Patent Monetization_David Aylen


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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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Patent Monetization_David Aylen

  1. 1. PATENT MONETIZATIONDavid AylenGowlings Moscow
  2. 2. 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?
  3. 3. 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?
  4. 4. 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
  5. 5. 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?
  6. 6. 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
  7. 7. Monetization Multi-step process
  8. 8. Monetization FIRST: Portfolio Management of IP THEN: Monetization of IP
  9. 9. MonetizationPORTFOLIO 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
  10. 10. Portfolio Management: Identify all IP Rights WHAT HOW ** DURATION• software 70 yrs• lists/data copyright• designs•brands: indefinite• words• designs trademark• sounds•machines 20 yrs•pharma•nanoscience patent•chemistry•electronics•shapes 15-25 yrs industrial design•special info indefinite trade secret
  11. 11. Portfolio Management: Audit and Categorization KNOW HOW Marketing Information of any type that has been maintained confidential and is not independently known and disclosed elsewhere and has commercial value New & useful apparatus, Software Scientific trial data Manual, General knowledge, Brands processes, chemical Databases Research Material Procedures, Undefined KH skill, expertise of compositions, designs Int. Circuits Raw Data Charts, Plans employee workforce Advertising Patents Copyright & Confidential KH Copyright &Applications are Utility models Confidential Info Confidential Trademarks published Industrial Unpatentable Info. Copyright designs - registrable (some countries) Unregistrable no reg. required - partially confidential can be registered Up to 20 years (some countries) exclusivity by country or region Protectable if kept Protectable from confidential “copying” Not Protectable Offensive Defensive Not Assignable Transactional Strategy Strategy Maintaining Secret Helps
  12. 12. Portfolio ManagementPatents
  13. 13. Useful ??
  14. 14. 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 compa [defensive] ? • IP not needed [transactional]
  15. 15. Portfolio: Offensive Strategy targeted at competition blocks manufacturing processes and product features preserves market leader position BP
  16. 16. 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
  17. 17. Portfolio: Defensive Strategy guarantees FTO for processes and products BP patents block others from patenting discourages others from entering the field
  18. 18. 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
  19. 19. Portfolio: Transactional Strategy Revenue generation BP :  sale of IP assets  licensing in / out  spin-offs etc Joint ventures Optimization of Transfer Payments BP
  20. 20. CASE STUDY - DuPONT Strategy transactional strategy → litigate for $$$ → force licenses → sell unused patents = monetization of idle assets
  21. 21. IP Portfolio Management IP Administration IP Management (Patent Asset Creation) (Economic Benefit Creation) Innovation Patent Prosecution Portfolio of IP Monetization Activities:-Research -Filing -Portfolio Management-Product Development -Prosecution -Integration of IP into Business Strategy -Maintenance -Value Maximization of IP Offensive, Defensive and Transactional re-investment
  22. 22. 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…”
  23. 23. 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?
  24. 24. 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
  25. 25. 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
  26. 26. 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]
  27. 27. 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]
  28. 28. 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]
  29. 29. 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]
  30. 30. 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)
  31. 31. PART III Monetization: How? WHO ARE ALL THE PLAYERS?
  32. 32. Customers Customers Bankruptcy Trustees TROLLS (patent due diligence; valuation; license; sale; enforcement (pat. acquisitions & Brand Owners Brand 1 Brand 2 licenses) cross licenses; pooling; patent sales enforcement patent collateral Universities & FinanciersResearch Institutes Manufacturers (patent due diligence & valuation)(patent licenses & sales) cross licenses; pooling; patent sales Licenses enforcement Suppliers Supplier Type 1 Type 2 Type 3 cross licenses; pooling; patent sales (patent due diligence M&A’s & valuation) enforcement Patents in a Disaggregated Modern Economy
  33. 33. Thank You David Aylen Moscow Managing Partner david.aylen@gowlings.commontréal  ottawa  toronto  hamilton  waterloo region  calgary vancouver  beijing  moscow  london