Capitalizing on Your Intellectual Capital

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Part of the MaRS Entrepreneurship 101 series.
http://www.marsdd.com/ent101

This presentation will take you through the maze of intellectual property law, introduce you to some common principles, and dispel some myths and misconceptions, relating to patents, trade secrets, copyright and trademarks. At the same time, we will discuss some real life scenarios around protecting and commercializing intellectual property.

This is also available as an audio presentation here:
http://blog.marsdd.com/2007/01/31/entrepreneurship-101-exploiting-your-intellectual-capital/

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Capitalizing on Your Intellectual Capital

  1. 1. Capitalizing on Your Intellectual Capital Entrepreneurship 101 Lecture Series MaRS Discovery District Tuesday, January 30, 2007 Arshia Tabrizi, Esq. B.A.Sc.Computer Eng. (Hon), Juris Doctor Member of California and Ontario Bars Tabrizi Law Office Professional Corporation
  2. 2. Tabrizi Law Office Overview Intellectual Property (IP) ! ! IP Strategy ! Forms of IP ! IP Licensing ! Q&A 1/31/07 Copyright 2006-2007, Tabrizi Law Office. All 2 Rights Reserved.
  3. 3. Tabrizi Law Office Intellectual Capital Intellectual capital = intangible assets ! ! Ideas:e.g. algorithm for gene sequencing ! Know-how: e.g. manufacturing process ! Branding: e.g. Google, drug names Innovation = ! “Protecting + Exploiting Intellectual Capital” 1/31/07 Copyright 2006-2007, Tabrizi Law Office. All 3 Rights Reserved.
  4. 4. Tabrizi Law Office Intellectual Property Protect intellectual capital: ! Rights through: ! Use, Creation, Registration ! Contracts ! Enforcement ! Exploit intellectual capital: ! Sales (product) ! Licensing agreements ! Strategic Alliances ! Mergers & Acquisitions ! 1/31/07 Copyright 2006-2007, Tabrizi Law Office. All 4 Rights Reserved.
  5. 5. Tabrizi Law Office Intellectual Property Right to use ! Sometimes you may “assume” you have the proper ! rights to use your intellectual capital: e.g.: contract for software developed by consultants ! e.g.: Infringement on a third party patent ! Right to exclude ! Even if you have the freedom to use, can you prevent ! others from using your intellectual capital: e.g.: registration of a patent prevents competitors from using or ! practicing your invention 1/31/07 Copyright 2006-2007, Tabrizi Law Office. All 5 Rights Reserved.
  6. 6. Tabrizi Law Office Intellectual Property Patents ! ! Strongest form of protection for “ideas” Trade Secrets ! ! Alternative to patent protection Copyright ! ! Expression of idea Trademarks ! ! Branding, market recognition 1/31/07 Copyright 2006-2007, Tabrizi Law Office. All 6 Rights Reserved.
  7. 7. Tabrizi Law Office IP Strategy IP Strategy as integrated business function: ! What does a knowledge-based enterprise do? ! “Protect and Exploit Intellectual Capital” IP Strategy is at heart of any knowledge enterprise ! Not an independent function or afterthought ! IP team ! Engineers, scientists, sales, managers, lawyers ! 1/31/07 Copyright 2006-2007, Tabrizi Law Office. All 7 Rights Reserved.
  8. 8. Tabrizi Law Office IP Strategy This “is” your business plan! ! On-going process of assessing intellectual capital: ! Competitive value, market differentiator 1. Market research (your friends at MaRS) ! IP Assessment (patent search) ! Potential applications 2. Productizing your intellectual capital ! Potential customers/ revenue 3. Exploitation strategy 4. Result of 2 and 3; license, partner, sell ! OR use it as an “internal differentiator” ! e.g. manufacturing process, business methodology ! 1/31/07 Copyright 2006-2007, Tabrizi Law Office. All 8 Rights Reserved.
  9. 9. Tabrizi Law Office IP Strategy Protect intellectual capital: ! Legal protection available? ! Lawyer; forms of intellectual property protection ! Legal protection desirable? ! Intellectual property strategy ! Which forms do I pursue and exploit ! Do I “share” the information (e.g. open source, standards) share” ! Cost of protection ! Some forms of IP are more expensive (patents) ! R&D strategy ! Partnering: option on results of research (license) ! Internal development: broad/narrow patenting, industries ! Business strategy ! License, partner, funding, bootstrap, offensive patents ! 1/31/07 Copyright 2006-2007, Tabrizi Law Office. All 9 Rights Reserved.
  10. 10. Tabrizi Law Office IP Strategy Self-maintained monopoly: ! Self-enforcement ! Big Brother not always there ! Risk of losing rights ! By not taking proper actions ! Elements of IP rights maintenance: ! Government registrations and filings ! Contractual measures ! Monitoring infringement ! Reverse engineering competitor products ! Enforcement of rights ! International, budget, results ! 1/31/07 Copyright 2006-2007, Tabrizi Law Office. All 10 Rights Reserved.
  11. 11. Tabrizi Law Office Patents Strongest form of IP protection: ! Exclusive rights over inventions (ideas) ! 20 year monopoly from filing ! What can be patented: ! Patentable subject-matter: ! Product, process, machine, composition of matter ! Not scientific principles or formulae ! Created problems for software patents ! Not methods of medical treatment ! 1/31/07 Copyright 2006-2007, Tabrizi Law Office. All 11 Rights Reserved.
  12. 12. Tabrizi Law Office Patents Legal test for patentability: ! New (prior art and patents) 1. Not Obvious (skilled person in art) 2. Useful (functional and industrial utility) 3. Filing: ! Patent database search ! First to file system ! Not first to invent; file provisional early ! 1 year grace period for publication ! University academic research ! 1/31/07 Copyright 2006-2007, Tabrizi Law Office. All 12 Rights Reserved.
  13. 13. Tabrizi Law Office Patents Patents are valuable: ! ! Exclude competitors ! Secure market before selling into market ! Venture funding ! Generate royalties Patents are costly: ! ! $10-100 K to secure a patent ! 2-5 years from filing to registration 1/31/07 Copyright 2006-2007, Tabrizi Law Office. All 13 Rights Reserved.
  14. 14. Tabrizi Law Office Patents Patents must fit with business strategy: ! Offensive 1. Exclude a competitor from a broad market segment ! NTP v. RIM ! Potential royalties (e.g. Qualcomm) ! Industry (biotech, hardware, software) ! Defensive 2. Freedom of action (i.e. right to use) ! Collateral for cross-licensing with competitors ! Large companies arms’ race ! Microsoft target of 3,000 patent filings each year ! 1/31/07 Copyright 2006-2007, Tabrizi Law Office. All 14 Rights Reserved.
  15. 15. Tabrizi Law Office Patents Only 5% of patents issued have any value ! Disadvantages of patents: ! Patents can be challenged (registration not validity) ! Patents (claims) can be worked around ! Scope if key ! Monitoring can be costly ! Infringement can be hard to detect ! Disclosure and lack of secrecy ! Value dependent on threat of lawsuit ! Lawsuit may expose invalidity ! 1/31/07 Copyright 2006-2007, Tabrizi Law Office. All 15 Rights Reserved.
  16. 16. Tabrizi Law Office Trade Secrets Proprietary ideas and know-how ! Protect by keeping secret: ! Security measures ! Employment agreements, policies ! May lose rights if “lazy” ! NDA (non-disclosure agreements): ! Maybe first legal document ! Large company forms pitfalls ! Disclose trade secrets in confidence ! Employees, consultants, customers/partners, investors ! Pending patent filing ! 1/31/07 Copyright 2006-2007, Tabrizi Law Office. All 16 Rights Reserved.
  17. 17. Tabrizi Law Office Trade Secrets Advantages over patents ! ! Complete secrecy and no need to disclose ! Unlimited period of protection unless public Disadvantages versus patents ! ! No protection against reverse engineering ! No protection against independent creation National Bureau for Economic Research ! ! Patents less effective than trade secrets 1/31/07 Copyright 2006-2007, Tabrizi Law Office. All 17 Rights Reserved.
  18. 18. Tabrizi Law Office Copyright Protects category of “works”: ! Literary, dramatic, musical, artistic ! Computer programs (source/object code) ! Most important form of IP in software/IT ! Author is the owner of work ! Exclusive right to copy and perform the work ! Employees and consultants need contracts ! Life of author plus 50 years ! Industries ! Software, Internet, music, content ! Google library, YouTube, P2P music sharing ! 1/31/07 Copyright 2006-2007, Tabrizi Law Office. All 18 Rights Reserved.
  19. 19. Tabrizi Law Office IP Licensing IP Licensing = Exploiting Intellectual Capital ! $45 billion licensing revenue in U.S. ! $100+ billion worldwide ! Small companies dependent on out-licensing ! Key revenue generating contracts ! Key relationship management ! On-going obligations (support, updates, R&D) ! Specialized counsel IP & corporate/commercial ! 1/31/07 Copyright 2006-2007, Tabrizi Law Office. All 19 Rights Reserved.
  20. 20. Tabrizi Law Office IP Licensing Most commercial agreements in knowledge- ! based industries are IP licensing agreements: Software license ! Microsoft Word, OEM/Distribution ! R&D or Co-development agreement ! Biotech start-up with pharma (license, funding) ! Technology license ! IP Core license to ASIC manufacturer ! Trademark license ! Internet co-branding deal ! Content license ! License of sitcom to TV channel ! 1/31/07 Copyright 2006-2007, Tabrizi Law Office. All 20 Rights Reserved.
  21. 21. IP Licensing Elements of licensing agreement ! ! Intellectual property ownership ! Right to use intellectual property ! Payment terms ! Royalties, license fees, consulting fees ! Warranties ! Liability of parties ! Termination 1/31/07 Copyright 2006-2007, Tabrizi Law Office. All 21 Rights Reserved.
  22. 22. Tabrizi Law Office IP Licensing Strategic Alliances ! quot;Technology # Large companies position for future developments ! Licensing a patent, technology or software ! Standards development (patent pooling arrangements) ! Money 2. Selling or licensing a product and generating revenue ! Funding your R&D with a larger partner/investor ! Customers 3. Access to new markets via distribution/manufacturing ! 1/31/07 Copyright 2006-2007, Tabrizi Law Office. All 22 Rights Reserved.
  23. 23. Tabrizi Law Office Conclusion quot; Your Business = # Capitalizing on Intellectual Capital ! ! Protect intellectual capital ! Exploit intellectual capital $# Your Business = Intellectual Property Strategy ! ! Registration, Contracts (Protect) ! Licensing, Alliances (Exploit) %# Advisory Group ! MaRS Team ! Legal counsel 1/31/07 Copyright 2006-2007, Tabrizi Law Office. All 23 Rights Reserved.
  24. 24. Q&A Tabrizi Law Office Professional Corporation 30 Kern Road, Suite 103 Toronto, Ontario M3B 1T1, Canada T.416.444.9300 F.416.444.9343 www.tabrizilaw.com 1/31/07 Copyright 2006-2007, Tabrizi Law Office. All 24 Rights Reserved.

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