key issues in ip due diligence, auction, sale, and monetization
TRANSCRIPT
Key Issues inIP Due Diligence, Auction,
Sale, and Monetization
The Value Perspective
Presented by:
Weston AnsonCONSOR Intellectual Asset Management
800.454.9091 www.consor.com
Key Issues
1. Identification and Context1. Identification and Context
2. Quality and Triage2. Quality and Triage
3. Valuation Process 3. Valuation Process
4. Value Extraction 4. Value Extraction
Key Valuation and Disposition Questions
What IP does the debtor own?
How does IP value change in various contexts? Bankruptcy, Going-concern, M&A
Should the IP be valued?
How do you value IP in a distressed scenario?
How do you market and dispose of these assets most cost-effectively and time-effectively?
Disposition Process: Direct Marketing or Static Auction?
When Is Valuation Necessary?
Strategic assessment of whether the IP assets be sold separate from the business
Negotiation of “stalking horse” bids and initial asset bundle pricing structures
Evaluation of bids for global asset portfolio versus individual asset buyers
IP assets to serve as collateral for various forms of financing
Purchase price allocation analysis of IP-related transactions
IP & Intangible Assets
Intellectual Property
PATENTS
COPYRIGHTS
TRADEMARKS
TRADESECRETS
Intangible Assets
Data &Knowledge
Bases
COPYRIGHTS
Customer& VendorRelations
ProprietarySoftwareProprietary
SoftwareInternetAssets
Marketing Bundle of Intangibles
Corporate name and logoPrimary trademarkMarketing umbrella and
brand nameSub-brand names and
trade dressWorldwide trademark
registrationsSecondary trademarks
Worldwide public relations efforts
Consumer advertisingMarketing strategyPackaging design and
copyrightsProduct warrantiesGraphicsPromotional concepts
Technical Bundle of Intangibles
Key patentsTrade secretsFormulaeProcess technologyDesign technologyPackaging technology
and sourcesNew product
technology
Technical data sheetsEvaluation dataProprietary test
resultsPlant and production
designProduct specifications
IT Bundle of Intangibles
Enterprise solutionsCustom applicationsDatabasesSource codeData warehouses
Domain names / URLs
E-commerce sitesThird party software
toolsCredit / payment
systems
Intangible Asset Bundles
1. Trademarks6. Corporate Identity
Assets11. Real-Estate Related
Assets
2. Other Brand-Related Assets
7. IP Contracts12. Communications-
Related Assets
3. Patent-Related
Bundles of Value8. IT/Software
13. People-Related Assets
4. Internet-Related
Assets9. Data/Information-
Related Assets14. Other Technology
Assets
5. Product-Related Assets
10. Research-Related Assets
15. Miscellaneous Assets
Identify IP / IA Bundles for Value
Stratify IP / IA Core v. Periphery
Peripheral portfolios may be monetized Vertical and horizontal Out-licensing / Spin-off
Analyze quality of IP Relevancy to current / future business Relative strength analysis
Potential infringement assessment
Birth of the IP Auction / Sale Market
History
Genesis – When, Who
Size – Dollars, Frequency, Statistics
Issues
Alternatives
Monetizing IP Assets
Monetization Alternatives Sale License Creditor Settlement Sale & Leaseback Securitization Litigation
Securitization Alternatives Line of Credit Take-out or DIP Interim Long term
Disposition Process:Direct Marketing vs. Static Auction
IP assets are unique with few comparables in the marketplace (El Comandante)
IP assets require a strategic plan to identify incremental value opportunities (Polaroid)
Targeted buyers typically need more information than is offered through static auction process (Collins & Aikman USA)
IP assets must be creatively packaged to match specific buyer needs and / or strengths (Tower Records)
Static auctions market the auction, not the specific assets (Ocean Tomo)
Case Study - Collins & Aikman
Key Assets:
Instrument Panel Skin / Materials / Process Safety Systems / Invisible Airbag Door (107 patents) Interior Trim (96 patents) Skin Materials and Processes (67 patents) Console / Door Trim (18 patents) Decorative Finishes / Laminates (14 patents) Kinematics / Air Registers / Cupholders (45 patents) Exterior Trim (40 patents)
Collins & Aikman: Direct Sale
Sale Process:
Direct marketing campaign to Tier 1 and Tier 2 automotive suppliers
Technology due diligence was highly labor intensive
Asset bundles sold individually to multiple buyers for nearly $5 million
Total marketing and sale process executed over 9-month period
Case Study – Amherst Fiber Optics
Company: TVC
Context: Liquidation of subsidiary
Cause: Parent company cash flow
Massive potential tax benefit
Components: 8 related but independent
patent bundles
Fiber Optics after-market, repair
and maintenance
Cause: Liquidation
Valuation Approach: Components of valueReplacement value
Amherst Fiber Optics: Monetization
Identify all IP in each patent / technology bundle Inventory patent applications and registrations Collate related trade secrets,designs, assemblers,
etc. Benchmark valuation
Liquidation context End-use dependent
Market the assets / close transactions Results:
$400,000 – $700,000 cash $10+ million tax refund
Case Study – Middleby Marshall Trademarks and Technology
Company: Middleby Marshall
Context: Acquisition
Components: Core corporate brandTwo sub-brandsPatent and Technology bundle
Cause: Loan securitization
Approach: Imputed royaltiesComparable sales
Concept of Value: Going-concernComponents of value
IP and Intangibles in ForeclosureSummary Case Studies
Relative Value
Ranking1 Company
Types of Intangibles
(A) (B) (C) (D) (E)
TM’s & Brands IT & DatabasesPatents &
TechnologyInternet Other
A plus
B + C
1. WarnacoWarners, Speedo, CK licenses
Complex operating systems
Manufacturing technology
Domain names & Website
N/A
C + E
A, B, D
2. Borden Chemicals
Corporate brand and sub-brands
Manufacturing systems
Multiple and proprietary
LimitedChemical processes
B
A + D
3. Montgomery Ward
Montgomery Ward, Ship N Shore, plus 100+ TM’s & sub-brands
Operating platforms;
Mailing listsNone Online store
Mail order system
B, C, D, E4. Exodus
Corporate identity Massive systems Multiple BMP’s2 Complex assets
Hosting processes
C + D
B
5. beenz.comCorporate TM
International databases
Proprietary technology and BMP
Online sweepstakes service
Other BMP’s
E + C
A, D, B
6. MoslerCorporate name
Security IT & software
Multiple patents ModestUL certifications
1 The rankings for each company reflect relative value within that company in a bankruptcy or liquidation scenario (e.g., Montgomery Ward will realize most value from the “B” assets, IT & Databases).
2 BMP = Business Method Patent. A BMP provides protection for intellectual concepts and systems sufficiently unique to earn patent protection. The on-click ordering system of Amazon.com is a BMP.
Bankruptcy and Reorganization
Amherst Fiber Optics AstroTurf Barneys Boston Market Collins & Aikman Dan River El Comandante Fortunoff Jacobson's Stores Jenny Craig
Kenar LA Gear Marvel Entertainment Montgomery Ward Owens Corning Polaroid Service Merchandise Starad, Christopher
Radko Tower Records
Summary
Identify all IP / IA in the current project Understand the context for historical and potential
use of the assets Triage the assets by quality and priority Bundle the assets for optimal effectiveness Benchmark valuation
Liquidation context End-use dependent
Market the assets / close transactions Licensing Sale or other disposition