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Ipbc china 2012 Presentation

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IP Strategy and Best Practices for SME

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Ipbc china 2012 Presentation

  1. 1. “The IP Acquisitions Market in Asia” – from a Chinese Tech SME perspective          A    presenta*on  at  IP  Business  Congress  China  2012                 Prepared  by:    Al  Kwok                      Founder,  GD-­‐HK  Interna*onal  Science  Park  Alliance                      IP  Advisor,  SS-­‐GATE/UNDP                      Principal  IP  Advisor,  S.T.A.R.S.  Founda*on                      President,  CASPA  PRD  Chapter                      Founder,  China  Interna*onal  Intellectual  Property  Services                      Former  VP  &  CIPO,  NetLogic  Microsystems  (“NETL”)  Dec. 4, 2012 IPBC China 2012 1
  2. 2. Pillars for Knowledge-based Economy IC IT IP Hardware Network Know-how/Content Functionality Physical devices Connectivity Experience sharing Scalability Moore’s Law Metcalfe’s Law TBD!? Scaling Factor 2X/18 mon. Value ~ n2 Value ~ XR (X, R >1)Disruptive Driver CMOS (IDT) IPv4/6, Internet, Apple iTunes -> QoS (NMI) “Unified IP Pooling” Driving Memories & CPU QoS, Mobile StandardizationProduct/Service => SOC Multimedia for scaling Start Time ~1985 ~2000 ~2015?Mkt. Size (~20 yr) ~$300B Trillions Zillions? •  Evolution of Knowledge-based Economy (KBE): IC -> IT -> IP •  Value of IP is based on its reusability and ability to share: •  The more it is reused, the higher its value •  No physical limitation: IP can be used by many users at the same time •  The impact of “free-market IP sharing” on KBE is immeasurableSept. 30, 2012 IIGLSD Presentation 2
  3. 3. IP Commercialization Vehicles  IP Productization (产品化) - constructive use of IP   IP Licensing (知识产权授权)   Must have adequate technical capabilities to use the licensed IP effectively   Tech Transfer (技术转移)   “IP Licensing” + know-how transfer   IP Acquisition (知识产权收购)   IP ownership + related intangible assets (like design work, schematics, source codes…)   Tech company M&A (科技企业并购)   “IP Acquisition” + business (customers, products, tools & factory) + technical staff & management team  Intangible Asset as Loan Collateral (无形资产作为贷款的抵押品) - constructive use of IP   The lender will hold the ownership of some qualified (被认证的) intangible asset as loan collateral - IP valuation know-how is crucial  IP Pooling (知识产权池) - constructive use of IP   Pool IP portfolios together for knowledge sharing to uplift the whole industry or strengthening the defense against infringement lawsuits  IP purchased as an Investment (but not used for product development)   To cash out later for a profit if the market matures in favor of the purchased IP   Developing countries should guard against any selfish use of IP as inhibitor or blackmail by Non-Practicing Entities (NPE) or patent trollsDec. 4, 2012 IPBC China 2012 3
  4. 4. IP Value Assessment Criteria  Factors driving valuation (based on share % of TAM)   The Strength of the patent (legal aspect)   Scope, territories, claims, enforceability…   The Significance of the patent (technical aspect)   How fundamental? Timelessness of its values   Differentiating functionalities: Values to customers   Competing solutions: need comprehensive benchmarking   The Usefulness of the patent (market aspect)   Applications with respect to industry standards and ecosystems   Sunrise (emerging trends) vs. Sunset (displaced practices)   Present state of market readiness (units shipped and growth rate)   Differentiations against competition (market share)   Customer/market acceptance: TAM and market share   Average Selling Price of the product and IP value in the product   The Lifecycle of the patent (longevity aspect)   The expiration date of the patent   Emerging disruptive technologies against the patentDec. 4, 2012 IPBC China 2012 4
  5. 5. Raising Values of a Product (IP is the Core) Price = Values to Customers   Price = Value to Customers => (价格 = 给客户的价值)   Price = Mftg. Costs + Services + >70%PM Embedded IP License + Brand Brand Recognition   Pre-sale services mean design- (品牌认知) win efforts providing solutions to Increasing Values (提高增值) address customers’ problems >60%PM   This is the best sources of innovation and ideas for the next- Embedded IP Licensing generation products (隐含IP授权)   Post-sale services mean reducing customers’ costs of ownership, >40%PM extending the useful lifetime of the Pre- & Post-Sale Services product, generating recurring sales (售前及售后的服务)   Embedded IP licensing means the customers can use the product ~10%PM IP for their own product uplifting & Manufacturing Cost differentiations - e.g., “Intel Inside” (生产成本)   Brand recognition means the customers recognize the product Mkt. Cap. / Intangible Asset: and its maker for superb quality, 1)  Apple: ~US$656B / >99% performance, reliability & services 2)  Foxconn: ~US$5B / <20%Dec. 4, 2012 IPBC China 2012 5
  6. 6. Methodology  for  “CRE  +  Con*nuing  Innova*on”     Lead Customers’ Requirements => 2nd G => 3rd G =>… Close collaboration between the customer (CRE) and the vendor Differentiating Value Creations => 2nd G => 3rd G =>… Business Model => 2nd G => 3rd G =>… Service/Product Roadmap => 2nd G => 3rd G =>… Application/Technology Roadmap => 2nd G => 3rd G =>… IP Portfolio Development => 2nd G => 3rd G =>… The next innovation ideas come from customers (CRE) & “Stress Tests” identifying (1)  The weak-links in product design & performance and scalability (2)  System (architecture) integrity and scalability (elasticity) issues (3)  The bottlenecks for scalability (technology and manufacturability roadmap) NetLogic Microsystems is a good benchmark for SMEs as innovatorsDec. 4, 2012 IPBC China 2012 6
  7. 7. Lifetime Achievement as its “Founding CIPO”: AK comment: Based on a portfolio of ONLY ~100 (high-quality) patents (Killer Patents!!!) (Game Changers!!!) (All multi-billion$ companies)AK comment: Considering the facts that NM is much less than 1/10 of the size (in revenue) of the other9 top-ranking companies and much younger (<10 years old), it is a crowning achievement! Likewise,“ipIQ” rated NM’s portfolio the best for a medium size (~$100M) high-tech company worldwide in its“Patent Scorecard 2006” report with the 2nd highest CII (current impact index).Mkt Cap: US$250M @ 2004 IPO => US$3.7B @ 2011 M&A (14.8X in 7 years = >46% CAGR)Sept. 30, 2012 IIGLSD Presentation 7
  8. 8. Proper IP Strategy for Industrial Uplifting  Understand the IP landscape   Value-chain covers Supply-chain & Demand-chain   From the Supply-chain: design/manufacturing   From the Demand-chain: APPLICATIONS & SERVICES  Weakness (as compared to developed countries)   30+ years behind in Supply-chain related IP  Strength (for a developing country like China)   Huge domestic market size for rapid scalability & ROI   Ahead in many new application areas (AMR, LED, IOT,…)  Proper actions:   Build IP portfolio in the application/service domain   Promote standardization   License IP in the supply-chain domain   Learn from TSMC how to overcome IP deficit honorably - upfront JV (licensing & TT) w/ Philips Electronics NV @ >30% equityDec. 4, 2012 IPBC China 2012 8
  9. 9. Key IP Strategies for China SME  Domestic IP pooling   Need to pool ~1000 domestic patents for each industrial product sector (e.g., LED, Nano-tech…)   Mostly from domestic universities and R&D centers   Used the IP pool as bargaining chips   Negotiate for favorable license terms (<3%) for Zero-IP entities   Negotiate for cross licensing as ultimate outcome!  (Sunrise) Tech transfers for inbound IP from overseas   For technological and engineering uplifting w.r.t. roadmaps  International M&A for outbound acquisition   Identify & establish collaborative advantages: (1) Cost down via tech/production transfer & logistics; (2) Market expansion/scaling   Acquire ~15% for a board seat to be represented by a local senior professional executive originally from the developing country   If “Dating” goes well, “Marriage” (full acquisition) can followDec. 4, 2012 IPBC China 2012 9
  10. 10. Thank You! al.kwok@ciips.orgDec. 4, 2012 IPBC China 2012 10

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