Intellectual Ventures Management LLC, led by a former chief technology officer of Microsoft Corp. (MSFT:US), is seeking $3 billion for a fund that would give it steady cash flow from patents and invention rights, according to an investor presentation obtained by Bloomberg News.
Invention Investment Fund III will purchase patents, patent licensing rights and applications as well as other invention rights, according to the April presentation from the Bellevue, Washington-based firm. The firm, founded in 2000, has historically made some of its money from suing over patent infringements.
Mercury Capital Advisors LLC, an advisory firm that helps firms raise money from institutional investors, is the fund’s placement agent. Kyle Mahoney, a spokesman for Intellectual Ventures, declined to comment on the fundraising.
Intellectual Ventures is among a growing number of investment firms seeking to take advantage of investor appetite for predictable cash flow. Last week, Harbert Management Corp. announced a separate account with California Public Employees’ Retirement System, the largest U.S. pension fund, that will provide cash distributions from contracts to sell power plants’ capacity and energy.
Intellectual Ventures was founded by Nathan Myhrvold, former chief strategist and chief technology officer at Microsoft, along with Edward Jung, Peter Detkin and Greg Gorder.
Jung, who is Intellectual Ventures’ CTO, was previously chief software architect and adviser to executive staff at Microsoft. Detkin was a vice president and assistant general counsel at Intel Corp., where he managed the company’s patent and licensing departments, and Gorder was a partner at law firm Perkins Coie LLP.
Like previous funds, the firm’s new offering will primarily make investments in technology invention rights. The firm makes its money from legal settlements, strategic sales of portfolios, retail licensing and subscription-based licensing, according to the presentation. This year, it has brought lawsuits for patent infringement against several companies, including HSBC Holdings Plc, SunTrust Bank Inc., JPMorgan Chase & Co., Motorola Mobility Holdings LLC and Toshiba Corp. (6502)
Intellectual Ventures and RPX Corp. this year led a group of companies that bought license rights to Kodak’s digital-imaging portfolio for $527 million. Kodak used the proceeds to pay off bankruptcy debt.
The new fund will have a 20-year life, according to the presentation, which is twice as long as an average private-equity fund. The fund will charge a 2 percent management fee on committed capital for 10 years.
The goal for the firm’s third fund is larger than the $2.8 billion Intellectual Ventures raised for its previous vehicle in 2008. The firm made 240 investments out of Fund II last year, according to the presentation.
The firm’s 2008 and 2003 vehicles were producing average annual cash yields of 12 percent and 19 percent as of Dec. 31, respectively, the presentation shows.
Intellectual Ventures manages six funds with total committed capital of about $6 billion. In 2010, it raised a “global good fund” focused on solving problems in the developing world and a second “invention science fund” that invests in inventions.
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