IP, licensing, & technology valuation

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The sixth presentation given in Minsk in preparation for the 2011 IT-Jump competition

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IP, licensing, & technology valuation

  1. 1. Intellectual Property,Licensing, and TechnologyValuation Marty Kaszubowski President, General Ideas
  2. 2. Intellectual PropertyTYPES OF INTELLECTUAL PROPERTY TYPES OF U.S. PATENTS• Patents: give monopoly on inventions, • Utility patents: cover useful items, ornamental designs, or plants structures, methods, or processes• Copyrights: protect rights in works of • Utility patents protect the authorship functional embodiment of an idea• Trademarks: function as indicator of • Utility patent gives owner the right source and quality to exclude others from practicing invention• Trade Secrets: confidential information that gives its owners a business • Design patents: cover ornamental advantage designs• Different IP Notices: Pat. Pending, ©, ™, • Plant patents: cover only asexually ® reproducing plants discovered in the wild (not wild plants that reproduce sexually or any genetically engineered plants)
  3. 3. Intellectual PropertyREQUIREMENTS FOR UTILITY PATENTS U.S. PATENT PROCESS• Inventorship: in U.S. only inventors may • Provisional Application: for utility file patent applications patents; optional but establishes priority date with U.S. Patent and• Novelty: invention must be new (not Trademark Office (“PTO”) covered by “prior art”) • Regular Application: must be filed• Non-obvious: invention cannot be an within one year after public disclosure obvious variation on prior art of invention or filing of provisional• Enabled: inventor must be able to application describe invention so that it could be built • Issued Utility Patent: provides 20 (but working model not required) years of protection from application• Utility: invention must be useful filing date• No statutory bars: for example, the “one year on-sale bar”
  4. 4. Licensing your technology• Licensing mean selling the rights to your technology to someone else …• In exchange you get: • Initial Payment ($) • Royalties ($$) • Opportunities to work on future projects & products • The right to “Take it back” if the other party fails
  5. 5. Why License? • You don’t have the resources needed to develop a product • You don’t have any relationship to the market(s) • You just don’t want to be a product company! • Your technology is more valuable when combined with someone else’s technology
  6. 6. What does it mean toput a “value” on your technology?
  7. 7. Why put a value on a technology?It’s the core asset of the company!You can’t license it until you know how valuable it is!It needs to be matured, and that costs money“Valuing” the technology helps establish the price youcharge for products and services that use the technologyWhen you sell the company, everyone will want to knowhow much value remains in the underlying technology
  8. 8. What IS the technology being “valued”?A “Technology" is usuallydescribed in terms of : A bundle of patents; Related technical trade secrets and proprietary technical know-how; Proprietary hardware/software required to make full use of the technology; and The business made possible by the practice of that comprehensive bundle of technology.
  9. 9. What factors affect the value?There are a number of factors affecting value: Nature, form, and stage of development of the technology Perceived technical risk Perceived commercial risk Economic impact and useful economic life Expected future advances in the field Transaction-specific details
  10. 10. Technology Readiness Levels1. Basic principles observed and reported.2. Technology concept and/or application formulated.3. Analytical and experimental critical function and/or characteristic proof of concept.4. Component and/or breadboard validation in laboratory environment.5. Component and/or breadboard validation in relevant environment.6. System/subsystem model or prototype demonstration in a relevant environment.7. System prototype demonstration in an operational environment.8. Actual system completed and qualified through test and demonstration.9. Actual system proven through successful long-term operations.
  11. 11. The value of technology increases as it matures! TRL 1-3 is basic research and is generally “marketed” to government agencies, major companies, and philanthropic organizations that seek to advance the state of the art. Ex: Sponsored research, “Science for hire” TRL 4-7 is technology demonstration and is “marketed” to early- adopters and strategic partners seeking early market advantages. Ex: Licensing agreements, sales of patent portfolio, joint venturing, pilot projects TRL 8-9 is technology application and product development and is marketed directly to end users. Ex: Product sales and marketing, full-scale manufacturing & support
  12. 12. Start gathering information … To do a proper technology valuation you’ll need:  Correct interpretations of patent claims and definition of what is unique and valuable.  The time remaining to practice the unique patent claims.  A “Concept Statement” for the product(s) you expect to develop.  Assessments of the markets for the product(s) you envision.  Financial models related to price, elasticity, demand, cost of manufacturing, costs-to-scale, etc.
  13. 13. Two QuestionsTo what extent does your technology make othertechnologies obsolete? Example: The automobile made the horse and buggy obsoleteTo what extent will your technology make currentmarketing & sales channels obsolete? Example: The people who sell automobiles are not the same people who sold horses and buggies
  14. 14. Other ExamplesNiche Innovations: Solid state Flash Drives did not make Hard Drives obsolete The people who sell Flash Drives do not sell Hard DrivesEvolutionary Innovations: 1 TB hard drives did make 100GB hard drives obsolete The people who sold 1GB drives also sell 1TB drivesRevolutionary Innovations: High Definition (digital) TV made analog TVs obsolete The people who sold analog TVs also sell digital TVs
  15. 15. The Transilience Map Makes sales & marketing channels obsolete Niche Architectural Automobiles Flash DrivesLeaves older MP3 Music Makes oldertechnologies technologies Digital Cameras viable obsolete High Capacity Hard Drives High Def.TV Evolutionary Revolutionary Retains existing sales & marketing channels
  16. 16. Value is a function of maturity and market potential Explosive Growth €$ Increasing Value Strong Market Potential Growth Slow Growth Stable Weakening Increasing Value Idea Stage Growing Mature Technology Maturity
  17. 17. Three Approaches to Valuing Technology “Values” the technology on the basis of what it Cost cost to create it Considers recent transactions involving transfer Market of ownership of similar technologies “Values” the technology as the “Present Worth” Income of projected economic benefits
  18. 18. Valuing based on CostAdvantages: Simple to do Easy for everyone to understandDisadvantages: Has little relationship to potential benefits Rarely considers opportunity costs
  19. 19. Valuing based on recent market activityAdvantages: Simple to do, if you can find the data … Easily understandableDisadvantages: Hard to find comparable transactions Every technology is unique, difficult to agree on comparisons
  20. 20. Valuing based on future earningAdvantages: Best captures the long-term value and full range of risks and benefitsDisadvantages: Difficult to create and agree on the financial model and associated assumptions Highly subjective, based on anticipated future revenues …
  21. 21. Don’t overanalyze!The size and growth potential ofyou market is a critical part ofassessing the value of yourtechnologyBut it’s an inexact science andcarriers much uncertainty.The most certain markets arethe ones that are already indecline …
  22. 22. Questions?

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