Alice xyz invented the telephone. She remains Alice xyz and not Graham Bell because Graham Bell got to the patent office 4 days before she did. Union Pacific is not AT&T because they refused to buy the telephone patent (because they thought the telegraph would never need to be replaced) and made Bell start AT&T. Patents and their value are interesting and I am thrilled enough to share something about them in my blog.
This was an interesting concept proposed by Harvard based professor that 2 complete strangers are connected to each other by 6 people or less. In that, if 2 strangers met and thoroughly analysed every person they knew and in-turn every person known to people they know and so on... the 2 would be connected before the 6th level.
This is alleged to be the founding or the fundamental structure of Orkut, My Spaces etc. The concept of having friends and knowing friend's friends and so on. After a comprehensive list is built only 6 links will separate 2 complete strangers.
The reason I am bringing this up is that this idea was not patented (read as enforced). I was surprised to know that 2 people ( owners of Linked In and Tribe) have bought the patent for $700,000 from Youth Stream. They later tried to convince another company called Friendster to buy this patent and start enforcing it. If it is enforced the Orkut's and My Space folks will have to pay royalties and other infringement related money to Friendster. This is where the nexus of strategy, law and finance comes in. There of course will be companies who specialize in social networking will claim that they are based on a mutant of the patent (For example Orkut and Visible Path have levels of friendships and not a binary friend/n0-friend status) will try and wiggle out of it on a legal technicality. Friendster, however, is still not be sure of buying this patent because its not sure how much royalties it can claim from this patent and whether this patent is enforceable at all. Only when the NPV of future royalties exceed the cost of the patent will this ticking time bomb patent be bought and enforced. In other words is it big enough to be worth it. To find that you need to do a market study and analyze the exact market size and revenue opportunities of this social networking concept.
A very interesting case study on the value of intellectual property. Last heard the patent is still up for sale and the 2 owners have ditched it and one of them joined Paypal and later eBay.