Are Patents Promoting Product Innovation? The Role of IP Strategy in the Global Marketplace
 

Are Patents Promoting Product Innovation? The Role of IP Strategy in the Global Marketplace

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Foresight President Efrat Kasznik gave a presentation titled “Are Patents Promoting Product Innovation? The Role of IP Strategy in the Global Marketplace” at the Product Management Event 2013 in ...

Foresight President Efrat Kasznik gave a presentation titled “Are Patents Promoting Product Innovation? The Role of IP Strategy in the Global Marketplace” at the Product Management Event 2013 in San Francisco on March 4th, 2013.

Many of the attendees at the session asked for a copy of our slide deck, so we have attached the embedded presentation.

Are Patents Promoting Product Innovation? The Role of IP Strategy in the Global Marketplace from Foresight Valuation Group

Incorporate a successful IP strategy to enhance your product management process

· Align your IP portfolio with your product strategy and corporate vision

· Maximize the offensive and defensive value of your IP as it relates to your products and industry

· Accelerate product development through ‘open innovation’ by optimizing the inflow and outflow of knowledge

· Implement tools and best practices for managing product innovation activities from R&D to market across your organization

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  • http://www.faqs.org/patents/assignee/tesla-motors-inc/
  • The trolls chasing the birds
  •  250,000 Active Patents That Impact SmartphonesThere are roughly 40,000 new software patents issued each year — and the rate of issuance is growing over time.http://www.npr.org/blogs/money/2012/04/27/151357127/another-ridiculous-number-from-the-patent-wars
  •  250,000 Active Patents That Impact SmartphonesThere are roughly 40,000 new software patents issued each year — and the rate of issuance is growing over time.http://www.npr.org/blogs/money/2012/04/27/151357127/another-ridiculous-number-from-the-patent-warshttp://ip-science.thomsonreuters.com/m/pdfs/iphone-report.pdf
  • Update/change
  • Update/change
  • Xerox PARC: Kodak: Point of R&D, patenting: which to patent, what others have already patented
  • 1979 – xerox PARC decided not to patent its invention of the GUI (graphical user interface) that later formed basis of Apple’s mac and Microsoft’s windows personal computer OS. Xerox had gone so far to write patent applications for some of its GUI technologies but decided not to proceed with its filings.Management (copier guys) didn’t see much of a business in what was then a small market for PCsXerox still should have viewed GUI research as corporate assets of potentially great value – if not to itself then to othersHad Xerox patented the GUI, even at 1% royalty rate on sales, license fees Xerox could have eared from 84-98 from mac and windows sales would have topped half a billion dollars.Xerox was a sleeping giant in terms of exploiting its IP – 8k patents in 97 but no one in company knew precisely how many of the patents had significant commercial or strategic value.Xerox also didn’t take advantage of its IP, even in 97 they only earned 8.5M in patent license royalties (1k per patent vs IBM’s 75k per patent of their 15k patents) .Recruited new CEO hired speficially to restructure program at xerox to help push earnings growth back into double digits. Formed Xerox IP operations – hired company’s first VP of IP – developed active patent licensing program, a more IP savvy R&D effort, and active anti infringement campaign“systematic mining of patent portfolio for opportunities” – Xerox’s strategy for proactive and aggressive effort to generate revenue from patentsIf you only use your patents to protect your products, you’re missing all manngers of revenue generating and other opportunities”
  • 1960s-Kodak engaged in small scale R&D to develop cameras and film for instant photography market (dominated by Polaroid, a company with 1/10 of Kodak’s $10B in sales) Research failed to yield profitable products to compete with Polaroid, Kodak abandoned projectLate 1960s- Polaroid instant camera sales exploded – represented 15% of all US camera purchases – Kodak’s president became obsessed with getting market share1969- Kodak launched renewed R&D program “project 130” to develop instant cameras and films- its managers knew of potential infringement dangers – hired law firm to advise R&D – told technical staff they “should not be constrained by what an individual feels is potential patent infringement” – this statement came back to haunt Kodak in court1976- Kodak launched its new line of instant cameras and films – largest advertising campaign in history of consumer photo business – 7 days later Polaroid responded with lawsuit1990 – lawsuit resolved and Kodak ordered to pay damagesFlaw in strategy – didn’t focus on designing around Polaroid patent and developing more advanced inventions – focused on whether or not if pursued in court that the Polaroid patents would be ruled invalid or not.
  • Old ugly honeywell touCh pad old vs new – highlight disruptive nature
  • http://searchsoa.techtarget.com/feature/Open-source-licenses-explained-caveats-and-comparisons

Are Patents Promoting Product Innovation? The Role of IP Strategy in the Global Marketplace Are Patents Promoting Product Innovation? The Role of IP Strategy in the Global Marketplace Presentation Transcript

  • ARE PATENTS PROMOTINGPRODUCT INNOVATION?THE ROLE OF IP STRATEGYIN THE GLOBAL MARKETPLACE‘ The Product Management Event 2013 March 4-5, 2013, San Francisco Efrat Kasznik, Founder & President Foresight Valuation Group, LLC
  • The Patent Dilemma…Foresight Valuation Group © 2013
  • About Me: Efrat Kasznik  Founder and President, Foresight Valuation Group (Palo Alto, CA), a Silicon-Valley based intellectual property, valuation and start-up advisory firm.  Lecturer on IP Strategy, Stanford Graduate School of Business (MBA class)  Licensing Executives Society (LES), High Tech Sector - Leadership Committee; Chair, Nanotechnology Committee  Intellectual property (IP) valuation and strategy expert, with 20 years of experience analyzing IP portfolios for mergers & acquisitions, financial reporting, technology commercialization decisions, tax compliance, transfer pricing, litigation damages and business liquidations.  Work with corporate clients across industries, from Fortune 100 to start-ups, as well as law firms, universities, research institutions, inventors, IP brokers and patent funds.  Co-founder, CFO and adviser to startups in the fields of telecom, media, cleantech and healthcare.Foresight Valuation Group © 2013
  • Outline  Products and IP  IP Marketplace Overview  IP Strategy in Product Lifecycle  Case Studies  IP Best Practices in Product InnovationForesight Valuation Group © 2013
  • Types of IP Patents Copyrights Trade Trademarks SecretsForesight Valuation Group © 2013
  • IP in Consumer Products Copyrights Trade Trademarks Secrets PatentsForesight Valuation Group © 2013
  • IP in Digital Products Patents Trademarks Copyrights Angry Birds Trade SecretsForesight Valuation Group © 2013
  • Comparison of IP Rights Type Definition Criteria Life Example Copyrights Original works of Automatic protection Author‟s life authorship: literary, + 70 years dramatic, musical, artistic, etc Trademark Word, name, Unregistered (first to use No s symbol, device – common law), or expiration used in trade to registered with USPTO as long as distinguish goods. used commerciall y Trade Business No need to show novelty, Indefinite Secrets items/info: or disclose publicly; need 1. Economic to take measures to keep value confidential (stamp, lock 2. Kept up) confidential Patents Right to exclude Novel, Non-obvious, 20 years others from Clearly described; from filing making, using or Granted by the USPTOForesight Valuation Group © 2013 products selling covered by
  • 250k Patents Going into Smartphones Design Patents Ex. „slide to unlock‟ feature Rounded square icons Utility Patents Ex. Enlarging documents by tapping screen Single touch and multi touch gestures „pinch to zoom‟Foresight Valuation Group © 2013
  • The State of IP in Mobile DevicesForesight Valuation Group © 2013
  • Outline  Products and IP  IP Marketplace Overview  IP Strategy in Product Lifecycle  Case Studies  IP Best Practices in Product InnovationForesight Valuation Group © 2013
  • The Mobile Patent Wars Source: The Guardian and New York TimesForesight Valuation Group © 2013
  • Mobile Market Patent Activity Redistribution of IP holdings through Land-grab and Turf-wars…  Global Litigation  Globalcourt battles: Apple-Samsung (2011)  Non-Practicing Entity (NPE=”Troll”) litigation: NTP-RIM $612.5 MM in damages (2006)  Multi-billion Dollar IP-driven Transactions  Patent acquisitions: Nortel patent auction (2011)  Company Acquisitions: Google/Motorola mobility (2011)Foresight Valuation Group © 2013
  • Multi-Billion Dollar Deals Involving IP Apple, Microsoft, Google, the losing bidder Research in Motion, EMC, in the Nortel auction, Ericsson, and Sony announced the $12.5 joined together in a billion acquisition of consortium to win an Motorola Mobility, whose auction for the 6,000 IP portfolio includes patents of the bankrupt 17,000 issued patents Nortel at a price of $4.5 and 7,500 patent billion. applications. June 2011 Aug 2011Foresight Valuation Group © 2013
  • A “Perfect Storm” in the IP Marketplace IP MarketplaceForesight Valuation Group © 2013
  • US Patent & Trademark Office (USPTO) By The Numbers - 2012 Over 350,000 6,700 patent patent applications examiners filed annually Patent prosecution 16 hours of fees can exceed examination time per patent $25,000Foresight Valuation Group © 2013
  • USPTO Pendency and Backlog Increase Pendency time is close to three years… … while application backlog is around 700,000Foresight Valuation Group © 2013
  • More than 2,500 Patent Suits Filed Annually Since 2001 Source: Northwestern Law, Searle CenterForesight Valuation Group © 2013
  • The New Patent Marketplace in 21st Century – Rise of the Intermediaries Enforcement (Litigation) IP Creators IP Users - Operating Companies - Operating Companies - Independent Inventors Patent - Others - Universities Sales/licensing - Research Institutions - Gov’t labs Cross Licensing Intermediaries: •Non-practicing entities (NPEs) •Patent Funds/Aggregators (Intellectual Ventures) •Market Makers (Auctions, patent exchange) •Financial services (securitization, litigation finance)Foresight Valuation Group © 2013
  • Troll Litigation is a Serious Problem! “This year, about 61% of all patent lawsuits filed through December 1 were brought by patent- assertion entities, as compared to 45% in 2011 and 23% five years ago” Source: Patent Troll Cases Now Dominated by “Trolls”, Study by Colleen Chien, Reuters, December 10, 2012Foresight Valuation Group © 2013
  • Startups Most Litigated by Patent Trolls Companies with less At least 55% of than $100MM annual unique defendants in revenue represent at Patent Troll lawsuits least 66% of Patent make under $10MM Trolls* defendants per year * Patent trolls, also known as Non-practicing Entities (NPEs) are companies engaged in holding patents for purposes of enforcing them in the marketplace against operating companies, in the form of licensing or litigation Source: Startups and Patent Trolls, Colleen Chien, Santa Clara University School of Law, Legal Studies Research Paper Series, September 2012Foresight Valuation Group © 2013
  • America Invents Act (AIA) Highlights Represents the most significant overhaul to the US patent system since 1952.  Main Changes include:  US moves from First to Invent to a First to File system (Section 102) – aligns the US with the rest of the world –Effective March 16, 2013  Post-Grant Review process for Business Method Patents at the USPTO (Section 18)  Joinder of parties >> Bars plaintiffs from suing multiple defendants (Section 299)  End of False Marking Claims (Section 16(b))Foresight Valuation Group © 2013
  • Outline  Products and IP  IP Marketplace Overview  IP Strategy in Product Lifecycle  Case Studies  IP Best Practices in Product InnovationForesight Valuation Group © 2013
  • IP Strategy Throughout the Product Lifecycle Developing IP Position Portfolio liquidation Portfolio commercialization & monetizationForesight Valuation Group © 2013
  • IP Strategy – New Product Goals: • Freedom to operate • Block competitors • Support future products • Hedge against litigation Developing IP PositionForesight Valuation Group © 2013
  • Sources of Product IP Tech Transfer Internal R&D Manufacturing Marketing Sources of outside innovation: •In-licensing (companies, universities) •Buying start-ups, competitors •Universities, research institutions •Collaborative R&D outfits (Xerox PARC)Foresight Valuation Group © 2013
  • The Open Innovation Movement What is open innovation? “Open innovation is a paradigm that assumes that firms can and should use external ideas as well as internal ideas, and internal and external paths to market, as the firms look to advance their technology” - Henry Chesbrough, Center for Open Innovation at the University of California, Berkeley Chesborugh ©Foresight Valuation Group © 2013
  • Outline  Products and IP  IP Marketplace Overview  IP Strategy in Product Lifecycle  Case Studies  IP Best Practices in Product InnovationForesight Valuation Group © 2013
  • Product IP Strategy Scenarios  IP strategy can determine a product’s success, market share, and profitability  Freedom to operate  Block competitors  Support future products  Hedge against litigation  Attract buyers, investors  Case studies demonstrate that a failure to properly address IP issues can result in loss of market share, margin erosion, and reduced market competitivenessForesight Valuation Group © 2013
  • Support Future Products: Xerox PARC Product: Graphical User Interface (GUIOverview: In 1979, Xerox‟s PARC (Palo Alto Research Center) decidednot to patent its invention of the GUI because Xerox management didn‟tsee value or business in then small PC market. Xerox had written patentapplications for some of its GUI technologies but decided not to proceedwith its filings.Outcome: A loss in potential revenues - had Xerox patented the GUI,even at 1% royalty rate on sales, license fees Xerox could have earedfrom 84-98 from Mac and windows sales would have topped half a billiondollars. Insight: Failure to patent results of innovative research can lead to huge financial and strategic losses.Foresight Valuation Group © 2013
  • Freedom to Operate: Polaroid and Kodak Product: Instant Camera Overview: Kodak launched “Project 130” to develop instant cameras and films – going after Polaroid‟s patented innovation. Kodak was aware of potential infringement dangers, since Polaroid was fanatical about surrounding its products with patents, but went ahead with its R&D strategy. Outcome: Kodak found to have infringed on seven of twelve Polaroid instant photography patents and ordered to pay $925M in damages to Polaroid. Total cost - $3B (700 employees layoff, $1.5B manufacturing plant, $500M buyback cost of 16M instant cameras, and$100M legal fees). Insight: Kodak‟s patent strategy focused on having Polaroid‟s patents ruled invalid if challenged in court instead of designing around the patents and developing more advanced inventions of their own.Foresight Valuation Group © 2013
  • Hedge Against Litigation: Honeywell Int. vs. Nest Labs, Inc. Product: Home Thermostat Overview: Honeywell filed a multi-patent infringement lawsuit against Nest Labs for allegedly infringing on seven Honeywell patents – sought cease and desist order and collection of damages – not licensing fees. Outcome: Nest filed for reexamination of Honeywell‟s patents. Insight: Companies can no longer concern themselves with being innovative – they must plan for litigation from other competitors in similar markets (particularly startups and large incumbents)Foresight Valuation Group © 2013
  • Block Competitors: Lululemon vs. Calvin Klein Product: Yoga pants Overview: Lululemon sued CK for allegedly infringing design patents for its “Astro” yoga pants‟ signature waistband and design Outcome: Lululemon has withdrawn lawsuit filing after companies agreed on confidential settlement. Insight: The importance of design patentsForesight Valuation Group © 2013
  • Outline  Products and IP  IP Marketplace Overview  IP Strategy in Product Lifecycle  Case Studies  IP Best Practices in Product InnovationForesight Valuation Group © 2013
  • Elements of IP Strategy Offensive: Enforcement/monetizatio Internal n R&D Buying (filing IP patents) (patent s, In- tradem licensin arks) Defensive: g Product centered (university, governmen t labs) Sources of IP IP Strategy GoalsForesight Valuation Group © 2013
  • IP Strategy Throughout the Product Lifecycle Developing IP position Portfolio liquidation Portfolio commercialization & monetizationForesight Valuation Group © 2013
  • IP Strategy – New Product Goals: • Freedom to operate • Block competitors • Support future products • Hedge against litigation • Attract buyers, investors Sources of IP: • Internal R&D  filing patents • Buying patents • In-licensing (university, government labs, etc) Developing IP positionForesight Valuation Group © 2013
  • IP Best Practices: Later Phase  Defensive Goals – Manage Litigation Exposure  Don‟t panic! Be Prepared…  Assess your options, use litigation data - not only legal analysis (prob. of success, anticipated damages, etc)  Mitigate the risk (patent defense funds) – be proactive!  Offensive Goals – Enforcement & Monetization  Be ready to enforce your IP  Monetize your portfolio regularly  Manage royalty, maintenance paymentsForesight Valuation Group © 2013
  • Strong IP Portfolio Supports Later Phases Use Internally License Sale Joint Venture/Spin Off Enforcement Portfolio commercialization & Portfolio liquidation monetizationForesight Valuation Group © 2013
  • Patent Licensing Scenarios Invention Paten Patent t Pool Infringement Royalties & >> Lawsuit Licensing $$Foresight Valuation Group © 2013
  • Is Your Industry the Next Litigation Battleground? Attribute Characteristics Mobile Your Industry ? Market Size Explosive Market, large economic stakes  ?? Products/ Multiple features in one product  ?? Services Multiple layers of Services in Platform IP Patent thicket – overlapping claims  ?? Landscape Business method patents – broad claims  ?? Competitive Incumbents with large IP holdings  ?? Dynamics Newcomers entering markets without IP  ?? NPE (trolls) patent holders  ??Foresight Valuation Group © 2013
  • About Foresight Valuation Group We Are Foresight Valuation Group, LLC (FVG) is a Silicon-Valley based intellectual property (IP) consulting firm, providing high quality analytical services. We Provide A full suite of services designed to help our clients increase their bottom-line results through valuing, strategically managing and monetizing their IP assets.  IP Valuations  IP Strategy  Economic Analysis & Business Valuations  Litigation Support  Startup AdvisoryForesight Valuation Group © 2013
  • THANK YOU! Efrat Kasznik President, Foresight Valuation Groupekasznik@foresightvaluation.com www.linkedin.com/in/ekasznik 650-561-3374www.foresightvaluation.com Presentation available upon request