Optimizing Values of Patents in Oil and Gas Industry Paper No. : A065 Date- 11 th March, 2010 Venue- SILVEROAK-II, Habitat Centre, New Delhi Session Name

Optimizing Values of Patents in Oil and Gas Industry Paper No. : A065

Date- 11th March, 2010

Venue- SILVEROAK-II, Habitat Centre, New DelhiSession Name : Leveraging

IPSession No: TS-12

Presented ByITAG Business Solutions Ltd,

Sughrue Mion PLLC , USA

© ITAG Business Solutions Ltd., 2010 © 2010 Sughrue Mion PLLC, All Rights Reserved.

Presenting Author – Mark BolandPAPER Number – A065 Session No. - TS-12Date – 3/11/2010 Time – 14.15-15.45 hrs

PRESENT AFFILIATION

Partner at Sughrue Mion, PLLC since 1991, began as associate 1985.

AREAS OF INTEREST Lead trial counsel in numerous patent infringement litigations, infringement and validity opinion practice and counseling, licensing and contract matters including joint ventures and co-development situations, patent application and prosecution, and counseling clients in devising global intellectual property strategies.

ACHEIVEMENTS / AWARDS

1. Catholic University of America, Columbus School of Law (JD 1985)

2. College of Holy Cross (B.A. Biology 1982; minor concentration Chemistry)

3. Co-Editor (1994 Ed.) (treatise) “Comprehensive Patent Interference Practice”

4. Lectured worldwide on various IP topics

5. Member of Sughrue’s Management Committee – 1993 to present.

Presenting Author- Dr. Dhanpat Ram AgarwalPaper Number- A065 Session Number- TS-12 Date- 3/11/2010 Time - 14.15-15.45 hrs

PRESENT AFFILIATION-

Director of ITAG Business Solutions Ltd, (KPO IN IP LAWS) Kolkata and in practice as Chartered Accountant since 1982 .

AREAS OF INTEREST-

Consultancy in IP Management , IP Laws , Taxation, Finance and other WTO related issues.

2. Author

•A Monograph on WTO 2005

•A Monograph on Intellectual Property Rights (IPR), 2010 (under print)

3. Co-Author of books on FEMA, Partnership Taxation and other direct tax matters

4. Presented papers on WTO , IPR and other economic and taxation issues at various National and International Conferences.

5. Participated in 5th, 6th and 7th WTO Ministerial Conference in Cancun (Mexico), Hong Kong and Geneva.

ACHIEVEMENTS / AWARDS

1. A Commerce and Law Graduate from Calcutta University, a chartered accountant and PhD in Economics.


Patent PortfolioView of Patents

Shift view from one of a patent as a legal instrument to that of a financial asset and weapon.

In a Knowledge EconomyIntellectual assets rather than physical assets have become important to corporate wealth and competitive advantage. Patent portfolio is a strategic and financial asset of a company

Patent PortfolioIn the last 20-30 years the source of value has shifted from tangible to intangible assets.

Source – Juergen Daum, New Economy Analyst Report, July 2001.

Patent vs. Trade Secret

OR

• Trade secret protection may be preferable for those inventions which the competitor cannot reverse engineer.

• While the patent system forces one to disclose the details of the invention, a trade secret enables one to keep the details of an invention a secret. – However, as the name suggests, a trade secret does not confer the right to

exclude.

Patent PortfolioPatents Enable:

Category-Leading Products

Enhanced Market Share

Higher Profit Margins

Patent Portfolio: A Sword & A Shield

A Sword• generate licensing revenue• block/exclude a competitor

from a particular market space• force an acquisition

A Shield• ensures freedom to operate• provides “trading chips” to

be cross-licensed or leveraged in response to any aggressive action

Patent Strategy: 4 Steps

I. Business & Patent Portfolio Goals II. Evaluation of Company Assets III. Procurement Phase IV. Procurement

Patent Strategy: I. Business and Patent Portfolio Goals

–Patent strategy identifies key business goals of company - needs management support–Identify business, technology, and product goals for company–Identify competitors and key players–Anticipate technology shifts, and direction–Determine focus of patent portfolio - offensive, defensive, marketing

» Resources and budgeting

Patent Strategy: I. Business and Patent Portfolio Goals -

Interplay Between IP, R&D, and Business Goals

• Alignment between big 3 strategies is bi-directional - proactive and reactive• Led by Business goals and plan• R&D strategy and IP strategy follow from the business

plan • R&D efforts, however, provide information for developing

(input into) the business plan• IP strategy provides input into the business plan and also

can influence the R&D efforts

Patent Strategy: I. Business and Patent Portfolio Goals -

Competitor’s Portfolio

Company Patents (2000-2005)

Patents (2006-present)

Patent Apps (2000-2004)

Patent Apps (2004-present)

Halliburton 841 706 1568 1153

Schlumberger 626 495 1590 1587

Baker Hughes 589 438 1178 1589

Exxon Mobil 51 21 1472 492

Shell Oil Co. 252 233 994 263

Chevron 15 20 681 762

Above table shows a trend where service providers are generally filing more patent applications and obtaining more patents than the oil companies

This shift provides the service providers with a greater bargaining position against the oil companies.

Patent Strategy: II. Evaluate Company’s Intellectual Assets

–Assets = products, services, processes, technologies–Determine anticipated life span of assets–Identify markets for assets–Identify products incorporating each asset–Identify those assets best suited for patent protection–Determine budget for patent strategy and procurement

Patent Strategy: III. Procurement: Types of Patents

•Cornerstone patents - blocking patents - keep competitors from entering a market covered by the patent•Fence Patents - Improvements of a competitor’s core patents - provides an incentive to cross-license•Design-around patents - Avoids infringement

Patent Strategy: III. Procurement: Filing Strategies

Clustering –File as many applications as possible for all possible features of a product

Blocking –designed to cover products/processes that the company does not intend to practice but would be viable alternative to competitors

» file application for both process A and process B, but company only intends to practice process A, in order to leave competitors with fewer alternatives to compete

Bracketing–File applications in view of competitors issued patents to fence in competitors future mobility

»Competitor Develops Technology - e.g. light filament. You develop glass bulb, socket, and everything else.

Patent Strategy: IV. Deployment

–Licensing–Asserting rights (litigation)–Continual evaluation of assets–Constant evaluation of competitor’s portfolio

Public

Corporate

Investors

IP Speciali

st

Education

Institutes

Research lab

Tradeshows

IP Auction

Newspapers, journals and magazines

Dedicated Database

IP Seminars/ conference / workshops

Newsletters

Advertisements

Press Release

Marketing Research

Approaching the Target population (Segment Oriented)

IP Commercialization


Identify Segments

Research

Invention Disclosure

New Idea / Invention

Patents

Commercialization

Self UseLicense

Lump sum Sale

ExclusiveNon Exclusive

Proof Of Concept

Commercial Viability

Technology Transfer- Different Stages

Technology Transfer


Technology Transfer-Technology Transfer is the process of sharing of knowledge, technologies, and facilities among different organizations to ensure scientific development as well as facilitate the process of channelizing research into the commercial environment.

Licensing

Sale

Foreign direct investment

Turnkey contracts

Acquisition of equipment

Different modes of technology transfer

Tech

nolo

gy T

rans

fer

Skilled Manpower

Technical Know-how

Organizational Innovations

Equipment & Materials

Components of

Technology Transfer


Basic license alternatives

Exclusive license

Sole license

Non-exclusive license

Know-how license

IP Licensing

Diff

ere

nt

Typ

es

of

Lice

nse

sSoftware license

Franchise

Other Variations of the Basic License Alternatives

Cross license

When a patent is granted to a patentee, he not only gets the right to prevent others from exploiting the invention covered by the patent but also gets the power to grant others a right to exploit the invention.

An agreement in which such a right is granted is called a patent license agreement.

The patentee is called the licensor, and the party to whom the license is granted is called the licensee.


IP valuation is the key element of new comprehensive business management systems including the identification, in a previous step, and IPR exploitation

IP valuation

Valuation Approaches Definition Common Uses Challenges

CostCost of replacement or reproduction

Insurance claims & disputes

Cost is a poor estimate of value

MarketValue of comparable deals

Property value & stock market

Finding close comparables and adjustment methods

Income

Present value of future cash flows (can include option methods)

Business valuation & academic circles

Certainty surrounding cash flow levels, timing, and risk-time discounting


Variables which influence the Valuation

Sale of product & Product’s Maturity

Profitability Margin

Competition & competitor sale and profitability

Types of goods

Loyalty of customer

Customer profile

Importance of product in the consumer’s life criteria’s: emotional, health impact, social standing, value addition


Geographical domain

Marketing network

Brand reminders through advertisement

Assignment

Value addition to licenser/ Assigner

Sale growth prospective

Product awareness in the geographic domain of assigner

Time period of license and its terms & Conditions

Discount Rate

Purposes and uses of IP/intangible asset valuations

Accounting for your assets

Calculating share values

Fund raising.

Fair Joint Ventures

Preparation of annual account

Commercial due diligence

Prospectus preparation

Forensic accounting.

Tax Generally

IP Investment Holding Company

Strategic Planning

Financial Reporting

Sale Transaction Support

Licensing

Strategic Alliances

Equity Raising

Collateral-based Financing

Infringement Damages

Transfer Pricing

Other tax issues


An IP Audit is defined as a systematic review of the IP assets owned, used or acquired by a business.

The intellectual property audit is an assessment of the legal status and value of an organization’s intellectual property

Types Of IP Audit

Gives an overview of the IP Asset

The valuation of the IP Asset

A specific purpose to address, such as due diligence or to enforce or defend legal action.

A qualified IP practitioner is required to assist you (eg. a recognized accountant, lawyer or patent attorney).

IP Audit

Provisional Audit / Preliminary

Audit

Comprehensive Audit


1.Chalk Out Audit PlanScope of the audit and the documents to be reviewed

Schedule for the audit

Audit team responsibilities

Enlist personnel to be interviewed

Employment agreements and policies

Information Gathering:

Nature of assets (product brochures, release notes, etc.)

Issues peculiar to the law of a particular state

Background about the technology at issue

Detailed checklist

IP Audit Procedure

2. Gather documents

Access to company information

Access to computer media

Questionnaires and interviews

Search of databases (USPTO, UCC filings, etc)

Search inventive employees to be sure all patents assigned


3. Analyze the Information

IP processes and systems audited can be compared against best disclosed in the literature and from other available resources

Quality of all IP assets analyzed

Possibly infringement issues analyzed

review the agreements to assess the risks and benefits in them.

4. Write the Audit Report

The results of IP audit should be mentioned in a report.

The report should include the objective of the audit, the audit plan and how it was executed and the results obtained from the analysis.

It should describe and evaluate IP defects uncovered in the audit, propose and describe specific remedial action that needs to be taken or that has been taken.

IP Audit Procedure contd….

Thank

You© ITAG Business Solutions Ltd., 2010 © 2010 Sughrue Mion PLLC, All Rights Reserved.

Documents

Optimizing Values of Patents in Oil and Gas Industry Paper No. : A065 Date- 11 th March, 2010 Venue- SILVEROAK-II, Habitat Centre, New Delhi Session Name