patent portfolios are increasing in size… taming complex intellectual property compensation...
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Patent portfolios are increasing in size…Taming Complex Intellectual
Property Compensation Problems
Roy Weinstein
• New approach to valuing intellectual property
• Substitution of reason for fantasy
• Occam’s Razor
Requirements for patentability
NoveltyNonobvious
Utility
$8.99 onAmazon
…for storing and transporting a banana carefully.
$6.99 on
Amazon
…eating receptacle for supporting, rotating, and sculpting a portion of ice cream…
Patent portfolios
9
Number of Worldwide Patents
Entity Worldwide U.S.
1. Alcatel-Lucent 74,669 15,732
2. Boeing 13,689 5,428
3. CSIRO 6,346 495
4. Disney 1,180 325
5. Fujitsu 199,232 23,693
6. Harris Corporation 5,938 1,732
7. Hewlett Packard 57,916 21,204
8. Johns Hopkins 6,652 1,221
9. Merck & Co. 52,296 5,409
10. Nokia 67,869 8,981
11. Northrop Grumman 5,250 2,096
12. Proctor & Gamble 81,584 7,642
13. Qualcomm 54,378 4,227
14. SAP 5,708 1,491
Number of Patents
Need many patents working together
Apple: 200 patents for the iPhone…
…not including patents licensed from others
Toyota: 2,000 patents for the Prius…
…not including:• patents licensed from others• patents covering components ..purchased wholesale
When it seems all patent bases have been covered…
Patent
Thicket
Very complex…
…very expensive
1991 2003 2004 2005 2006 2007 2008 2009 2010 2011
Year Payer Payee Technology Amount($ Millions)
Description
1991 Eastman Kodak Polaroid Photography $925 Settlement
2003 Microsoft Eolas Internet $521 Verdict
2004 Intel Intergraph Computer Chip $675 Settlement
2006 RIM NTP Wireless Email $613 Settlement
2010 Boston Scientific Johnson & Johnson Medical Device $1,730 Settlement
2011 Apple, EMC, Ericsson, Microsoft, RIM, Sony
Nortel Wireless and Networking
$4,500 Purchase
2011 Johnson & Johnson Bruce Saffran Medical Device $593 Judgment
2011 Apple Nokia Smartphone $608 Settlement
2011 DISH Network, EchoStar
TiVo DVR $500 Settlement
2011 Google Motorola Wireless Handsets $12,500 Sale
46 years to issue the first 10,000 U.S. Patents
2010: 10,000 patents every 15 days
Number of Patents by Year
India Taiwan Europe Korea China Japan U.S.
Number of Patent Grants: 2010
6K16K
60K70K
135K
225K
250K
Complex compensation problem…
…necessary patents owned by more than one entity
Patented Technology
Royalty Payment
PatentOwner
Licensee
Hypothetical Negotiation
New approach…
…the Nash Bargaining Solution.
Occam’s Razor
For “pioneering analysis of equilibria in the theory of non-cooperative games”
The NBS can seem complicated:
Two simple conditions:
1) No other feasible outcome is better for one side and not worse for the other
2) Neither side is worse off reaching an agreement than if no agreement is reached
NBS requires knowledge of:
1) Patent owner disagreement profit
2) Licensee disagreement profit
3) Total incremental profits from use of the patent
Profit split from use of the patent
50/50 split is a reasonable and likely starting point
Why 50/50?
If no agreement is reached:
Licensee Patent Owner
Why 50/50?
If an agreement is reached:
Licensee Patent Owner
How will the patent compensation world look in 5 years?
• 50/50 split of the incremental benefits from patent use
• Wider applications of NBS• Greater reliance on reason and good science
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