Beruflich Dokumente
Kultur Dokumente
INTELLECTUAL PROPERTY
CLJ Events
10 April 2013 09:00 am – 11:00 am
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Outlines
• IP System
• IP Embodiment
• IP Valuation
• IP Strategy
• IP Audit
IP System
• IP system is a set of activities to
encourage and protect persons or
parties of concerns in relation to
invention, innovation and creation
along the social and economic
development path
• IPRs which are intangible assets as
derived from IPs are systematically
governed by competent functioning
bodies e.g. WIPO, WTO (via TRIPs)
and NPOs in
- Administration
- Codification
- Regulation
- Enforcement
- Dispute Resolution
- Marketplace Regulation
• IP embodiment comprises IP business partners
and their respective IP actions/functions or
interactions.
IP Embodiment • IP business partners cover the following players
whose activities or functions are interrelated or
mutually made or strategically overlapped with
each others such as IP/technology development
companies, licensing agents, patent licensing and
enforcement companies, privateers, institutional
IP aggregators/IP acquisition funds, litigation
finance/investment firms, IP brokers, IP-based
merger & acquisition advisory firms, IP auction
houses, IP-backed lending firms, online
IP/technology exchanges, royalty stream
securitization firms, IP transaction exchanges,
etc.
• IP functions are engaged in variety of
arrangements for monetization or securitization
of IP from which IP business models are
structured for the sake of industrial and
economic development, and for benefits to all
concerned parties.
IP Business Partners
IP/Technology Development Licensing Agents - entities functioning
Companies – Entities engaged in R&D as intermediaries by helping IP owners
activities and produce IP often not find licensees. Also called IP advisory,
used for manufacturing themselves but IP consulting, IP management or
licensed to one or more operating technology transfer firms. They may
companies for their further activities in merely act as consultants where the
bringing physical products or services patent owner gets involved in the
to marketplace. In case the IP creators licensing process, or function more like
provide consulting services to the IT companies where the patent owner
licensees to integrate the technology outsources patent monetization and
into the licensee’s products or sets aside day-to-day licensing
processes, they are considered beyond operations, but collects a major part of
the scope of intermediaries between revenue from licensing. They can be of
patent owner and patent “carrot” licensing or “stick” licensing
licensee. They will be intermediaries activities. In the latter case, these
when they form a link between the IP entities tend to be engaged in activities
creator and those who commercially like PLEC business model.
deploy it in the form of products and
services. In some cases, they do both
manufacturing and licensing.
• Patent Licensing and Enforcement
IP Business Companies (PLECs) - own one or more
patent portfolios, attempt to license
Partners them through targeted letter-writing
campaigns and then file patent
(cont’d) infringement suits against those letter
recipients who refuse to enter into non-
exclusive licenses. PLECs are often called
non-practicing entities (NPEs) or patent
trolls. PLECs might have purchased the
patents they are asserting or it is
otherwise founded by the inventor(s) of
the asserted patent portfolio. As for the
latter, they are not
intermediaries. PLECs earn revenue
both from license fees and from the IP
awards market.
IP Business Partners (cont’d)
• Privateers - Operating companies who have
been spinning groups of patents to PLECs to
generate additional revenue, by means of
outsourcing patent-monetization function,
that helps save the costs incurred in cross
license and counter-claim exposure, and avoid
anti-competitive regulations and bad publicity,
etc.
• Institutional IP Aggregators/Acquisition Funds
– private equities who operate as general
partners of a limited partnership and raise
money either from large technology
companies or from the institutional investors
and even high-net-worth individuals. The
investors are promised above average ROI
from selective, targeted or large-scale patent
purchases with the goal of instituting licensing
programs and/or employing various arbitrage
strategies.
• Litigation Finance/Investment Firms –
functioning alike both PLECs and IP
IP Business Acquisition Funds. Like IP Acquisition
Partners (cont’d) Funds - general partners of a limited
partnership and raise money from large
institutional investors and high-net-
worth individuals. Like PLECs – with a
view to acquiring a financial interest in
patent portfolios for assertion by taking
the form of targeted letter-writing
campaigns, followed with patent
infringement suits against those letter
recipients who refuse to enter into non-
exclusive licenses. Variances in the
model (and from a PLEC) include the
level and nature of ownership or
participation (e.g., equity vs. debt) that
the firm takes in the patent portfolios
being asserted or in the patent-owning
entity itself (typically an LLC formed for
the purpose of assertion).
• IP Brokers – function as same as
IP Business Licensing Agents with key distinctions
that they seek to help IP owners find
Partners (cont’d) buyers rather than licensees; and
operate both on the sell-side and the
buy-side (assisting technology
companies in acquiring patents having
“strategic” (i.e. defensive) value vis-à-
vis their competitors). A typical “one hit
and done” engagement term between
an IP Brokerage firm and an IP owner is
shorter than that of a Licensing Agent
firm because once the IP is sold, the IP
Broker takes a percentage of the sale as
a success fee, without any opportunity
for recurring revenue. In contrast, buy-
side brokerage engagements can
continue indefinitely as the broker’s
client strengthens and extends its IP
position over time.
• IP-Based M&A Advisory Firms – Entities
IP Business operating like investment banking (or 2nd
generation IP investment banking) by advising
Partners technology companies in their M&A activities
and earning fees based on the value of the entire
(cont’d) deal (or apportioned according to the value of
the IP within the deal of either sell-side or buy-
side, focusing on IP assets; followed with
services e.g. IP due diligence, IP integration and
operations as a result of M&A activity, IP deal
structuring advisory and general consultations
related to contemplated investments, mergers,
acquisitions, divestitures, joint ventures and
other corporate transactions. It involves not just
maximizing IP value in the context of a
“traditional” corporate acquisition or divestiture,
but actually sourcing the transaction based, at
least in part, on IP considerations. By this, the IP
investment banker assist operating companies in
identifying potential acquisition targets or
acquirors with complimentary IP assets.
• IP Auction Houses – Entities attempting
IP Business to do for the IP marketplace (like
Christie’s and Sotheby’s auction houses
Partners (cont’d) did for the antique and art marketplace)
holding multi-lot, live auctions for
patents with the intent of providing a
marketplace for facilitating the
exchange of such historically-illiquid
assets. With various auction formats
and structures, such auctions enable
sellers to offer one or more patents
according to a pre-determined set of
terms and conditions and allow the
auction house to charge listing fees,
attendance fees, buyers’ premiums
and/or sellers’ commissions. Also, other
entities aim to be the “eBay of patents”
by offering online patent auctioning
services.
• On-Line IP/Technology Exchanges, Clearing
IP Business houses, Bulletin Boards, and Innovation
Portals - Functioning like the former B2B
Partners (cont’d) web sites; offer web platforms and
interfaces specialized for patent and other
IP assets. (Like online classifieds Craig’s List,
but this is provided for IP.) There are
variances such as whether listing fees are
charged to patent owners/sellers in addition
to, or versus, back-end fees for successful
patent sale or licensing
transactions. Additional variances include
whether these sites are public and
browseable for free, or whether they are
private, “member’s only” sites that require
registration (and presumably a registration
and/or annual membership fees). Some of
these sites also offer forums, bounties,
challenges and idea exchange platforms
that aim to spur innovation and thus create
new IP.
IP Business • IP-Backed Lending Firms - Entities that
provide financing for IP owners, either
Partners (cont’d) directly or as intermediaries, usually in the
form of loans (i.e., debt financing), where
the security for the loan is either wholly or
partially IP assets (i.e., IP
collateralization). Thus, these parties often
function as intermediaries between
borrowers and commercial lending
institutions, such as banks. Unlike
traditional bankers who focus on accounts
receivable (i.e. Factoring) and tangible
assets, however, these IP-backed financiers
take into account a borrower’s IP assets or
target company’s (potential or actual) IP
assets in structuring a financing
transaction. Variances in this model include
entities who deploy their own capital (and
thus resemble IP investment firms) or who
maintain a network of technology-specific
or industry-specific investors to whom they
refer IP owners (and thus resemble patent
brokers).
IP Business Partners (cont’d)
• Royalty Stream Securitization Firms - Entities providing a
consultation and/or capital to patent owners in performing IP
securitization financing transactions. In such transactions, an
entity sells their IP underlying the transaction to a bankruptcy
remote entity or SPV, and the SPV grants a license back the IP to
the original owner. Then, SPV issues IP-backed notes/securities
to investors to raise cash/fund for IP owner at the agreed-upon
purchase price. The notes are then backed by the expected
future royalties to be earned from licensing the underlying IP (to
the original patent owner and/or third parties). By this, the
original IP owner obtains funds raised at much more cheaply
than a loan backed by its traditional assets. The IP-backed notes
are generally higher-rated commercial paper reflecting the
quality of the IP and not necessarily the overall creditworthiness
of the original IP owner.
IP Business Partners In Securitization
• Securitization - A technique that isolates income-
producing assets from bankruptcy risk by
assigning them to SPV which then issues debt
securities payable from the cash flows generated
by the assets.
• Improve asset-liability
management
Y •B
Z •D
• Overcome the agency costs of
asymmetric information where
one has information over the
other
IP Business Partners - SME Assets Securitization
Implementation
• Germany: The securitization of • Malaysia: Securitization started in
SME loan initiated in 1998 by 1986 when the government set up a
Deutsche Bank followed by mortgage financing body called
other commercial banks in National Mortgage Corporation
(Cagamas) to function as SPV
2000 (Jobst, 2007). To reduce between the house mortgage lenders
the financing cost of SMEs, and investors of long-term funds.
KfW has been commissioned Apart from mortgages securitized by
by the government to Cagamas, securitization for other
implement the securitization assets has not been very strong in
scheme to raise the financing Malaysia (Rosalan, 2008). The
for SMEs. transaction is governed by the
Securities Commission Act 1993. In
2001, SC issued Guidelines on the
• Japan: Securitization of SME Offering of Asset-Backed Securities
loan is one of the program which provides the criteria for
implemented by Japan Finance securitization deals. In 2007,
Corporation for Small and Cagamas pioneered the securitization
Medium Enterprise (Tsukahara, of SME loans via the issuance of
RM600 million credit-linked notes by
2006). its wholly owned subsidiary, Cagamas
SME Bhd. (Wan Azhar, 2007)
IP Business Partners - SME Assets Securitization
Implementation
• Thailand: Secondary Mortgage • Scheme: SMC purchased a pool of housing
Corporation (SMC) established in 1997 loans from financial institutions in the
under the Royal Decree of Secondary primary market, and securitized them by
issuing Mortgage-Backed Securities which are
Mortgage Corporation with its initial
to be sold to both local and foreign investors.
capital of Baht 1,000 million, as a state The pool of loans will be transferred to SPV
enterprise financial institution under as established by SMC in order to segregate
the Ministry of Finance with its major the risk of pools of loans from SMC risk and
objective to develop the secondary loan originators. Then, SPV will issue MBS
market for housing mortgage loan instrument backed up by the said transferred
under the principal of asset pool of housing loans. Investors in MBS
securitization for fund raising activities instrument will receive both interest and
principal repayment generated from cash
for the adequate and stable expansion
flow stream collected from loan borrowers
of housing mortgage financing, and to under the specified terms and conditions.
expand lending activities of housing MBS can achieve a credit rating from rating
loan market in order to resolve the agency, and also to be attached with credit
problems faced by the real estate enhancement scheme, such as the
sector during the country’s economic repayment of loan interest and principal is
downturn period. insured by reliable credit insurance
institution, to level up the confidence.
IP Business Partners (cont’d)
• IP Transaction Exchanges & Trading Platforms/IP
Transaction Best Practices Development Communities
In further attempts to make IP a more liquid asset
class, plans have been announced to create traded
exchanges (whether physical or online locations)
similar to the NYSE and NASDAQ where yet-to-be-
created IP-based financial instruments would be listed
and traded much like stocks are today. Another variant
involves an on-line trading platform where IP buyers
and sellers can come together to execute transactions
based on a set of agreed rules developed by a “best
practices” steering committee composed of major
corporate buyers and buyer-sellers.
IP Business Partners (cont’d)
IP Exchange
• Innovation – a fast decaying rate of innovation/product
has forced the companies to learn as to how to
accelerate every aspects of businesses, particularly with
IT business
• Speed
once product was launched, a plagiarism prevails e.g. knock-
off and reverse engineering
production, marketing campaign and distribution plans can
never last for six months but to be substantially shortened to
only, for example; 6 weeks, instead
• Protection – consideration angle of being worth the
effort of regional or global patenting
“If
only two can be chosen out of the three,
what’re yours based on economic aspect?”
IP Business Partners - Coase Theorem
• When looking at how to deal with• Freidman looks at “how an item
protection for intellectual property, must be useful before it can get a
we look at transaction cost, and patent”. No matter what to do in
that is the Coase theorem. The the area of productivity, people
Freidman book clearly states that have very little incentive to come
copyright protection is cheap and up with uses for things, and rather
easy to enforce, and patent just get as many patents as you can
protection has high transaction and then when someone discovers
costs and is hard to enforce. If a use for it, you get paid. But this
there is a very small amount that runs into a problem in that no one
you are copying, there is a high will be looking for uses. There is no
transaction cost of getting incentive for it. This has been an
permission. This just makes sense, excellent chapter to read in the fact
the smaller affect that you will that it relates directly to both law
have on revenues and profits, the and economics, and we can use
lower the copyright holder’s the analytical tools it gives us for
incentive to get that lost revenue any other form of property rights
from you. It would take him time, that we want to look at.
in both finding where you copied
his work and how many times you
copied it and for what purpose.
IP Business Partners (cont’d)
- IP Exchange
Economic Characteristics
• Not of a diminishing value by time of Value Sources
exploitation • Direct Use
• Not always be restricted to a single user, but — Manufacture and/or Marketing of
likely to be applicable to multi-users, IP value Products
can be managed on a multi-disciplinary basis • Indirect Use
to gain benefits as desired for all partners — Strategic Alliance/JV Opportunities
• Not necessarily depend on IP asset-creating • Licensing/Sale
or inventing investment cost, but rather on
— Additional source of revenue
commercialization ignition spark after project
completion, and perhaps or more likely to be • Strategic/Defensive
associated with other assets — Building up higher entry barrier
against competitors
• Be context specific (e.g. internal
development, JV, sale or licensing) with
• Tax
relevant time specific parameters (e.g. — Built-in-gains to offset 382 limitations
historical, current or potential)
/197 benefits /Donations
• Devalued after achieving the saturation of S-
Curve
Patent Rights
Suppose the invention covered by your patent
• A patent gives the patent owner is a chair with four legs, a seat, a back
the "exclusive right" to stop others and a pair of rockers -- a rocking chair.
from making, using, selling or Under your patent, you have the exclusive
offering for sale the product, or right to stop others from making, using,
selling or offering for sale your patented
process of making the product, that rocking chair. Assume the rockers on your
is described by the patent claims. It rocking chair are unique and covered by
is important to note that a patent an earlier patent to someone else. The
does not give the patent owner the rocker patent owner has the exclusive
right under his patent to stop others
right to exploit the patented (including you) from using his patented
invention himself. The patent rockers. Use of the patented rockers on
owner has only the "exclusive your rocking chair would constitute
right" to stop others from doing so. infringement of the rocker patent.
The sources of risk are the revenue growth rate and the variable costs as a percentage of sales.The average of the
DCF is known as the net present value (NPV) and standard deviation as volatility. The results show that the average
DCF is positive (about 40), whereas the probability of a negative DCF is about 15%. The decision as to whether to
proceed or not with this project will therefore depend on the risk perspective (tolerance) of the decision-maker. This
example has also been extended to calculate the distribution of bonus payments on the assumption that a bonus is
paid whenever the net DCF is larger than a fixed amount (such as 50).
• 1 2 3 4 5 6 7 8 9 10
• Revenue 100 105.0 110.3 115.8 121.6 127.6 134.0 140.7 147.7 155.1
• % growth 5.0% 5.0% 5.0% 5.0% 5.0% 5.0% 5.0% 5.0% 5.0%
• Average 5% 5% 5% 5% 5% 5% 5% 5% 5%
• S.D. (Volatility ) 8% 8% 8% 8% 8% 8% 8% 8% 8%
• Fixed Cost 35 35 35 35 35 35 35 35 35 35
• Variable Cost 50 53 55 58 61 64 67 71 74 78
• Variable Cost 50.3% 50.3% 50.3% 50.3% 50.3% 50.3% 50.3% 50.3% 50.3% 50.3%
• min 48% 48% 48% 48% 48% 48% 48% 48% 48% 48%
• ml 50% 50% 50% 50% 50% 50% 50% 50% 50% 50%
• max 54% 54% 54% 54% 54% 54% 54% 54% 54% 54%
• Profit/Cash Flow 15 17 20 22 25 28 32 35 38 42
Challenges Benefits
– More complex in – Able to identify
manual computation probability of specific
outcome
– Prone to be Garbage- – Able to identify variables
In Garbage-Out which have influence in
(GIGO) the model (e.g. net
present value)
– Add more flexibility to
the model
– Obtain clear charts and
reports
IP Valuation – Option pricing based methods
Option Pricing- The theory behind option pricing was
primarily developed for use in pricing financial
Based Method options but can also be applied to a number
Real Options Method (Non- of other situations other than directly
financial Options) financial assets. The valuation of IP still in
Real (non-financial) option development or being commercialized is one
valuation methods treat the such framework. Option based methods
development as well as essentially belong in the income based
commercialization of IP as a series methods category as they too use expected
of options. As the IP is developed future cash flows to measure value.
and commercialized, many
decisions about investment
timing, when to patent, The basic definition of an option is a right but
abandonment, direction of not an obligation, at or before some specified
research etc. must be made. The time, to purchase or sell an underlying asset
information to make these
whose price is subject to some form of
decisions is often not available at
the time of valuation, but
random variation. Options are priced using
becomes available later. The real the Black-Scholes option-pricing model,
options method, using the Black- which is a mathematical model for the
Scholes model, takes into account valuation of options.
the flexibility of these future
decisions.
IP Valuation - OPT
Black-Scholes Model
IP Valuation
OPT vs Real Option
Advantages Disadvantages
It incorporates the value
associated with the uncertainty The main disadvantage of the
and accounts for the flexibility real options method is the
inherent in the development of IP. complexity of the model. It is
The value associated with the difficult to understand and the
uncertainty of cash flows and the
ability to manage the evaluation can be costly to
development of the IP is perform. Some experts doubt the
accounted for. Like the DCF accuracy of options based models
method it values the stream of for use with real investments
cash flows but it also accounts for
acquired knowledge. As a result, it such as IP. The main arguments
provides a more complete are that option based models
evaluation than the DCF as it over-value IP through the
captures more than simply cash inclusion of non-viable
flows and static costs.
development as well as
commercialization decisions.
IP Valuation – Option Pricing-Based Method
• Advantages • Disadvantages
- Simplicity is the main advantage - Valuing IP using patent information
of patent information related and related value indicators have many
non-patent value indicators. Once drawbacks. For example simply counting
the relevant information has been citations avoids taking a stand on
questions such as how and why citations
researched and is available in a arise and what type of information they
useable form its relatively easily to convey. Focusing on simple counts
classify and evaluate the IP without deliberately ignores any added
the need for complex methods. information within the network of
citations. Using value indicators as a proxy
- Data for the evaluation is often for value is only as useful as the level of
publicly available. With sufficient expertise of those who are conducting the
expertise it is possible to value IP valuation. One must also decide which
belonging to other parties. As a indicators are relevant to the value of a
result, these qualitative methods particular IP, and which are not. The
quality and realism of the qualitative
facilitate the comparison and
evaluation in IPScore, for example, is
ranking of IP within a company’s greatly dependent on the quality of
own portfolio or against information used.
competitors’ IP.
To optimize the value Cost savings can
IP Strategy of IP assets, value
creation function
be achieved if
granted tax
can be simply incentives and
formulated where other tax
Σ Profiti profitability rests
upon price and
privileges, and due
to economy of
cost mechanism. scale and skilled
= (Pricei – Costi) The price will be work force.
rising on account
x Volumei of strategic
management such
as product
uniqueness,
product
differentiation,
monopolistic
competition,
higher barrier to
entry, innovation
and branding.
IP Strategy
SWOT analysis provides Qualitative evaluation
self assessment through methods are most often
internal audit that reveals used for the purpose of
strengths and weaknesses, internal IP management.
while taking opportunities They are most useful for
from the external factors comparing, categorizing
like technological progress, and ranking IP within a
government laws and portfolio or vis-à-vis
regulation, life styles, competitors’ IP. They are
demography, political and also useful for assessing
economic situation; and the risks and opportunities
escaping the risks from IP of IP.
infringement, the act of
not pursuing IP
circumvention and
plagiarism.
IP Audit
IP audit is a strategic
exercise where IP assets are Taxonomy can assist the
to be inventoried and then Company in determining the
mapped against the current extent to which current and
future products are
business and future protected (e.g. to identify
strategic priorities. Within the existence of strategic
an audit process through a gaps in the portfolio and
classification or taxonomy, pockets of non-core IP), and
IP assets will be categorized further performing
in manner that actionable competitive assessment
information is provided for (e.g. to determine the
IP asset optimization by position and trajectory of
rivals’ portfolios).
means of technical analyses
(e.g. SWOT).
understanding IP assessment
entire business competitive
strategy (e.g. SWOT,
IP Audit (cont’d) to align IP
strategy with
GAP,
trajectories)
business goals opportunity
IP audit to identify key
target
(e.g. licensing
and sale,
process which markets,
products and
utilization
across SBUs)
technologies and risk (e.g.
is used to IP assets litigation)
identification process and
support the IP To ensure not
missing all
control (e.g.
best practices,
business plan relevant IP
assets
strategic
patenting,
IP assets licensing
needs these categorization compliance)
Using
essential steps taxonomy to
assess the
of action: strength and
relevancy of
IP
Thank You