IT HAS BEGUN - IP HOLDING COMPANIES GO MAINSTREAM: Nathan Myhrvold and his partner, former Microsoft chief software architect Edward Jung, have created the quintessential company for the 21st century. It doesn't actually make anything: it outsources, offshores and offloads nearly every task performed by regular corporations. It has no factories, machine shops or marketing teams. Only patent attorneys populate the quiet hallways. The five-year-old firm's plan is to create or buy new ideas, accumulate patents—exclusive rights to use the inventions—and rent those ideas to companies that need them to do the gritty work of producing real products. Because today's businesses are constrained by their need to make money, Myhrvold says, "it is irresponsible for them to think wildly outside the box." He wants to fill that innovation gap—"We are thinking wilder, crazier thoughts than anyone else."

To generate patentable ideas, Intellectual Ventures hired a dozen top scientists as part-time consultants to participate in several all-day gabfests each month, which the company calls "invention sessions." Lawyers transcribe the discussions, which can range from biotech to nanotech to solid-state physics, and follow up on the most promising ideas with patent applications. One participant, Dr. Leroy Hood of the Institute for Systems Biology in Seattle, says: "We are thinking about how you can solve problems that have never been solved before." Since the company has been holding sessions for only a year, it has likely produced about a hundred ideas whose patent applications won't be processed—or start earning any money—for at least three years.

The company is buying patents from all corners of the high-tech world, including those that could pose legal threats to its powerful investors. In a recent e-mail, Intellectual Ventures stated that the company is "interested in purchasing patents and applications in the areas of software, e-commerce, communications, semiconductors, consumer electronics and computer architecture—basically, just about anything that deals with bits." By buying all these patents, Intellectual Ventures ensures they cannot be used against its investors by other small IP holding companies.