Drivers of Patent Licensing
IPR university center 6.5.2010
Antti Kosunen
Agenda
Drivers of Patent Licensing


  1        What Drives Patent Licensing


  2        Market Players


  3        Lice...
Intellectual Property – Growth and importance
                            Worldwide (cross-border) royalty and license
   ...
Success is Based on Several Factors and Single
Corporations Will Not Own All of Them




               IPR as        Inno...
Innovation + Effectively managed IPR = Shareholder value
                                Intellectual   Legally protectabl...
Patents Are a Currency of Negotiations



                                    Standards bodies
                           ...
Technology Patents = IT


    Competitive edge can seldom be achieved with Patents…often a
     must have, when certain s...
Power is Achieved with Patents
This will lead a growing number of companies to focus on and excelling
only in the core act...
Increase shareholder value
Change the reality and communicate it effectively

           Acquisitions                  Exi...
FINANCIAL USES OF PATENTS

            % of companies declaring “very important” factor for raising capital in total respo...
Decisive role of IPR became acknowledged but a
significant portion of its value still remains unextracted

   Intellectual...
European Patent Licensing – new players
Financial Services companies treating IP as an alternative asset:

- IP Bewertungs...
Licensing companies
Helping patent holders to monetize their assets, fighting large
corporations, increasing liquidity of ...
Licensing = Currency, Essense of Patents = Power

                                  Freedom to
                           ...
Stick licensing                  Friendly licensing               Tech tranfer




  You can get a lot farther      It i...
Licensing models
Totally different games
       Stick Licensing / Enforcement             Carrot licensing
            – S...
Licensing models

              Licensing and R&D partnerships / Innovation Capitalist
  Joint development – universities,...
IP / Business Strategy – what to do with it?
                       Large portfolios
                              Why not...
Patent Valuation Parameters

• Market driven - Reads on an interesting technology area
   – Huge
        • e.g. 802.11x
  ...
Patent sales – patent quality effects


• Well written spec and               • Poorly written spec and claim
  claim move...
Questions, please ask!




                 Feedback and questions always welcome!!
Page  21   Antti Kosunen      antti@l...
Antti Kosunen
Adding Shareholder Value
                                                 IPR Business Advisor

            ...
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Drivers of patent licensing antti kosunen

  1. 1. Drivers of Patent Licensing IPR university center 6.5.2010 Antti Kosunen
  2. 2. Agenda Drivers of Patent Licensing 1 What Drives Patent Licensing 2 Market Players 3 Licensing Models 4 Patent Valuations Page  2
  3. 3. Intellectual Property – Growth and importance Worldwide (cross-border) royalty and license receipts 120 100 80 60 40 20 0 1970 1975 1980 1985 1990 1995 2000 2005 (Billion USD; source: World Bank) Page  3
  4. 4. Success is Based on Several Factors and Single Corporations Will Not Own All of Them IPR as Innovation becomes more Currency distributed and patents become currency/negotiations power between the partners in innovation value chains and business operations Page  4
  5. 5. Innovation + Effectively managed IPR = Shareholder value Intellectual Legally protectable + Property = limited monopoly Rights Customer Business Need + Innovation = Opportunity Securing IPR = owning the business position Stephen Potter
  6. 6. Patents Are a Currency of Negotiations Standards bodies New entrants Competitors Supplier’s Customer’s Suppliers Organisation Customers suppliers customers Substitutes Stakeholders Page  6
  7. 7. Technology Patents = IT  Competitive edge can seldom be achieved with Patents…often a must have, when certain size has been achieved  Better use of patents, may give temporary competitive edge  Better patents may give temporary competitive edge =========================================== Business with bio/drug patents are totally different games with different rules Page  7
  8. 8. Power is Achieved with Patents This will lead a growing number of companies to focus on and excelling only in the core activities and to outsource the rest – often management of IPR and also parts of R&D.  Small companies will succed only when being agile and owning their IP Agility  IP may help them through mid size disaster. Major problem with large customers; ”unlimited liabilities” IP till you die Economies of scale  Large corporations will direct Control / liabilites ecosystems having strongest IP Master of the ecosystem controlling and enabling companies to ”serve” their needs Page  8
  9. 9. Increase shareholder value Change the reality and communicate it effectively Acquisitions Exit Company /Stock price  Buy the business before  Sell the company with the  Licensing profit P/E 4-5 * you buy the company business you own (Nasdaq) Increasing long term profitability and lowering risks = increasing shareholder value Page  9
  10. 10. FINANCIAL USES OF PATENTS % of companies declaring “very important” factor for raising capital in total responding companies Venture Private Stock Securitisation Negotiating loans Obtaining capital investors market public European companies subsidies All 18 21 11 6 9 8 <=250 employees 22 27 11 6 10 10 >250 employees 11 10 9 6 7 4 Foundation year <=1960 (174 companies) 7 5 8 8 7 7 >1960 and <=2000 (174 companies) 17 21 11 4 6 5 >2000 (128 companies) 31 38 13 6 14 13 No of companies responding 285 290 281 281 284 285 Convincing venture capitalists and private investors are the two most important; these are more important for smaller companies than for larger ones; The size factor seems to be less relevant than the age factor: younger companies, founded after 2000, give far higher importance to patents for raising funds than older ones OECD-EPO-TOKYO SURVEY 2009
  11. 11. Decisive role of IPR became acknowledged but a significant portion of its value still remains unextracted Intellectual Former CTO of Microsoft founded Intellectual Venture and raised $300 Ventures was the million to start the business. Now they have 12,000 patents and $5 billion first real one equity. And they are now returning profits to investors Imperfect markets and information asymmetries keep patent valuations Window of low. opportunity Better understanding of patents will create more liquid markets and increase prices. Increasing demand has also increased patent prices. Intangible assets’ Accounting standards; Profit impact increasing; major share in profits; values increase global, investors value patents more. Page  11
  12. 12. European Patent Licensing – new players Financial Services companies treating IP as an alternative asset: - IP Bewertungs AG / Deutsche Bank >euro 100m: acquire inventions, create proofs of principle, marketing back-up – and then sell them on….. -The IP Group: UK public company. Buys an option on university IP – Oxford, chemistry lab; York, Southampton etc., builds spin-offs, creates IPO’s - BUT: BTG - now concentrating on life sciences, merged with Protherics Stephen Potter A University Technology Transfer Office has carried out an IPO – Imperial Innovations - brave and unique: 89 equity investments, IPO of Ceres Power
  13. 13. Licensing companies Helping patent holders to monetize their assets, fighting large corporations, increasing liquidity of patents Litigations Patents 1000 Source: PatentFreedom © 2009 Data Captured as of January 1, 2009 800 600 400 200 0 Page  13
  14. 14. Licensing = Currency, Essense of Patents = Power Freedom to operate Licensing revenue • Stick Licensing Suppliers • Carrot Licensing Negotiations Currency Exlclude R&D competitors Customers security Page  14
  15. 15. Stick licensing Friendly licensing Tech tranfer  You can get a lot farther  It is nice to chat and plan, “NIH – Not Invented Here” with a kind word and a but big bucks not easily still very strong gun than a kind word achievable alone. Al Capone Cf. Procter and Gamble  Very expensive+risky, “PFE - Proudly Found litigation in the US 2.5 m. Elsewhere” Best results achieved with strategic objectives with Time consuming and stronger patent portfolio frustrating process, but compared to target money can be made here, company. with solid IP Target/customer/supplier Page  15
  16. 16. Licensing models Totally different games Stick Licensing / Enforcement Carrot licensing – Step change? -- Step change? – Validated? – Validated? – Market need? – Infringement? – Cost and performance? – Detectable? – Tech transfer support? – Legal clarity? – Market ready, value chain complete? – Funds? – Know-how, proof of principle – Tech support available? PATENT BUSINESS TECH TRANSFER WITH PATENTS Page  16
  17. 17. Licensing models Licensing and R&D partnerships / Innovation Capitalist Joint development – universities, companies, Innovation capitalists having co-ownership / co-inventorship of (parts of) IP, which may be give problems Licensing for minimal money but medium term R&D support for university Invention Capitalists Companies creating portfolios for adding business value for the purpose of using patents as currency in M&A deals. Standards licensing Professional organisations IEEE etc- political and time consuming - “essential patents” Private industry – MPEG-2, MPEG-4, GPS, CDMA, 3-G Page  17
  18. 18. IP / Business Strategy – what to do with it? Large portfolios Why not monetize these? High Value Patents They are costing you $$$ Defensive Patents Overhead Patents Value Stephen Potter 0% 5% 50% Portfolio
  19. 19. Patent Valuation Parameters • Market driven - Reads on an interesting technology area – Huge • e.g. 802.11x – Interesting Huge • e.g. FPGAs – Speculative • e.g. 4 G Market Inter • Is likely to be used – Blocking • e.g. MPEG-2 Spec Stephen Potter – Key feature • e.g. EPGs for digital cable Design Feature Blocking – Design Choice Choice • e.g. Moto’s clamshell phone Use
  20. 20. Patent sales – patent quality effects • Well written spec and • Poorly written spec and claim claim moves value up moves value down Stephen Potter Excellent Fair Poor
  21. 21. Questions, please ask! Feedback and questions always welcome!! Page  21 Antti Kosunen antti@lexfordenterprises.com +358 400 850 200
  22. 22. Antti Kosunen Adding Shareholder Value IPR Business Advisor +20 M&A / fund raising projects +40 Licensing projects Deals done in +40 countries +10 patent litigations in the US, Finland and Germany CEO of a stock market company Technology entpreneurial mindset, Started / sold / listed companies MSc. econ Page  22 antti@lexfordenterprises.com +358 400 850 200

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