generic patent monetization basics 2 26-16
TRANSCRIPT
INTELLECTUAL PROPERTY ANALYTICS
Patent Portfolio Monetization I
Issues to debate before creating a corporate monetization strategy
INTELLECTUAL PROPERTY ANALYTICS
Agenda
• Common patent portfolio Issues • Monetization program goals & objectives • Patent family value drivers • Deal structures to consider • Monetization mistakes
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INTELLECTUAL PROPERTY ANALYTICS
Common Portfolio Problem #1: Evolutionary Fugue
• Unclear patent holdings due to mergers, acquisitions, divestitures, lost records, and lack of a useful grading scale
• Patent value confusion from changing court and PTO decisions and processes, and a lack of a simply stated inventive distinction and the PTO limitation(s) for each patent family
• Lack of precision regarding technology and product line areas covered by each family, and how they read on adverse parties
• Lack of database tools to easily manage the portfolio for BOTH product line and IP departmental success
• Suspicion that substantial $$ wasted on maintenance fees for worthless patents, but no easy way to determine which ones
Result: lack of portfolio alignment with business objectives
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“Fugue Blanket,” by www.nemobott.com
INTELLECTUAL PROPERTY ANALYTICS
Common Portfolio Problem #2: Cultural Confusion • The IP department is typically a cost center, not a P&L center, so
portfolio management is under-resourced and “budget-adjustable” • Ad-hoc portfolio organization, planning, and decision-support systems
(e.g. spreadsheets, licensing agreements, patent family growth, maintenance payments, product line issues, etc.)
• Product line groups subconsciously think of a patent as a long term asset to be kept in a safe place for defensive emergencies
• IP Dept. subconsciously thinks a patent is like like dry ice in the sun, so it needs to be used before it vaporizes over time
• IP Dept. has no engineering resource; product line groups have it, but need it to maintain product line sales growth; both suffer from lack of portfolio knowledge
Result: Inability to properly address threats and opportunities, and efficiently manage the company’s patent portfolio
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INTELLECTUAL PROPERTY ANALYTICS
Corporate Patent Portfolio Perspective • When Nortel went under, the company was sold off in pieces • Business divisions were sold:
§ Ericsson (CDMA & LTE assets) = $1,130m
§ Avaya (Enterprise Solutions) = $900m
§ Ciena (Metro Ethernet Networks) = $770m
§ Ericsson (GSM Business) = $100m
§ Genband (Carrier VoIP) = $100m
§ Ericsson (Multiservice Switch) = $65m
Total sale price for all 7 = $3.065B
• Nortel’s residual 6,000 patents sold for $4.5 Billion— 50% more than all of its business divisions put together!
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INTELLECTUAL PROPERTY ANALYTICS
Strategic Corporate Program Goals
• Leverage exclusionary rights: u Protect competitive advantage
u Maintain freedom to operate
u Create powerful negotiating chips for competitive IP issues
• Enhance profitability via monetization: u Maximize ROI on development $$
u Minimize maintenance fees
u Recoup $$ outlays for inbound license fees
u Maximize company’s valuation
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INTELLECTUAL PROPERTY ANALYTICS
Monetization Objectives To Support Strategy
• Analyze, grade, and organize patent families such that: u Inventive distinctions and critical limitations are identified for each family u Product lines and IP Dept. can mine the patent database easily u Identify technology areas with too many or too few good patent families u Monetize excess good patent families in oversupplied areas u File or acquire good patents in areas of deficiency u Find & abandon patents of no value
§ Before the 11.5-yr $7400 maintenance fee for the parent patent + foreign fees… § Before the 7.5-yr $1600 fee for each child patent + foreign fees
• Create Innovative deal structures to leverage company’s IP • Transform IP Dept. to a P&L operation that can afford:
u Resource levels to consistently weed and feed the the company portfolio u Outside analysis and reverse engineering expertise to analyze patent families and
determine which company patents are being infringed, and by whom
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INTELLECTUAL PROPERTY ANALYTICS
Value Drivers
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INTELLECTUAL PROPERTY ANALYTICS
Patent Family Value Ranges
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INTELLECTUAL PROPERTY ANALYTICS
Patent Rating Chart Parameters*
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*Techinsights, an Ottawa reverse engineering company, broadly distributes this chart—a good way to rank patents for further diligence
INTELLECTUAL PROPERTY ANALYTICS
Monetization Deal Architectures to Consider
• 2-stage private auction (6 mo.)
• Stalking-horse bid invitation preceding private auction (8-9 mo.)
• Directed 1-on-1 negotiated transaction
• Recording bid (buyer proposes X families— seller rejects Y, & X-Y families ~ relate to $ bid)
• Privateer model
• Syndicated transactions
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INTELLECTUAL PROPERTY ANALYTICS
Operating Companies Pursuing a Privateer Model
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Operating Company Sponsors
IP Privateers serving Operating Company
Palm (Under HP today) Smartphone Technologies LLC
Hitachi / SANDISK Solid State Storage Solutions LLC
ETRI SPH America LLC
HP/Cisco, others? AMBATURE LLC
Nokia/ Sony MMI LLC
Alcatel Lucent Multimedia Patent Trust LLC
GE CIF Licensing LLC
Hitachi Mednis LLC
Micron Technology Round Rock Research LLC
SHARP SHARP Technology Venture
INTELLECTUAL PROPERTY ANALYTICS
Multi-Lot Parallel Patent Auction Strategy
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Negotiations carefully timed to avoid negotiation overlap
INTELLECTUAL PROPERTY ANALYTICS
Monetization Mistakes
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INTELLECTUAL PROPERTY ANALYTICS
Showstoppers for Patents Chosen for Monetization
• High encumbrance load on the chosen patent families • Restrictions mandated by company (e.g. No NPE’s) • Degraded quality of patent families selected:
u Less than 15-20% good Evidence of Use charts for number of patent families u Poor litigation/licensing history u Reexamination in process u Terminal disclaimer to patent not in the portfolio u Examiner limitations that narrow applicability to a small market u Government investment in IP creation u Complex technology + horrible claim language (poor English) u Intervening rights u Low apportionment factor
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INTELLECTUAL PROPERTY ANALYTICS
Typical Seller Mistakes
• Hang on to patents they don’t need until close to expiration
• Selling leftovers after filtering out the good stuff
• Hide vulnerabilities hoping none are discovered
• Unrealistic price expectations
• Internal changes to patent list late in the process
• Monetization goals not supported by management
• Unrealistic PPA terms (buyer drafts PPA, seller warrants facts)
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