waiting. And if everyone’s incentivized to wait to see what the outcome is and the wait is very long then you can’t actually effect change or adaptation to the policy or your business. So I think the first thing I would do is I’d like to see things resolved faster and with less cost.
You know, when you think about startups — it’s a complicated long answer because it depends really on what part of the lifecycle the startups are in. In a sense, we did a set of transactions to the benefit of startups where they get to, you know, purchase or rent IP in order to defend themselves when they are disruptive to incumbent companies. That’s the kind of thing that actually — transactions like that are probably made a little more difficult than they should be because of policy. So then on the other hand as startups start to get large their notion that they can either use IP to pave their way into other markets or defend themselves against competitors coming from other markets that would infringe upon them I think that’s another set of policies I’d like to see become clearer. I think another thing that we should be prepared for is the US has enjoyed a dominance with their ITC in terms of its ability to be used as a very strong trade tool but for the first time we have an economy in China that could establish their own and the power of denying US companies access to the Chinese market is immense in terms of trade balance. So I think we also need to start figuring out how we can make or ease cross border trade IP and IP values in order to, you know, avoid trade wars. If you only can use injunctive relief in an ITC model to settle disputes between multinational companies but they can’t actually trade IP or transact IP, I think you’re heading for a fight.
QUINN: Well, I know we said that we were going to keep this short and if you have time for one last question I’d like to ask you what do you think about the Supreme Court taking on enhanced damages in the Halo case?
JUNG: Oh, yeah.
QUINN: I mean, I’ll share with you my thought. I think if they’re going to be intellectually honest they’ve got to say, like they did in the attorney’s fees situation, that enhanced damages are at the discretion of the district court, the district court has broad discretion and can only be overturned in the most egregious of circumstances. And I personally think that if enhanced damages go back on the table then those companies that are let’s say the users of technology that maybe aren’t as respectful of patents as we would hope they would be would have to at least become worried to some extent about the possibility of triple damages which historically has made them respect the rights more. And I wonder if you think — am I overreaching? Am I hoping too much? Am I putting too much in one case? What do you think is potentially the impact of that?
JUNG: No, actually I generally agree with exactly what you’re saying. I think this is one of the — okay, hmm. You know, unfortunately, this whole — in a sense, damages is probably the most interesting area for affecting change, but that is so poorly served by the legislative policy, by what the judiciary system has been trying to tell us in case law, as well as even what academics are telling us because, you know, it’s so key to evaluation and, ultimately, business transactions ground out in evaluation and so, you know, damages are super important and probably the most — the clearest way to assess the business of IP transactions. So I agree with the importance. Unfortunately, the way the matter was brought up and the kind — the scope of what they can rule on isn’t going to really probably drive that much clarity for us in terms of how it’s going to affect evaluation. But, you know, there it is.
QUINN: Well, I guess we will know soon enough.
JUNG: We will.
QUINN: We should know by the end of June. But this term they haven’t taken many patent cases, so maybe they’re showing a little bit less appetite to get involved. I personally think that would be good for a little while and let this thing shake out. I also think the Federal Circuit probably needs to have a couple more en banc cases in some of these areas as well.
JUNG: Yes. Well, we’ve seen the Supreme Court slow down their acceptance and intake of these matters so I’m hoping that they’re getting their fill.
QUINN: That would be a good thing. Well, I really appreciate you taking the time to chat with me today and I look forward to seeing you at the IP Dealmakers event in New York.
JUNG: All right. Great. Looking forward to it. Thanks a lot for the call and I’ll see you then.