InterSoap Appendix A: Case Discussion “Inter-Soap” Tivo … · Appendix A: Case Discussion Tivo 2 ... Software then creates modular segments from these ... • TiVO has also been

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Appendix A: Case Discussion

Tivo

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I.6 Case Discussion: Tivo “Inter-Soap”

InterSoapInterSoap

Inter SoapA Hypothetical Case

http://www.bookofjoe.com/images/tivo_logo.jpg

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Case Discussion: Tivo InterSoap• The video recording firm Tivo has come up with a new

type of interactive computer-based personal video recorder (i-DVR)

• A system that can transform recorded regular broadcast-TV soap operas into interactive episodes designed by the users th l

InterSoap

themselves

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• TiVo provides a television recording service that allows subscribers to record, watch and control television programming, using digital video

d

InterSoap

recorders.

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• TiVo now wants to move into niche market of interactive, customized soap opera content and provide a fine-tuned, specialized service to soap-watchers.

InterSoap

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InterSoap Features

• Will enable soap watchers to store soap opera episodes and to mix and match scenes to create new plot lines.

InterSoap

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InterSoap Features• Allows viewers to search for old soap opera

episodes based on desired characteristics (e.g. Latino males, or Susan Lucci, or rejecting divorce, etc.)

InterSoap

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• Users record regular TV network episodes. Software then creates modular segments from these episodes and enables the user to create different plot lines, e.g. a happy ending, a divorce, etc, by reassembling these modules.

InterSoapCase Discussion: Tivo InterSoap

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• How does Tivo protect and exploit its innovations?

• How does it deal with others’ rights and property (such as the creators of soap operas)?

InterSoapCase Discussion: Tivo InterSoap

operas)?

http://www.soapcentral.com/gh/snapcaps.html

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Tivo InterSoap: Internal IP Assessment

• What is Tivo’s 2005 patent portfolio?• ~70 patents domestic and foreign, with 106

patents pending

InterSoap

http://www.tivo.com/cms_static/press_30.html11

Internal IP Assessment

• Sizable patent portfolio represents a significant deterrent, even an incentive for cooperation

• Adds to Tivo’s first mover advantage in highly-interactive TV programming

InterSoap


Internal IP Assessment

• But majority of patents could be obsolete soon, and have little value

• Patent litigation with EchoStar

InterSoap


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Case Discussion: TiVOIdentify potential licensees for Inter-

Soap• Identify potential rivals

InterSoap

• Identify inventors• Identify speed of innovation

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Who are the potential patent licensees for Inter-

InterSoapCase Discussion: TiVO

pSoap?

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• Video game and consumer electronic companies• Soap opera producers • Digital recorder manufacturers• Cable TV set-top manufacturers • TV set manufacturers• Others?

InterSoap

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Who are the potential rivals?

InterSoap

Who are the potential rivals?

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• Video game and consumer electronic companies• Soap opera producers • Digital recorder manufacturers• Cable TV set-top manufacturers • TV set manufacturers• Others?

InterSoap

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What are these companies’ patent strategies?

• Check the TV/software/game patents assigned to h

InterSoap

each.• Check the employers of patent holders and of

scientific papers in the field

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• Gemstar-TV Guide Intl. brought and lost several suits on i-TV programming guides– ended up licensing to Tivo

InterSoap


How can TiVo protect its Trade Secrets?

InterSoap

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What are Trade secrets f I t S ?

InterSoap

of Inter-Soap?

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• Software source code– Patent would disclose it– Copyright would only protect against actual copying, not

against development of interoperative software by rivals• Contract terms of deals

InterSoapExamples for TiVo Trade Secrets

• Contract terms of deals• Manufacturing process• Business strategy

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TiVo may establish Trade Secrets by:

• Nondisclosure agreements with employees and business partners

• Access management & document control

InterSoap

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How Inter-Soap can protect Trade Secrets

• Physical security

–Guards, locks, paper shredders–Locked document files

• Electronic security

InterSoap

–Password protection, and firewalls, etc.• Employee background checks, and training

http://www.bbc.co.uk/schools/gcsebitesize/img/ict06datasecurity.gif

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• Documentation

–Confidentiality notice–“Do not copy notice”–Anti-copy documents such as

colored ink and paper

InterSoap

p p• Publication controls

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Should Tivo try to get a patent on InterSoap technology?

InterSoap

http://www.millersoap.com/soap/Soap%3Fs.gif

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Should Tivo try to get a patent?• TiVo could get a patent on the technology, as

well as on the concept and method of using existing TV episodes in an interactive fashion

InterSoap

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Inter-Soap without Patents

• Should Inter-Soap launch its technology faster and less expensively without disclosing details of the operating system or hardware if it uses trade secrets?

InterSoap

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Inter-Soap without Patents• But, technology could be reverse engineered, rendering

trade secrets ineffective once product is sold.• High-turnover of staff in tech firm such as TiVo may

lead to knowledge spillover and erode the trade secrets, even earlier.

InterSoap

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Tivo InterSoap: Infringement concerns

• Should avoid costly litigation– but it is pursuing litigation against

InterSoap

EchoStar, a DVR competitor

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Tivo: Infringement concerns

• TiVO has also been the target of litigation –Forgent Networks is seeking

compensation for infringement on its “JPEG ”

InterSoap

“JPEG patents”

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InterSoap and Trademarks• Should Inter-Soap get and protect a Trademark?

InterSoap

http://www.miscellany.com/ande/dist/ivory.gif

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InterSoap and Trademarks• Inter-Soap should apply for trademarks for its name, Web-

address and all associated words and symbols• Prevent other companies from using the same name, logo

or slogan–This will not prevent someone from

using the name: Inter-Soap

InterSoap

using the name: Inter Soap Laundromat

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InterSoap Trade Dress Elements

• The Set-top box and its packaging• The title graphics and layout of the game system

and soap operas• Jingles and game sounds

InterSoap

• Jingles and game sounds

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What should Inter-Soap do to establish copyrights?

InterSoap

py g

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• Inter-Soap should copyright its software, interactive games and any music, video, graphics or text that accompanies them

InterSoap

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Inter-Soap and Copyright• Will get copyright in operating software• Will get copyright in hardware chips• Users may get copyrights in soap operas with new

arrangements of storylines

InterSoap

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Projected Tivo InterSoap Costs

• Costs of tangible and monetary asset acquisition• Costs of IP creation • Costs of acquiring and maintaining subscribers

InterSoap

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Tivo InterSoap Costs• Fixed costs of IP creation and tangible asset ~

$50 M• IP creation costs $40 M, amortized over 10

years

InterSoap

• Tangible asset creation costs $10 M, depreciating over 20 years

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Tivo InterSoap Costs

• SAC (subscriber acquisition costs) of $50 per customer

• $25 / yr. for maintaining a customer

InterSoap

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InterSoap

Revenues # of subscribers year Income Discounted Income Aggregate DCF

$2,500,000 100,000 1 -$7,950,000 -$7,950,000 $555,352

$8,125,000 125000 2 -$450,000 -$360,000

$13,476,562 195312.5 3 $878,125 $562,000

$27,542,114 381469.7 4 $4,497,509 $2,302,725

$69,625,675 931322.6 5 $14,649,968 $6,000,627

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Tivo InterSoap: DCF Valuation • Must determine the discount factor (weighted

average cost of capital)• Must also forecast income streams from

InterSoap sales

InterSoap

InterSoap sales

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• The sale price of a patent usually ranges from one-quarter to one-half of the expected benefit to the buyer

• The price of a license is similar

Valuation

Poltorak, Alexander I. and Paul J. Lerner. Essentials of Intellectual Property. New York: John Wiley and Sons, Inc.,

2002.

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• Another Example of Real Options Valuation for Tivo InterSoap

InterSoap

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• Current value of underlying asset S=$60.2 M

• Exercise price K=$47.2 M• σ=47.33%

2 0 224

InterSoap

• σ 2=0.224• T = 10, rf=4.5%

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• Black-Scholes Options Pricing FormulaStandard Normal Distribution of d1, d2

•N(d1)=0.8721•N(d2)=0.2075

InterSoap

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InterSoap

http://en.wikipedia.org/wiki/Black-Scholes48

• Black-Scholes Option Pricing FormulaValue=$668,000 Value of patent = $668,000 as call option

Versus NPV of patent = $555 K (calculated as DCF) -- much lower

InterSoap

(calculated as DCF) much lower than option value

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Value of Tivo InterSoap Patents

• Existing Patent: +$555 K • Undeveloped Patent: +$668 K

T t l V l $1 22 M

InterSoap

• Total Value: $1.22 M

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What kind of income stream can we expect out of Tivo InterSoap?

InterSoap

Develop a forecasting model

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Projected Tivo InterSoap Income Stream

• Subset of Tivo income stream; caters to a niche market of viewers.

• Assume a 10 M potential audience.

InterSoap

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• InterSoap will sell for a one time fee of $75 and monthly $5.00.

• Assume annual subscriber growth of a(1.25)^(n-1), a0 = 100,000 over n years

InterSoap

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• Finding Tivo InterSoap’s Discount Factor for use in DCF income valuation.

• Use weighted average cost of capital (WACC)

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A DCF Forecast (’02 – ’08)InterSoap

https://www.researchconnect.com/reports/TiVo%20report.pdf

])1/([0

tT

tt rCFDPV +=∑

=

DCF = -$ 155 M55

Calculating Tivo’s WACOC• Includes cost of debt capital and cost of equity

capital• Since Tivo has $4.5 M of debt listed, this is

negligible

InterSoap

negligible.

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• InterSoap DCF income stream (and IP portfolio protecting InterSoap) valued at ~$555,000

• Estimate varies greatly with inputs (“garbage in, garbage out”)

InterSoap

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Example InterSoap• Assumptions:• Risk-free rate Rf = 5%• Historical return on the equity market Rm =

10%• β Factor of Intersoap = 1 5

N: David

• β-Factor of Intersoap = 1.5• V = Value of the firm

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Example InterSoap

• Assumptions:• Cost of debt RD = 7%• No taxes

N: David

• Debt-Equity Structure

DebtEquity = 1

DE

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Example InterSoap• Calculating the Weighted-Average-Cost-of-

Capital WACC

• WACC = * RD + * RE

N: David

DV

EV

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Example InterSoap

• Calculating Cost of Equity RE

• RE = RF + (RM – RF) * β= 5% + (10% 5%) * 1 5

N: David

= 5% + (10% - 5%) * 1.5= 12.5%

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Example InterSoap

WACC = 0.5 * 7% + 0.5 * 12.5%= 3.5% + 6.25%= 9 75%

N: David

= 9.75%

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Example InterSoap

Free Cash Flows in $ M

2006 2007 2008 2009 2010 2011 2012

N: David

2006 2007 2008 2009 2010 2011 2012

-50 5 15 23 28 32 33

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Example InterSoap• Calculating the Net Present Value (NPV)

N: David

])1/([0

tT

tt WACCFCFNPV +=∑

=

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Example InterSoap

5)^0975.1/(324)^0975.1/(283)^0975.1/(232)^0975.1/(15

1)^0975.1/(550

++++

++−=NPV

N: David

6)^0975.1/(33)()(

NPV = -50 + 4.56 + 12.45 + 17.40 +19.30 + 20.10 + 18.88

= 42.6965

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Should Inter-Soap be open or proprietary?

InterSoap

proprietary?

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Calculating Tivo’s Required Rate of Return for Tivo IP

InterSoap

• To be used for royalty valuation

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• R [ t t t] = 4 3 %

InterSoap

i

ttmmbevi

VRVVRVWACCR )]()()([ −−

=

Rm [return on monetary asset] 4.3 %• Vm= current assets – current liabilities = 148 – 98 =

$50 M

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• Rt [return on tangible assets]= interest rate at which banks issue loans with tangible assets as collateral (~10%)

• . Vt= property, plant and equipment assets = $7.8 M

InterSoap

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• Ri [return on intangible assets] = [.25 ($590 M) - .043 ($50 M) - .10 ($7.8 M)] / $532 M = 27%

• Approximation of rate of return for Tivo intellectual assets.

InterSoap

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• Fair market value of IA as a % of total Tivo market value: 532 / 590 = .90

InterSoap

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• Weighted ROR = required ROR x .90 = .27 x .9 = .243

• Weighted ROR as % of total = .243 / .25 = .97

InterSoap

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• However Tivo has a negative net operating income, so royalty rate determination complicated

InterSoap

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• Assuming InterSoap IP has same rates of return as Tivo:

• .97 (weighted rate of return as % of total ROR) x $555,000 (DCF income) / $60 M (DCF revenue)

InterSoap

$555,000 (DCF income) / $60 M (DCF revenue) ~ 0.9 %

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Calculating Tivo’s WACOC• Cost of equity capital = risk free rate + (beta x

market risk premium)• For risk free rate, use rate of return on long term

gvt bond (4 3%)

InterSoap

gvt. bond (4.3%)

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Calculating Tivo’s WACOC• Beta is 2.985 • Use analogue for market premium, e.g. Sirius

Satellite Radio which has estimated risk premium of 7%

InterSoap

of 7%

http://uoig.uoregon.edu/reports/2005/Winter/SIRI.pdf

http://www.expectationsinvesting.com/spreadsheets/WACC.xls76

Calculating Tivo’s WACC• Cost of equity capital = 4.3 + 2.985 x 7 = 25%• Equity makes up most of total capital, so

WACC ~ 25%

InterSoap

http://uoig.uoregon.edu/reports/2005/Winter/SIRI.pdf77

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Tivo InterSoap: Licensing Opportunities

InterSoap

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Tivo InterSoap • Are there licensing opportunities to expand

market and/or control market structure?

InterSoap

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Tivo InterSoap • Yes: since interactive television content is a nascent market,

InterSoap should consider licensing technology to popularize its product.

• Lowers risk to TiVo commercializing InterSoap IP, licensor.

InterSoap

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Tivo InterSoap • Licensing and second sourcing (e.g. with

EchoStar) may accelerate process of raising product quality, leading to expanded market.

InterSoap

82

Tivo InterSoap

• May also consider joint-ventures as opposed to IP licensing

InterSoap

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• InterSoap and SoapNet (a soap opera channel) coulcreate a bundle for consumers.

InterSoap

http://www.ipww.com/texts/0504/tivo0504.html84

• Create InterSoap-enabled programming, e.g. very user-interactive I Wanna Be a Soap Star

InterSoap

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Licensing Possibilities• License InterSoap service to other DVR

producers, or to cable companies already licensing Tivo DVRs.

• License InterSoap service with DVD, TV

InterSoap

License InterSoap service with DVD, TV manufacturers


• Can value a license for competitors or firms in Tivo’s market; DCF models comparable to Tivo InterSoap’s.

• What about for different markets, different applications?

InterSoap

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• Baseline determinants: licensing agreements + InterSoap commercialization should be ≥ $1.22 M (over 5 years)

InterSoap

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Tivo InterSoap: Royalty Rate• Since this represents profit margin (expected to

be low for consumer electronics), royalty rate should be lower than .9%

• Could use “25% rule” of net profits

InterSoap

Megantz, Robert C., How to License Technology, John Wiley & Sons: NY, 1996, p. 55-69.89

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Tivo InterSoap• Swedish company Timbuktu Services wants to

use InterSoap’s proprietary technology to develop interactive surveillance tech.

• Should Tivo license, and if so, for how much?

InterSoap

90

Evaluating a License from Timbuktu

• Previous valuation methodology not suitable for Timbuktu, given different cost / profit structures, business models.

InterSoap

• Within range of 0 – 5 %

91

Evaluating a License from Timbuktu• Must ask, what are the profit margins for potential

licensee?• What kind of risk is Timbuktu assuming in this

venture?

InterSoap

• Will Tivo InterSoap’s existing sales model be impacted by license? (e.g. cannibalized sales)

92

• Seek help from IP network (ask industry experts or broad-based technologists) for info on licensee’s market

• Tivo InterSoap sales will not be significantly impacted (surveillance not related to soap operas)

InterSoap

93

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• Instead of a royalty on gross revenue, might consider royalty on net profits from operations utilizing InterSoap IP

• May be more amenable to Timbuktu, as no royalties need to be paid when in the red

InterSoap

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Hybrid Licensing• Package copyrights on software code, trademarks,

trade secrets and patents into hybrid license to Timbuktu.

• Better to hammer out separate licensing deals

InterSoap

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Tivo InterSoap: Allow Sub-Licensing?

• Could be considered to quickly disseminate InterSoap technology to consumers

• However, results in loss of control over licensing activities and overall “velocity” of market

InterSoap

activities and overall velocity of market


Tivo InterSoap: Trademark Licensing

• A good idea, to broaden brand appeal of Tivo InterSoap

• However, should seek to quality-control trademark, ensuring that products maintain standard of quality

InterSoap

ensuring that products maintain standard of quality


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98

• Controlling market structure: can Tivo InterSoap develop an industry-wide standard? Or seek a proprietary standard

InterSoap

99

Tivo InterSoap• Yes: interactive TV programming a budding market,

ripe for growth and development• As DVR-technology leader, Tivo is poised to lead

development in this market

InterSoap


Tivo InterSoap

• InterSoap should not be a stopping point in terms of R&D scope; Tivo should focus on developing interactive TV programming and infrastructure

InterSoap


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Tivo InterSoap

• E.g. developing standards to transmit deliver user-edited content to multiple TVs, or enable multiple users to edit content at same time.

InterSoap


Tivo InterSoap

• Tivo has opportunity to accrue enough IP to “encircle” market for future licensing and joint venture deals

InterSoap

• Tivo should aggressively patent


Tivo InterSoap

• Licensing technology to more parties (MSOs, DVR manufacturers) may increase demand for said technology, i.e. a network effect.

InterSoap

http://www.ipww.com/texts/0504/tivo0504.html104 105

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Tivo InterSoap: Identify IP Threats

• Piracy a low threat, as InterSoap is not a content-creator, but a content-enabler

• However, interactive TV software may be illegally i d d di ib d

InterSoap

copied and distributed.

106


• Might InterSoap be used for piracy?• InterSoap will allow subscribers to share and

distribute user-edited content, could result in h i f ill l

InterSoap

sharing of illegal content.

107


• Post-Grokster ruling, liability for copyright infringement is “inducement test”: does a product e.g. P2P service induce users to violate copyright law?

InterSoap

law?

108


• InterSoap can avoid this trap by posting stringent copyright warnings against sharing, developing end-user agreements and actively monitoring share-network

InterSoap

network.

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Tivo InterSoap: IP Threats

• Much less of a problem if InterSoap package is coupled with hardware elements

InterSoap

110

Tivo InterSoap: IP Threats• International problems: must be aware of varying

levels of IP protection in world• E.g. may be more difficult to obtain EU software

patents, so IP at greater risk there

InterSoap

111

112

Inter-Soap Techno-fixes?

InterSoap

fixes?

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Inter-Soap Techno-fixes• Protect system with proprietary hardware

–Disadvantage: takes longer to get customer base, won’t run on cable boxes or game

InterSoap

boxes or game• Encrypted software

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Technology Anti-Piracy Strategies for Inter-Soap

• Its software runs on dedicated hardware or other companies’ hardware which Inter-Soap’s can license

• Protection against piracy of Inter-Soap’s own operating system and hardware

InterSoap

115

116

Would someone pay for the Inter-Soap system to watch soap operas h b d TV f

InterSoap

they can see on broadcast TV for free?

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Would someone pay for the Inter-Soap system to watch soap operas h b d TV f

InterSoap

they can see on broadcast TV for free?

118

Sure, because there is value-added: a new form of control and new

InterSoap

viewing options

119

Must enhance value, provide complements with InterSoap, e.g.

b i id d l d bl

InterSoapTivo InterSoap

N

website to provide downloadable editing tools and subscriber exchange of edited soap episodes

120

• Add tiers to subscription service: providing a cheap, basic-level InterSoap would reduce incentive for illegally copied InterSoap.

• Provide increased interactive capabilities for more money

InterSoap

121

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• If InterSoap vulnerability to piracy and IP violation very high, may also consider marketing InterSoap as “widget frosting”

• Make free, or virtually free, to enhance Tivo DVR

InterSoap

122 123

• Can Tivo InterSoap use P2P to its advantage?

• Possibly

InterSoap

Possibly.

124

Tivo InterSoap• Currently there are +3.3 M subscribers to

Tivo, growing at +1 M annually• Subscribers typically tech-savvy, so will

likely be familiar with P2P networks

InterSoap

http://columbia.multexnet.com/net/pdfcache/35150640.pdf125

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Tivo InterSoap

• Circulating a barebones version of InterSoap on P2P networks will popularize product to DVR owners.

• Feedback effects will cross-over to boost Tivo

InterSoap

sales.


Tivo InterSoap

• Fosters growth of Tivo community, which itself represents great economic value.

• Increases attractiveness of advertising on Tivo through pop-up windows, banners, etc.

InterSoap


128

• Assessing the value of a patent portfolio for InterSoap

InterSoap

p p

129

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• Must compile weighted patent portfolio matrix, determine a discount rate, find annual incremental values of PP, and find duration of PP

• Duration of PP set at 5 years; discount rate ~

InterSoap

25%

130

• Assume PRFTi (profit in unpatented market) = 0• Portfolio’s incremental value = PRFTmi - PRFTi =

PRFTmi=DCF income stream estimated for InterSoap

InterSoap

131

• Assume InterSoap has 3 component patents: one for hardware additions to Tivo DVR, one for software infrastructure to edit and interact with soaps, and another for transmission / distribution technology (“InterSoaping”)

InterSoap

132

• Hardware is first developed for InterSoap, so its patent initially represents total IP protection

• Later, Software and Share/Distribution patents cover larger portion of InterSoap

InterSoap

133

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InterSoap

Year Hardware Software Share/Distribution

1 1 0 0

2 0.8 0.2 0

3 0.5 0.25 0.25

Tivo InterSoap Patent Portfolio

4 0.33 0.33 0.33

5 0.25 0.35 0.4

-$6,997,027 $3,447,070 $3,823,442

134

• Values skewed because first 2 years InterSoap had negative income streams

• Or, use average annual patent portfolio value of $555,000 / 5 = $111,000

InterSoap

Hardware Software Share/Distribution

$247,680.96 $142,703.20 $126,672.77

135

• More precise way to value IP• Would allow for optimal license-making• Can be used to assess different intellectual

properties in whole IP portfolio protecting I S

InterSoap

InterSoap

136

Tivo InterSoap Patent Valuation• DCF estimated as $555,000 over 5 years.• Risk adjusted patent value = 2.65 x 555,000 / 5 =

$294,000• Assuming patent covers all of InterSoap

InterSoap

• Assuming patent covers all of InterSoap

137

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138

Case Discussion: Where should Tivo InterSoap obtain patents?

InterSoap

Tivo InterSoap obtain patents?

139

• For example, S. Korean soap operas big in E. / SE. Asia and telenovelas popular in Hispanic audiences

• Between Mexico and S. Korea, which has safer IP environment?

InterSoap

140

• US Trade Representative issues Special 301 Report • S. Korea on Priority Watch List, while Mexico on

Watch List• From this standpoint, there are higher risks in S.

Korea relative to Mexico.

InterSoap

o ea e at ve to e co.

141

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Patenting Strategies

• “Evasion” patents to confuse competitors trying to emulate process or technique

Reitzig, Markus, “Strategic Management of Intellectual Property,” MIT Sloan Management Review, Vol. 45 No. 3, Spring 2004.

http://www.infonet.unsw.edu.au/ras/image/desk_paper_pile.jpg

142 143

Case Discussion: TiVOIs InterSoap® Available as a

Trade-mark?• A trademark search using TESS yielded no results

for InterSoap

InterSoap

• Would be advisable to check state-by-state trademark databases.

144 145

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InterSoap: Patents or Copyright?

InterSoap

146

InterSoap: Maybe both Patent andCopyright

• Patents for: business model, hardware and software• Copyrights: software, arrangement of soap opera episodes, music,

video, graphics or text which accompanies interactive games• Soap opera producers retain the rights to the content they produce

InterSoap

147

Inter-Soap and Copyright Licenses

148

Inter-Soap and Copyright Licenses• Must Inter-Soap obtain licenses from TV

networks that own soap opera episodes?

InterSoap

149

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Inter-Soap and Copyright Licenses

N i it d t d b t th d

InterSoap

• No, since it does not record, but the users do.

150

Must Intersoap users get license from a TV Network in order to re-

combine episodes?

InterSoap

151

• No as long as they do not copy it for others.– “fair use”– “first sale doctrine”

InterSoap

152

• And “moral rights of writers and directors?

InterSoap

N

153

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154

What are Business Anti-Piracy Strategies for

InterSoap

y gInter-Soap?

155

156

Therefore Strategy for Inter-Soap?• Hardware:

– Open – Licensed– Closed

• Software Game Operating System

To TV cable set-top, DVR, game console manufacturers, etc

InterSoap

– Open – Licensed– Closed To other game

software companies, TV soap program producers, etc.

157

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• One size does not fit all for Inter-Soap• Different strategies for different product

segment, different market segments

InterSoap

158 159

How to value Tivo’s intangible

InterSoap

gassets?

160

Calculating Tivo’s Intangible Assets

From TiVo’s balance sheet:• Total market value: $590 M• Net working capital = current assets – current

liabilities = $50 M

InterSoap

ab t es $50

161

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• Total fixed assets: $ 8 M• Estimated IA = Market value – net working

capital – total fixed assets = $532 M


InterSoap

162

• Value of intangible assets listed as $2.231 M for period ending 31 Jan 05

• ~ $530 M of unreported intangible assets, which ld IP l


InterSoap

could represent IP value

163

164

Anti –Piracy Strategies TIVO may seek:

I. Technical II. Legal III. Business Strategies

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I. Technical: TIVO’s Options:TIVO s Options:

166

1- Electronic Method: Get IP address and track P2 P file sharers

2- Using protective and encryption methods for files (for example of the content).

167

3- Copy prevention

4- Encryption and protections strategiesprotections strategies

5- Access controls

168

II. Legal Options for TIVO: 1- Litigation:

> Like record labels TIVO may sue companies likemay sue companies, like Internet providers, to prevent access for file-sharing

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III. Business Responses TIVO tiliTIVO may utilize:

170

> Because P2P networks, illegal downloads, and various other infringements are known gto result in significant economic loss for companies, TIVO may opt to:

171

1- Lower Prices2- Speed up new versions or upgrades

> Causing infringers who are selling for profit to be unable to keep up with the improvements.

172

3- Differentiate between organizations from individual:

> Thereby allowing organizations discounts so itsorganizations discounts, so its members may access at lower rates, while complying with IP laws.

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4. Pay per use: - Can make the initial one

affordable then be able to haveaffordable then be able to have users pay for each view and create a revenue

174

TIVO may use some of these with its product to undermine infringing of its IPRs:

175

1- Spoofing: Bogus and polluted files placed in file-sharing system to frustrate P2P users.

176

2- Use of “watermarks” that prevent the play of new

d i l d iprotected music unless device complies with SDMI.

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IV. How do legal strategies assist Intersoap in itsassist Intersoap in its innovations?

178

> Allows recourse for potential infringement, thereby lessening the ability for furtherlessening the ability for further or continuing disregard for TIVO’s IPRs.

179

> Though Congress seeks to be weakening patent legislation, TIVO may use methods to determine sources that violate their IPRs with the possibility of redress.

180

Question: > Can commercial deals be a substitute for any diminishing profits for Intersoap?

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> Possibly, TIVO may create deals with commercials and have various methods of including these commercialsincluding these commercials before, during, or after the usage of the software to generate revenue.

182

Question: > Should InterSoap have copyrights?

183

Consider:> Specific elements

copyright is desired for iprotecting.

> Is it already copyrighted?

184

> Is possession of the copyright:

- Necessary?- Financially- Financially

feasible?- Prudent?

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5. Each of the following can be used to determine the value of a company’s intellectual assets except:

a. Whether it is in existing use vs. liquidation value

b. The amount of times it is cited or referenced to in other patents/patent

filings.C. Consideration as to the length of the

patent description as filed with the USPTO. D. Usage of “Royalty Methodology” like

tax generated revenue from deals resulting from cross-licensing.

186 187

Example:• TiVo buys patent for its InterSoap from Apple for $1 mil.• Of this, $400,000 are goodwill and $600,000 are Apple’s development

cost.• Patent’s remaining economic life is 10 years.• TiVo must amortize $600,000 over 10 years.

Noam, Intellectual Asset Management 2005188188

Documents

InterSoap Appendix A: Case Discussion “Inter-Soap” Tivo … · Appendix A: Case Discussion Tivo 2 ... Software then creates modular segments from these ... • TiVO has also been