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06.03.2013 - NES/CEFIR Public Seminar "Patent Monetization" by David Aylen, Managing Partner, Gowlings’ Moscow office
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David Aylen
Gowlings Moscow
PATENT MONETIZATION
Monetization
• PART I What…
• Monetization: what is it?
• PART II When…
• Monetization: When do you do it?
• PART III How…
• Monetization: How do you do it?
Monetization
• PART I What…
• Monetization: what is it?
• PART II When…
• Monetization: When do you do it?
• PART III How…
• Monetization: How do you do it?
PART I Monetization: What is it?
• = a way to make money
• = a way of generating cash from a patent portfolio
• = any technique to make IP a liquid asset from which to
profit
• = “business model” for obtaining unrealized
value in a portfolio of IP assets
Monetization
• PART I What…
• Monetization: what is it?
• PART II When…
• Monetization: When do you do it?
• PART III How…
• Monetization: How do you do it?
Part II Monetization: When do you do it?
• When you know what you have to monetize
• When you know what you want to monetize
• When you decide the timing is right
• When you decide how to monetize
Monetization
Multi-step process
Monetization
FIRST: Portfolio Management of IP
THEN: Monetization of IP
Monetization
PORTFOLIO MANAGEMENT
• Identify all IP rights
• Categorize them
• Look at Business Plan
• Manage IP rights to support business plan
• Keep what you need
• Monetize the other IP rights
Portfolio Management: Identify all IP Rights
WHAT HOW ** DURATION
• software
• lists/data
• designs
copyright 70 yrs
•brands:
• words
• designs
• sounds
trademark
indefinite
•machines
•pharma
•nanoscience
•chemistry
•electronics
patent
20 yrs
•shapes
industrial
design
15-25 yrs
•special info trade secret indefinite
Portfolio Management: Audit and Categorization
KNOW HOW Information of any type that has been maintained confidential and is not
independently known and disclosed elsewhere and has commercial value
New & useful apparatus,
processes, chemical
compositions, designs
Manual,
Procedures,
Charts, Plans
Undefined KH
Scientific trial data
Research Material
Raw Data
Software
Databases
Int. Circuits
Not Protectable
Not Assignable
Maintaining Secret Helps
Copyright &
Confidential
Info.
no reg. required
can be registered
(some countries)
Protectable from
“copying”
Confidential KH
Unpatentable
Unregistrable
Transactional
Protectable if kept
confidential
Defensive
Strategy
Up to 20 years
exclusivity by country
or region
Copyright &
Confidential Info
- registrable (some
countries)
- partially confidential
Patents
Utility models
Industrial
designs
General knowledge,
skill, expertise of
employee workforce
Applications are
published
Offensive
Strategy
Marketing
Brands
Advertising
Trademarks
Copyright
Portfolio Management
Patents
Useful ??
Portfolio Management: Look at Business Plan
• What priorities?
• What markets and where?
• Who are competitors?
• Where will money be spent?
• IP rights:
• IP needed…to stop others [offensive] ?…to protect company
[defensive] ?
• IP not needed [transactional]
Portfolio: Offensive Strategy
targeted at competition
blocks manufacturing processes and product
features
preserves market leader position BP
CASE STUDY - Apple v. Samsung
→ exclude Samsung’s GALAXY brand from the market:
“losing is NOT an option”
→ 100% aggressive offensive strategy
[patents-trademarks-designs …]
→ exclusion of GALAXY from USA and EU market =
obliteration
Portfolio: Defensive Strategy
guarantees FTO for processes and products BP
patents block others from patenting
discourages others from entering the field
CASE STUDY - P&G v. K-C
Disposable diaper “technology”
Feature oriented: EWB
P&G FTO check
Althouse patent purchased = defensive strategy
K-C Patent infringement attack = offensive strategy
Portfolio: Transactional Strategy
Revenue generation BP :
sale of IP assets
licensing in / out
spin-offs etc
Joint ventures
Optimization of Transfer Payments BP
CASE STUDY - DuPONT Strategy
transactional strategy
→ litigate for $$$
→ force licenses
→ sell unused patents
= monetization of idle assets
IP Portfolio Management
IP Management
(Economic Benefit Creation)
IP Administration
(Patent Asset Creation)
Innovation Patent Prosecution Monetization
-Filing
-Prosecution
-Maintenance
-Research
-Product Development
Activities:
-Portfolio Management
-Integration of IP into Business Strategy
-Value Maximization of IP
Offensive, Defensive and Transactional re-investment
Portfolio of IP
Monetization
"There are countless patents that are promising but
sitting idle, stowed in the corporate file room. In fact,
about 90 percent to 95 percent of all patents are
unused…”
Monetization
• PART I What…
• Monetization: what is it?
• PART II When…
• Monetization: When do you do it?
• PART III How…
• Monetization: How do you do it?
PART III Monetization: How?
Basic Techniques
• Sale • Outright [not core to business]
• Sale and license back [core to assignee]
• Sale and structured payments [cash flow]
• License • Non-exclusive [flexible]
• Exclusive [right to sue]
• Cross-license [defensive pooling]
David Aylen Gowlings RUSSIA / CIS
PART III Monetization: How?
Basic Techniques
• Litigation • Infringement action
• Judgment or settlement
• Monetary damages or royalties
• Securitization • Pledge to bank or lender
• In return for cash
• Donation • Tax deduction
David Aylen Gowlings RUSSIA / CIS
PART III Monetization: How?
Advanced Techniques
• Patent Licensing and Enforcement co.’s [non operating; strategic cease and desist and infringement actions; license driven;
inventor assist or trolls]
• Patent Pools [defensive; anti-troll; amongst operating co’s; their patents and third party in the pool]
• Patent Aggregators [defensive; anti-troll; not operating co. / NPE non practicing entity]
PART III Monetization: How?
Advanced Techniques
• IP Tech Development co.’s [R&D based; patent and know how licensing; specialty areas biotech, internet;
wireless…]
• University Tech Transfer [Collegiate IP development co ; university or independent]
• IP Auction Houses [urgency; closure; liquidity; price; transparency v. secrecy; networking]
• On-line IP Exchanges / Clearing Houses [E-bay / Craigslist for IP ;members only or public access]
PART III Monetization: How?
Advanced Techniques
• IP Backed financiers and Securitization Firms [debt financing by specialists; or mortgage approach with license back]
• Risk-management i.e. insurance [assignment of patent to insurer; value = prepaid premiums; tax deductible; license
back]
• Technology Spin-outs [spin-out from tech company; non-core; stranded in tech co.; sell off or becomes lic.
Co]
• Patent Brokers [sale or license;”real estate agents”; finding buyers/sellers;commission; quality]
PART III Monetization: How?
Valuation $$$
• How do you value a patent?
• GAAP forbid companies from booking patents generated
internally on the balance sheets as assets
• Patent valuation = expert area
[patent attorney + economist + finance]
PART III Monetization: How?
Valuation $$$
• Some techniques
• Discounted cash flow methods for inventions with clear revenue streams
ie licenses
• Litigated patents (what awards)
• Citation frequency (how often cited in patent office)
• Maintenance fee history (how old)
PART III Monetization: How?
WHO ARE ALL THE PLAYERS?
Manufacturers
Customers Customers
Brand Owners
Suppliers
TROLLS (pat. acquisitions &
licenses)
Universities
&
Research Institutes (patent licenses & sales)
Brand 1 Brand 2
cross licenses; pooling; patent sales
enforcement
cross licenses; pooling; patent sales
enforcement
Lic
en
ses
Supplier Type 1
cross licenses; pooling; patent sales
enforcement
Patents in a Disaggregated Modern Economy
Type 2 Type 3
Financiers (patent due diligence & valuation)
Bankruptcy Trustees
(patent due diligence; valuation;
license; sale; enforcement
patent collateral
M&A’s (patent due diligence
& valuation)
Thank You
montréal ottawa toronto hamilton waterloo region calgary vancouver beijing moscow london
David Aylen Moscow Managing Partner [email protected]