• Smart Money in Movies

    by  • June 28, 2009 • copyright, patent

    The Netflix Prize is a million dollar award for “substantially improve the accuracy of predictions about how much someone is going to love a movie based on their movie preferences.” It’s now being reported that a team has met the requirements for winning the million dollars, but for a waiting period of 30 days allowing others to match their accomplishment.

    But what kind of rights does Netflix get out of it? The rules say this:

    After qualifying for either the Grand or Progress Prize and being verified by the Contest judges, as a condition to receiving either Prize, the winning individual and/or team must grant to Netflix (including its affiliates and subsidiaries, employees, agents, and contractors), an irrevocable, royalty free, fully paid up, worldwide non-exclusive license under the Participants’ copyrights, patents or other intellectual property rights in the winning algorithm (“Winning Algorithm”) to reproduce, distribute, display, and create derivative works from the Winning Algorithm and also to make, have made, use, sell, offer for sale, and import products that would otherwise infringe the Winning Algorithm. Except as encompassed in the concept of “have made”, this license will not include the right to grant further licenses or sublicenses.

    So Netflix gets a nonexclusive license – that’s it, not even the right to sublicense. In theory, another competitor, Blockbuster, say, could license the same algorithm, matching Netflix’s ability to predict what movies a viewer would like.

    Netflix could have written rules that required assigning ownership of the invention to it but instead it took the most liberal approach possible, allowing the inventors to retain the full scope of their intellectual property rights. I think that’s a very smart move on Netflix’s part. Look at the all-star cast of the potentially winning team – it includes two people in the statistics research department at AT&T Research, two machine learning experts at Commendo research and consulting in Austria, two engineers and founders of Pragmatic Theory in Montreal, and a senior scientist at Yahoo Research in Israel, most of whom had already won lesser prizes in the contest. These are sophisticated scientists. A million dollars divided seven ways after taxes isn’t life-changing, but what they can accomplish by further exploiting the rights could be huge.

    Netflix didn’t even take (not in the rules, anyway) an exclusive field of use license. Netflix might have been able to lock up this particular functionality for itself, giving itself a differentiation point from its competitors, but it didn’t. Instead, it decided to rely only on its business acumen to retain its leadership position in order to encourage as many contributors as possible to work on the task. My guess is that will prove to be the right decision.

    And the bonus thought for the day – what kinds of agreements do these inventors have with both their employers and each other on the intellectual property rights in the invention? It gets very complicated very fast.

    HT to MR for the question.

    © 2009 Pamela Chestek