The Center for Data innovation spoke with Erich Spangenberg, co-founder and chief executive officer of IPwe, an intellectual property (IP) transaction platform based in Paris focusing on promoting innovation and creating an IP marketplace. Spangenberg discussed how IPwe is leveraging AI and blockchain to connect the world of IP and dramatically lower the cost of patent ownership.
This interview has been edited.
Chivot: What inspired you to shift from investment banking and corporate law to entrepreneurship? What was your specific motivation for starting a company focused on intellectual property (IP)?
Spangenberg: I started my career as an attorney and partner at Jones Day and then made the transition to high yield investment banker at Donaldson, Lufkin & Jenrette. These were great jobs. But for me there was something missing. Even as a partner or banker at these top tier firms, you are still just a highly paid advisor making other people rich. You tell yourself you’re “in the game,” having an expensive car and a big house, but as an advisor, you’re really not making the critical decisions that create wealth and bring about important changes in the business.
I made the transition to business and found it far more challenging. Large corporations force you to be good at so many different skills to survive and advance. You are “in the game,” but these large entities are limited in their ability to adapt to change. By definition, their business model works. By design, this model is difficult to change.
Founding and running your own business is hardly a panacea. Most fail. You are constantly pivoting, trying to explain your business model, raising money, and putting stress on yourself and anyone around you. But as it all comes together, you find yourself in this state where the endorphins of success cause you to forget the pain and failures. You want to do it over and over again. Once I experienced this, I couldn’t imagine doing anything else.
I was in Shanghai in 2017 attending a conference when it occurred to me that AI and blockchain had the potential to address issues we had been facing in the IP ecosystem.
Back in 2007, I had acquired a company with a 10-person team doing interesting work around predictive analytics. I focused that team on IP. Over the next 10 years, we got pretty good at using our algorithms to assess key attributes of IP—we did over $2 billion in acquisitions, financing and licensing as principals.
While tuning our algorithms and improving the results, the problem we spent a lot of time on revolved around finding, formatting, and cleaning the right data.
What occurred to me that day in Shanghai was that there might be a fit between blockchain and AI—that the data residing on the blockchain was in a format that would be easier to consume, cleaner, and potentially be of higher quality. I thought about how these two technologies would intersect and be deployed in a way to address issues in the IP ecosystem.
Three things motivated me to launch IPwe. First, I wanted to address a huge market need that could change how IP is created, financed, and managed. Second, I wanted to make money. Third, I wanted to do something that most told me couldn’t be done. As a patent owner with about 20 patents in 2004, growing to thousands of patents in 2010, I was both amazed and frustrated with how the IP ecosystem operated. Thousands of insular solutions, without one place to get everything I needed to operate efficiently.
It seemed odd to me that the IP system operated the way it did. The lack of transparency and ridiculously high transaction costs told me that IP was important, but it was simply too difficult for financial and other business professionals to work with, and commonly misunderstood. Global IP investment and was upwards of $1.9 trillion—even larger than the private equity industry. Most people have a very limited understanding of what it is, how it operates, how to value it, and to deploy it.
Having exploited these inefficiencies as a patent “troll,” I wanted to see if I could improve the system. IPwe is the culmination of many who tried before to fix the IP ecosystem and create an IP transaction platform—the difference today is that an IP transaction platform can scale if it is technologically enabled.
IPwe is a really simple idea: Apply our team’s experience, relationships, and exponential technologies to create a single place for the entire IP ecosystem to efficiently interact and transact. Whether you create IP, use it to commercialize, license, invest, finance, insure, or something else—our goal is for IPwe to be the optimal place to go. Whether you are a patent owner, regulator, financer, investor, or an IP professional, our platform will be the place to interact with and transact IP. The beauty of our platform is that we provide a framework with a blockchain basis where our smart contracts and AI can blossom. The success of our users and the benefits they derive from our platform is factually independent from their skills and IP expertise.
Our experience and networks are deep and global. The exponential technologies we rely on AI and Hyperledger—have advanced to meaningfully lower discovery and transaction costs associated with IP.
Chivot: We increasingly hear about AI in the space of IP. What is the relevance to each other? And how does IPwe use AI?
Spangenberg: Fair question. What our AI system does is serve the needs of two key groups—the “experts” and “the rest of us.”
Regarding the latter, most of us are not IP experts. For this group, IPwe provides quick answers to key IP attributes: What do we have? Is it valuable? Is it relevant? Am I at risk? What is my competition doing? They do not need or want a long memo—they want quick answers to simple questions within acceptable levels of certainty. If they need to go deeper, they have this intelligence which can be used when they go to the IP professionals who also use our platform.
Regarding the former group, IP professionals and experts use their professional judgment to perform high-value services. Our AI systems save them tremendous amounts of time on the low-value, busy work. This lets them dig in and apply their professional judgment where it is critical to deploy their expertise and judgment. Using our system, they can go as granular as needed, having more certainty they have access to the information to reach their conclusions.
Chivot: How does the IPwe AI engine work?
Spangenberg: First, go and try it on our website—it is available to anyone free of charge. Plug in a company name, inventor, or phrase and see the information you can find. Second, you can look at our history which will give you some indication that it works, in terms of the investments we’ve raised in IP AI development, the value of IP acquisitions, financings, and licensing as principals that relied on our AI.
I think the market is well-aware of this competitive advantage. A good way to measure this is how appealing we are to young talents in the IP space. We receive interest from all levels—from interns to senior executives and IP professionals who see the potential of our platform and technologies. We were looking for someone to head our AI department for a while. Filling this role was rather difficult—the candidate needs to bring battle-tested patent expertise, knowledge of international laws around patents, and the right amount of curiosity for cutting-edge technologies. We recently hired Jonas Block as our head of AI applications—an experienced German patent litigator whom I challenged to write a thesis on how we can to solve patent licensing with blockchain technology and AI. He delivered his thesis within 10 months in parallel to his work on cross-border patent assertion and we are happy to have him drive our AI applications now.
There is a tendency to think of AI as a magical machine to produce answers. We think about AI as a faster way to process information. Our AI runs on algorithms built by our data-scientists, then tested and tuned by top monetization and legal specialists in IP. We have collected huge amounts of data surrounding IP over the last 17 years that we use to drive our results.
This system permits you to get answers and information you need to make better decisions. The answers are within an acceptable range of certainty and when you want to dig deeper, you can lean on our tools and in-house expertise to do so.
Chivot: What other technologies are important for improving the IP ecosystem?
Spangenberg: Another technology that matters in IP is blockchain. It lowers transaction costs. Put aside the hype and buzzwords surrounding blockchain and think about why enterprises are now adopting this technology to address important processes and applications. From a business perspective, we don’t really care to know the technicalities—we simply want to know if it works. Hyperledger allows us to do things which weren’t possible before. First, lower transaction costs: It is an easier, more secure way to transact. Second, scalability: The marginal cost of adding customers becomes extremely low, saving us from hiring more people as we scale up our users and transactions. Third, efficiency: Smart contracts take administration and automation to the next level. You will never again miss an important “event” under a contract.
Chivot: As your business grew, what was a major setback or disruption that you did not anticipate? What do you hope to achieve in the future with IPwe?
Spangenberg: On the setbacks—first, it took us almost two years and $10 million to build out the technology to support our platform. A $35 million investment in our AI was made between 2007 and 2019 which we recovered many times over, but the platform and Hyperledger components took longer and cost far more than we anticipated. Second, we had a hard time explaining to the market what we are doing—we focused too much on the technology and not enough on what it did.
We are now entering the execution phase. With offices in China, the EU, the United States, and soon in Japan and Singapore, we have the global footprint to deliver the promise to bring together the world’s IP ecosystem.
It starts pretty basic—IPwe offers everyday tools and insights in the flavor of free analytics and reports to answer questions and make better decisions to finance, license, transact, and pool patents. You’ll see an evolution over the next few months to include IP-based financing, insurance, and many other IP solutions.
Our goal is simple—to make IP accessible and understandable for more people to promote innovation and transactions. For the past two years, I was worried we might not get there. Today, I am confident the market is ready for IPwe.
