capitalizing on your intellectual capital

Capitalizing onCapitalizing onYour Intellectual CapitalYour Intellectual Capital

Entrepreneurship 101 Lecture SeriesEntrepreneurship 101 Lecture Series

MaRS Discovery DistrictMaRS Discovery District

Tuesday, January 30, 2007Tuesday, January 30, 2007

Arshia Tabrizi, Esq.Arshia Tabrizi, Esq.B.A.Sc.Computer Eng. (Hon), Juris DoctorB.A.Sc.Computer Eng. (Hon), Juris Doctor

Member of California and Ontario BarsMember of California and Ontario Bars

Professional CorporationProfessional Corporation

Tabrizi Law Office

1/31/071/31/07 Copyright 2006-2007, Tabrizi Law Office. AllCopyright 2006-2007, Tabrizi Law Office. AllRights Reserved.Rights Reserved.

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OverviewOverview

!! Intellectual Property (IP)Intellectual Property (IP)

!! IP StrategyIP Strategy

!! Forms of IPForms of IP

!! IP LicensingIP Licensing

!! Q&AQ&A

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Intellectual CapitalIntellectual Capital

!! Intellectual capital = intangible assetsIntellectual capital = intangible assets

!! Ideas: e.g. algorithm for gene sequencingIdeas: e.g. algorithm for gene sequencing

!! Know-how: e.g. manufacturing processKnow-how: e.g. manufacturing process

!! Branding: e.g. Google, drug namesBranding: e.g. Google, drug names

!! Innovation =Innovation =

““Protecting + Exploiting Intellectual CapitalProtecting + Exploiting Intellectual Capital””

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Intellectual PropertyIntellectual Property

!! Protect intellectual capital:Protect intellectual capital:

!! Rights through:Rights through:

!! Use, Creation, RegistrationUse, Creation, Registration

!! ContractsContracts

!! EnforcementEnforcement

!! Exploit intellectual capital:Exploit intellectual capital:

!! Sales (product)Sales (product)

!! Licensing agreementsLicensing agreements

!! Strategic AlliancesStrategic Alliances

!! Mergers & AcquisitionsMergers & Acquisitions

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!! Right to useRight to use!! Sometimes you may Sometimes you may ““assumeassume”” you have the proper you have the proper

rights to use your intellectual capital:rights to use your intellectual capital:!! e.g.: contract for software developed by consultantse.g.: contract for software developed by consultants

!! e.g.: Infringement on a third party patente.g.: Infringement on a third party patent

!! Right to excludeRight to exclude!! Even if you have the freedom to use, can you preventEven if you have the freedom to use, can you prevent

others from using your intellectual capital:others from using your intellectual capital:!! e.g.: registration of a patent prevents competitors from using ore.g.: registration of a patent prevents competitors from using or

practicing your inventionpracticing your invention

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!! PatentsPatents

!! Strongest form of protection for Strongest form of protection for ““ideasideas””

!! Trade SecretsTrade Secrets

!! Alternative to patent protectionAlternative to patent protection

!! CopyrightCopyright

!! Expression of ideaExpression of idea

!! TrademarksTrademarks

!! Branding, market recognitionBranding, market recognition

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IP StrategyIP Strategy

!! IP Strategy as integrated business function:IP Strategy as integrated business function:

!! What does a knowledge-based enterprise do?What does a knowledge-based enterprise do?

““Protect and Exploit Intellectual CapitalProtect and Exploit Intellectual Capital””

!! IP Strategy is at heart of any knowledge enterpriseIP Strategy is at heart of any knowledge enterprise

!! Not an independent function or afterthoughtNot an independent function or afterthought

!! IP teamIP team

!! Engineers, scientists, sales, managers, lawyersEngineers, scientists, sales, managers, lawyers

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!! This This ““isis”” your business plan! your business plan!

!! On-going process of assessing intellectual capital:On-going process of assessing intellectual capital:1.1. Competitive value, market differentiatorCompetitive value, market differentiator

!! Market research (your friends at MaRS)Market research (your friends at MaRS)

!! IP Assessment (patent search)IP Assessment (patent search)

2.2. Potential applicationsPotential applications

!! Productizing your intellectual capitalProductizing your intellectual capital

3.3. Potential customers/ revenuePotential customers/ revenue

4.4. Exploitation strategyExploitation strategy

!! Result of 2 and 3; license, partner, sellResult of 2 and 3; license, partner, sell

!! OR use it as an OR use it as an ““internal differentiatorinternal differentiator””!! e.g. manufacturing process, business methodologye.g. manufacturing process, business methodology

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!! Protect intellectual capital:Protect intellectual capital:!! Legal protection available?Legal protection available?

!! Lawyer; forms of intellectual property protectionLawyer; forms of intellectual property protection

!! Legal protection desirable?Legal protection desirable?!! Intellectual property strategyIntellectual property strategy

!! Which forms do I pursue and exploitWhich forms do I pursue and exploit

!! Do I Do I ““shareshare”” the information (e.g. open source, standards) the information (e.g. open source, standards)

!! Cost of protectionCost of protection

!! Some forms of IP are more expensive (patents)Some forms of IP are more expensive (patents)

!! R&D strategyR&D strategy!! Partnering: option on results of research (license)Partnering: option on results of research (license)

!! Internal development: broad/narrow patenting, industriesInternal development: broad/narrow patenting, industries

!! Business strategyBusiness strategy!! License, partner, funding, bootstrap, offensive patentsLicense, partner, funding, bootstrap, offensive patents

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!! Self-maintained monopoly:Self-maintained monopoly:!! Self-enforcementSelf-enforcement

!! Big Brother not always thereBig Brother not always there

!! Risk of losing rightsRisk of losing rights!! By not taking proper actionsBy not taking proper actions

!! Elements of IP rights maintenance:Elements of IP rights maintenance:!! Government registrations and filingsGovernment registrations and filings

!! Contractual measuresContractual measures

!! Monitoring infringementMonitoring infringement!! Reverse engineering competitor productsReverse engineering competitor products

!! Enforcement of rightsEnforcement of rights

!! International, budget, resultsInternational, budget, results

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PatentsPatents

!! Strongest form of IP protection:Strongest form of IP protection:

!! Exclusive rights over inventions (ideas)Exclusive rights over inventions (ideas)

!! 20 year monopoly from filing20 year monopoly from filing

!! What can be patented:What can be patented:

!! Patentable subject-matter:Patentable subject-matter:

!! Product, process, machine, composition of matterProduct, process, machine, composition of matter

!! Not scientific principles or formulaeNot scientific principles or formulae

!! Created problems for software patentsCreated problems for software patents

!! Not methods of medical treatmentNot methods of medical treatment

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PatentsPatents

!! Legal test for patentability:Legal test for patentability:

1.1. New (prior art and patents)New (prior art and patents)

2.2. Not Obvious (skilled person in art)Not Obvious (skilled person in art)

3.3. Useful (functional and industrial utility)Useful (functional and industrial utility)

!! Filing:Filing:

!! Patent database searchPatent database search

!! First to file systemFirst to file system

!! Not first to invent; file provisional earlyNot first to invent; file provisional early

!! 1 year grace period for publication1 year grace period for publication

!! University academic researchUniversity academic research

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PatentsPatents

!! Patents are valuable:Patents are valuable:!! Exclude competitorsExclude competitors

!! Secure market before selling into marketSecure market before selling into market

!! Venture fundingVenture funding

!! Generate royaltiesGenerate royalties

!! Patents are costly:Patents are costly:!! $10-100 K to secure a patent$10-100 K to secure a patent

!! 2-5 years from filing to registration2-5 years from filing to registration

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PatentsPatents

!! Patents must fit with business strategy:Patents must fit with business strategy:1.1. OffensiveOffensive

!! Exclude a competitor from a broad market segmentExclude a competitor from a broad market segment!! NTP v. RIMNTP v. RIM

!! Potential royalties (e.g. Qualcomm)Potential royalties (e.g. Qualcomm)

!! Industry (biotech, hardware, software)Industry (biotech, hardware, software)

2.2. DefensiveDefensive

!! Freedom of action (i.e. right to use)Freedom of action (i.e. right to use)

!! Collateral for cross-licensing with competitorsCollateral for cross-licensing with competitors

!! Large companies armsLarge companies arms’’ race race!! Microsoft target of 3,000 patent filings each yearMicrosoft target of 3,000 patent filings each year

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PatentsPatents

!! Only 5% of patents issued have any valueOnly 5% of patents issued have any value

!! Disadvantages of patents:Disadvantages of patents:!! Patents can be challenged (registration not validity)Patents can be challenged (registration not validity)

!! Patents (claims) can be worked aroundPatents (claims) can be worked around

!! Scope if keyScope if key

!! Monitoring can be costlyMonitoring can be costly

!! Infringement can be hard to detectInfringement can be hard to detect

!! Disclosure and lack of secrecyDisclosure and lack of secrecy

!! Value dependent on threat of lawsuitValue dependent on threat of lawsuit

!! Lawsuit may expose invalidityLawsuit may expose invalidity

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Trade SecretsTrade Secrets

!! Proprietary ideas and know-howProprietary ideas and know-how

!! Protect by keeping secret:Protect by keeping secret:

!! Security measuresSecurity measures

!! Employment agreements, policiesEmployment agreements, policies

!! May lose rights if May lose rights if ““lazylazy””

!! NDA (non-disclosure agreements):NDA (non-disclosure agreements):

!! Maybe first legal documentMaybe first legal document

!! Large company forms pitfallsLarge company forms pitfalls

!! Disclose trade secrets in confidenceDisclose trade secrets in confidence

!! Employees, consultants, customers/partners, investorsEmployees, consultants, customers/partners, investors

!! Pending patent filingPending patent filing

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Trade SecretsTrade Secrets

!! Advantages over patentsAdvantages over patents

!! Complete secrecy and no need to discloseComplete secrecy and no need to disclose

!! Unlimited period of protection unless publicUnlimited period of protection unless public

!! Disadvantages versus patentsDisadvantages versus patents

!! No protection against reverse engineeringNo protection against reverse engineering

!! No protection against independent creationNo protection against independent creation

!! National Bureau for Economic ResearchNational Bureau for Economic Research

!! Patents less effective than trade secretsPatents less effective than trade secrets

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CopyrightCopyright

!! Protects category of Protects category of ““worksworks””::!! Literary, dramatic, musical, artisticLiterary, dramatic, musical, artistic

!! Computer programs (source/object code)Computer programs (source/object code)!! Most important form of IP in software/ITMost important form of IP in software/IT

!! Author is the owner of workAuthor is the owner of work!! Exclusive right to copy and perform the workExclusive right to copy and perform the work

!! Employees and consultants need contractsEmployees and consultants need contracts

!! Life of author plus 50 yearsLife of author plus 50 years

!! IndustriesIndustries!! Software, Internet, music, contentSoftware, Internet, music, content

!! Google library, YouTube, P2P music sharingGoogle library, YouTube, P2P music sharing

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IP LicensingIP Licensing

!! IP Licensing = Exploiting Intellectual CapitalIP Licensing = Exploiting Intellectual Capital

!! $45 billion licensing revenue in U.S.$45 billion licensing revenue in U.S.

!! $100+ billion worldwide$100+ billion worldwide

!! Small companies dependent on out-licensingSmall companies dependent on out-licensing

!! Key revenue generating contractsKey revenue generating contracts

!! Key relationship managementKey relationship management

!! On-going obligations (support, updates, R&D)On-going obligations (support, updates, R&D)

!! Specialized counsel IP & corporate/commercialSpecialized counsel IP & corporate/commercial

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!! Most commercial agreements in knowledge-Most commercial agreements in knowledge-based industries are IP licensing agreements:based industries are IP licensing agreements:!! Software licenseSoftware license

!! Microsoft Word, OEM/DistributionMicrosoft Word, OEM/Distribution

!! R&D or Co-development agreementR&D or Co-development agreement!! Biotech start-up with pharma (license, funding)Biotech start-up with pharma (license, funding)

!! Technology licenseTechnology license!! IP Core license to ASIC manufacturerIP Core license to ASIC manufacturer

!! Trademark licenseTrademark license!! Internet co-branding dealInternet co-branding deal

!! Content licenseContent license!! License of sitcom to TV channelLicense of sitcom to TV channel

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!! Elements of licensing agreementElements of licensing agreement

!! Intellectual property ownershipIntellectual property ownership

!! Right to use intellectual propertyRight to use intellectual property

!! Payment termsPayment terms

!! Royalties, license fees, consulting feesRoyalties, license fees, consulting fees

!! WarrantiesWarranties

!! Liability of partiesLiability of parties

!! TerminationTermination


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!! Strategic AlliancesStrategic Alliances"#"#TTechnologyechnology

!! Large companies position for future developmentsLarge companies position for future developments

!! Licensing a patent, technology or softwareLicensing a patent, technology or software

!! Standards development (patent pooling arrangements)Standards development (patent pooling arrangements)

2.2. MMoneyoney!! Selling or licensing a product and generating revenueSelling or licensing a product and generating revenue

!! Funding your R&D with a larger partner/investorFunding your R&D with a larger partner/investor

3.3. CCustomersustomers!! Access to new markets via distribution/manufacturingAccess to new markets via distribution/manufacturing

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ConclusionConclusion

"#"# Your Business =Your Business =!! Capitalizing on Intellectual CapitalCapitalizing on Intellectual Capital

!! Protect intellectual capitalProtect intellectual capital

!! Exploit intellectual capitalExploit intellectual capital

$#$# Your Business =Your Business =!! Intellectual Property StrategyIntellectual Property Strategy

!! Registration, Contracts (Protect)Registration, Contracts (Protect)

!! Licensing, Alliances (Exploit)Licensing, Alliances (Exploit)

%#%# Advisory GroupAdvisory Group!! MaRS TeamMaRS Team

!! Legal counselLegal counsel

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Q&AQ&A

Professional CorporationProfessional Corporation

30 Kern Road, Suite 10330 Kern Road, Suite 103

Toronto, OntarioToronto, Ontario

M3B 1T1, CanadaM3B 1T1, Canada

T.416.444.9300T.416.444.9300

F.416.444.9343F.416.444.9343

www.tabrizilaw.comwww.tabrizilaw.com

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