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LES-Singapore Presentation 11 11-09(f)


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Presentation at LES-Singapore Asian Pacific Regional Conference

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LES-Singapore Presentation 11 11-09(f)

  1. 1. The  Emerging  IP  Deals  and  Opportuni7es  in  Asia:   Emerging  IP  Trends  and  Strategies  in  China   Presented  at  LES  Asia  Pacific  Regional  Conference   In  Singapore  on  November  9,  2011     Prepared  by:    Al  Kwok                        Founder,  GD-­‐HK  InternaRonal  Science  Park  Alliance  Ltd.                  Founder,  China  InternaRonal  Intellectual  Property  Services  Ltd.          Governor  &  Co-­‐founder,  Savantas  Policy  InsRtute          Former  VP  &  CIPO,  NetLogic  Microsystems  ( NETL )                       Guangdong-­‐Hong  Kong  (Guangzhou  Nansha)  Science  Park  Investment  Services  Ltd.   1    
  2. 2. Outline     Background  of  Speaker     Global  Trends     China  SituaRon:       Challenges  &  OpportuniRes     Business  Model  and  Process     Business  Ecosystem     CIIPS’  Efforts   Guangdong-­‐Hong  Kong  (Guangzhou  Nansha)  Science  Park  Investment  Services  Ltd.   2    
  3. 3. Author s  IP  Business  Background     New  paradigm:  IP  are  crown  jewels  for  knowledge-­‐based  companies     Joined  Quality  Semi.  Inc.  in  1989  as  a  member  of  its  founding  team  licensing  &   transferring  CMOS  technology  &  products  to  Japanese  fab  (Foundry)  partners     Executed  IP  license  business  model,  transferring  engineering  know-­‐how  to  licensee   partners  and  bringing  up  foundry  capability  &  capacity  within  a  year     Joined  PMC-­‐Flash  in  1996  (as  VP  &  CIPO)  to  start  the  IP  license  business     Took  advantages  of  PMOS  flash  for  embedded  NVM  in  SOC  design     Managed  patent  poraolio  generaRon  for  comprehensive  IP  protecRon     Secured  license  (&  ODM)  agreements  with  top-­‐Rer  Japanese  firms  (>US$10M)     Joined  NMI  ( NETL )  in  1998  (as  VP  &  CIPO)  to  iniRate  IP  poraolio  dev.  program     Set  up  a  system  to  ensure  con7nuous  innova7on  &  IP  genera7on     Set  up  top-­‐management  patent  commieee,  and  patent  generaRon  and  reward   programs     Promoted  and  implemented  patent  programs  to  all  engineering  staff     Building  an  impressive  patent  porHolio  since  1998     In-­‐house  patent  aeorney  to  manage  IP  creaRon/development     Enabling  conRnuous  cugng-­‐edge  product  developments  including  knowledge-­‐ based  processors  and   NETL7  (Layer  7  switching)     CreaRng  significant  entry  barriers  against  compeRRons     Ensuring  NMI’s  long-­‐term  leadership  and  profitability  in  NSE  market   Guangdong-­‐Hong  Kong  (Guangzhou  Nansha)  Science  Park  Investment  Services  Ltd.   3    
  4. 4. Global  IP  Commercializa7on  Trends   Guangdong-­‐Hong  Kong  (Guangzhou  Nansha)  Science  Park  Investment  Services  Ltd.   4    
  5. 5. Knowledge-­‐based  Economic  Trend   Evolution of Intangible Assets – U.S. Companies Guangdong-­‐Hong  Kong  (Guangzhou  Nansha)  Science  Park  Investment  Services  Ltd.   5    
  6. 6. Global IP Market Trend   Past:     TradiRonally  patents  regarded  as  internal  assets  and  parts   of  trade  secrets     Cross-­‐licensing  as  a  means  to  avoid  infringement  lawsuits   and  speed  up  product/market  development     Trendsegng:     In  early  1990s,  IBM  started  patent  licensing  and  selling       Over  the  years,  the  global  market  for  patent  trading  and   licensing  has  taken  shape     Now:     IBM  now  makes  US$1.5B  per  year  from  their  patents     Patent  trade  is  a  mulR-­‐billion  dollar  market     Various  IP  transacRons  (incl.  M&A)  at  hundreds  of  billions     Nortel  for  $4.5B,  NetLogic  for  $3.7B,  Motorola  Mobility  for  $12.5B Guangdong-­‐Hong  Kong  (Guangzhou  Nansha)  Science  Park  Investment  Services  Ltd.   6    
  7. 7. Drivers for IP Commercialization   Semiconductor  (Moore’s  Law)  &  IT  (Metcalfe’s  Law)   RevoluRons  triggered  Business  Model  Changes     Shortened  Product  Lifecycles  induce  tech  transfers  to  speed  up  R&D     GlobalizaRon  of  Business  CompeRRon  in  last  50  years     Time-­‐to-­‐market  –  means  greater  profit     Customer  demands  for  complete  turn-­‐key  system-­‐level  soluRons     Increasing  product  complexity  –    IP  acquisiRons  to  fill  know-­‐how  gaps     Global  CollaboraRve  InnovaRon  –  both  in-­‐house  &  outside     Open  InnovaRon  Trend  –  a  form  of  CollaboraRve  InnovaRon     Independent  innovaRon  and  cooperaRon/sourcing  IP  in  parallel.       Professional  Service  Ecosystem  for  IP  transacRons  becomes   complete     Patent  applicaRon,  lP  consultancy,  mediaRon  &  liRgaRon,  patent   development  and  planning,  patent  evaluaRon,  patent  monetarizaRon   and  patent  investment.     Guangdong-­‐Hong  Kong  (Guangzhou  Nansha)  Science  Park  Investment  Services  Ltd.   7    
  8. 8. Raising  Values  of  a  Product  (IP  is  the  Core)   •   =  给 户  =>   Price  =  Values  to  Customers      =   + 务+IP 权+   ( = 给 户 ) •  Pre-­‐sale  services  mean  design-­‐win   efforts  providing  soluRons  to  address   customers’  problems   Brand  RecogniRon   •  This  is  the  best  sources  of  innovaRon   ( 认 ) and  ideas  for  the  next-­‐generaRon   products   •  Post-­‐sale  services  mean  reducing   ) Embedded  IP  Licensing   customers’  costs  of  ownership,   (隐 IP 权) extending  the  useful  lifeRme  of  the   product,  generaRng  recurring  sales   Increasing Values ( •  Embedded  IP  licensing  means  the   Pre-­‐  &  Post-­‐Sale  Services   customers  can  use  the  product  IP  for   ( 务) their  own  product  upliping  &   differenRaRons  -­‐  e.g.,  “Intel  Inside”   •  Brand  recogniRon  means  the   Manufacturing  Cost   customers  recognize  the  product  and   ( 产 ) its  maker  for  superb  quality,   performance,  reliability  &  services   Guangdong-­‐Hong  Kong  (Guangzhou  Nansha)  Science  Park  Investment  Services  Ltd.   8    
  9. 9. China  Situa7on:  Challenges  &  Opportuni7es   Guangdong-­‐Hong  Kong  (Guangzhou  Nansha)  Science  Park  Investment  Services  Ltd.   9    
  10. 10. Stage  of  Enterprise  Development:  China  vs.  US   Human Primary Stage of Key asset / Domain Scalability resource capital development value driver knowledge factor development sources Family- Hands-on Agriculture Farmland Family Copy recipe training Factory- Low-cost Task Hands-on Family & Counterfeit & cluster era labor oriented training friends clone Industrial Automated Techno- Traditional Industrial Profit-driven mass-prod. logical investors, Standards, era training technology oriented govt. prog. trade assoc. Business (Business) On-job VC, Professional Post-industrial services/ Process professional Institution Standards, IP era know-how oriented development & license investors Knowledge Open Business Integrated Learning Knowledge based source intelligence system ecosystem sharing economy platform On  average,  US  SMEs  are  at   Post-­‐industrial  stage  of  development,  whereas  the   majority  of  China  SMEs  are  at   Factory-­‐cluster  stage  of  development.     Guangdong-­‐Hong  Kong  (Guangzhou  Nansha)  Science  Park  Investment  Services  Ltd.   10    
  11. 11. IP Deficit Crisis – Case Studies China  has  made  significant  progress  in  the  past  10  on  IP  development   and  protecRon.    Yet,  it  sRll  has  a  big  gap  to  close.     Case  1:    DVD  players  manufactured  in  China   Price:  US$32   Profit  to  the  Chinese  manufacturer:    US$1   Royalty  paid  to  the  IP  owners:  US$20     Lack  of  IP  means  making  money  for  others.    Chinese  industry   development  cannot  be  self-­‐determined   Case  2:    An  LED  company  in  Guangdong   Before  IPO,  patent  infringement  lawsuit  from  abroad.   Signed  a  license  agreement  to  avoid  bad  publicity   Went  on  with  the  IPO     Chinese  investors  are  paying  a  heavy  price   Guangdong-­‐Hong  Kong  (Guangzhou  Nansha)  Science  Park  Investment  Services  Ltd.   11    
  12. 12. Lacking International IP Strategies   Products  confiscated  for  IP  infringement  at  exhibiRons  abroad.     Brand  companies  sued  for  IP  infringement  before  product   launch  abroad     China’s  enterprises  file  many  domesRc  and  internaRonal  patent   applicaRons  while  lack  strategic  roadmaps  for  product  &   technology  developments   Lack  proficiency  in  patent  legal  &  claim  structure.    NegaRvely   impact  enforceability  and  value     New  to  the  internaRonal  IP  market,  lack  appropriate  IP  pooling   as  bargain  chips     In  a  vulnerable  posiRon  in  negoRaRng  IP  license  fees  or     infringement  seelements       Overseas  organizaRons  are  vigorously  applying  for  China   patents  and  buying  up  China  patents  at  low  prices,  which  can   greatly  influence  China’s  industry  development Guangdong-­‐Hong  Kong  (Guangzhou  Nansha)  Science  Park  Investment  Services  Ltd.   12    
  13. 13. Challenges of IP Commercialization  China’s  global  enterprises  want  to  strengthen  their  IP  poraolio   by  acquiring  internaRonal  patents  for  global  market  expansion     Lost  opportuniRes  due  to  lacking  professional  experience,  inadequate  IP   evaluaRon  tools  and  indecisiveness  through  management  layers  in  the   decision-­‐chain    The  exisRng  domesRc  IP  trading  centers,  focused  on  Chinese   patents  and  lack  supporRng  professional  services.     Cannot  sustain  the  IP  commercializaRon  profitable  and  unable  to  meet   internaRonal  standard  pracRces    The  value  of  China’s  enterprises  are  mainly  from  tangible   assets.    The  financial  sector  lacks  an  objecRve,  effecRve  and   internaRonally  accepted  evaluaRon  metrics  and  system  on   intangible  assets     It’s  difficult  to  realize  the  capitalizaRon  of  intangible  assets   Guangdong-­‐Hong  Kong  (Guangzhou  Nansha)  Science  Park  Investment  Services  Ltd.   13    
  14. 14. IP  Business  Models,     Processes  &  Ecosystems  Guangdong-­‐Hong  Kong  (Guangzhou  Nansha)  Science  Park  Investment  Services  Ltd.   14    
  15. 15. Cri7cal  Success  Factors  for  IP  Trading    Trust     Buyer/Seller:  Win-­‐win,  bonding  collaboraRon…     Infrastructure:  Escrow,  3rd-­‐party  facilitators…     Legal  framework:  Common  Law,  arbitraRon…     Assurance:  Going  aper  the  infringer,  indemnificaRon…    Confiden7ality     Privacy  (non-­‐disclosure)  -­‐  “not  open  bidding”     Professional  brokerage  –  accountable  SERVICES    (“Product”)  Quality     Enforceability,  claim  strength  (scope  &  integrity)     Enabling  –  can  realize  the  ProducRzaRon  Goals   Guangdong-­‐Hong  Kong  (Guangzhou  Nansha)  Science  Park  Investment  Services  Ltd.   15    
  16. 16. IP  Commercializa7on  Varie7es     IP  ProducRzaRon  (产 )  -­‐  construcRve  use  of  IP     IP  Licensing  ( 识产权 权)     Must  have  adequate  technical  capabiliRes  to  use  the  licensed  IP  effecRvely     Tech  Transfer  ( 术转 )     IP  Licensing  +  know-­‐how  transfer     IP  AcquisiRon  ( 识产权 购)     IP  ownership  +  related  intangible  assets  (like  design  work,  schemaRcs,  source  codes…)     Tech  company  M&A  ( 业 购)     IP  AcquisiRon  +  business  (customers,  products,  tools  &  factory)  +  technical  staff  &   management  team     Intangible  Asset  as  Loan  Collateral  ( 资产 为贷 )  -­‐  construcRve   use  of  IP     The  lender  will  hold  the  ownership  of  some  qualified  ( 认证 )  intangible  asset  as   loan  collateral  -­‐  IP  valuaRon  know-­‐how  is  crucial     IP  Pooling  ( 识产权 )  -­‐  construcRve  use  of  IP     Pool  IP  poraolios  together  for  knowledge  sharing  to  uplip  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     CIIPS  is  against  any  selfish  use  of  IP  as  inhibitor  or  blackmail  by  Non-­‐PracRcing  EnRRes   (NPE)  or  patent  trolls   Guangdong-­‐Hong  Kong  (Guangzhou  Nansha)  Science  Park  Investment  Services  Ltd.   16    
  17. 17. Global IP Market Players   Enterprises     Licensors,  licensees,  buyers  and  sellers     UniversiRes  &  research  insRtutes     Trading  agents—brokers     Professional  services  providers     Legal  consultancy  services,  liRgaRon  law  firms,  patent  evaluaRon   and  sopware  tool  plaaorms  etc.       IP  Investors:     Private  equity  companies,  patent  investment  fund     Non  pracRcing  enRRes  (NPE)     Engaging  in  patent  trading/licensing  in  order  to  make  profit  by   patent  liRgaRons   Guangdong-­‐Hong  Kong  (Guangzhou  Nansha)  Science  Park  Investment  Services  Ltd.   17    
  18. 18. Guiding  Principles  for  the  Ecosystem     Sincere  win-­‐win  proposiRon  between  the  trading  parRes     Full  disclosure  reduces  risk  for  swip  producRzaRon  of  licensed  IP     Absolutely  no  conflict  of  interest     SeparaRon  of  roles  for  rule  segng  (overseer),  execuRon  (trading   parRcipants  and  enablers)  and  arbitraRon  (arbiters)     No  mixed  roles  (in  a  case)  are  allowed  to  avoid  conflict  of  interest     Adequate  check  and  balance     Proper  balance  of  the  interests  of  trading  parRes     3rd  party  enablers  to  check  for  abiliRes  and  monitor  the  efforts  by  the   trading  parRes  to  honor  the  deal  and  respecRve  obligaRons.     Transparency  (verificaRon  by  independent  3rd  parRes)     Full  disclosure  for  IP  lisRng  (like  IPO  prospectus)  by  the  IP  seller  and   full  disclosure  on  IP  protecRon  capability  by  the  IP  buyer     All  steps  in  the  process  are  auditable  with  supporRng  documents  by   independent  auditors  and/or  the  rule  segng  party.     Must  add  value  at  each  process  step     All  3rd  party  enablers  must  create  values  to  the  trading  parRes  and   ensure  quality  outcome  of  the  trading   Guangdong-­‐Hong  Kong  (Guangzhou  Nansha)  Science  Park  Investment  Services  Ltd.   18    
  19. 19. IP  Trading  PlaHorm/Ecosystem     Core  ParRcipants:  sellers,  buyers  and  enabling  3rd  parRes     Value-­‐adding  enabling  3rd  parRes  to  facilitate  win-­‐win  outcomes  to  both   IP  seller  and  buyer  and  reduce  risk     Instead  of  win-­‐lose  paradigm  without  the  3rd  parRes     The  plaaorm  should  be  centered  on  risk  reducRon/management     Full  disclosure  (similar  to  IPO  prospectus)  to  build  trust  and  eliminate   costly  misunderstanding  &  misjudgments     Fair  assessment  of  the  IP  value  &  potenRal     Fair  assessment  of  the  risk  and  liability     Fair  comparison  to  similar/compeRng  IPs     ImplementaRon  issues  for  the  buyer  to  effecRvely  use  the  IP     Adequate  supports  from  the  seller  to  the  buyer  to  realize  the  buyer s  ROI   –  producRzaRon  of  the  licensed  IP  for  profit  sharing     All  3rd  party  enablers  must  add  values  in  the  process  from  start  to  finish   for  the  seller  and  buyer  to  realize  their  respecRve  ROI,  and  collaborate   to  nurture  the  ecosystem     Legal  agents  for  buyers  and  licensers,  technical  assessors,  IP  protecRon   auditors,  escrow  agents…   Guangdong-­‐Hong  Kong  (Guangzhou  Nansha)  Science  Park  Investment  Services  Ltd.   19    
  20. 20. Best  IP  Business  Prac7ces     Up-­‐front  proper  due  diligence  processes     Government  regulaRon  discovery  process     E.g.,  export/import  controls  and  restricRons     Risk  assessment  and  management     Guiding  technology  transfer  w/  proper  IP  protecRon     E.g.,  IP  hardening  for  licensee  with  lesser  IP  protecRon  capability     E.g.,  Trusted  third-­‐party  design  integrator  to  handle  sensiRve  IP     Good  visibility  on  how  the  licensed  IP  will  be  used     Technology  transfer  plan  and  milestones     ProacRve  problem-­‐solving     Lining  up  3rd-­‐party  enabling  supports     Escrow  arrangement(s)     Control  and  manage  legal  costs  (through  arbitraRon)     Within  10%  of  the  license  cost     Cap  indemnificaRon  exposure  (up  to  the  license  cost?!)   Guangdong-­‐Hong  Kong  (Guangzhou  Nansha)  Science  Park  Investment  Services  Ltd.   20    
  21. 21. Technology  Transfer     IP  transfer  is  like  organ  transplant/arRficial  implant     Foreign  IP  will  be  embedded  into  the  host  product  like  a  foreign  organ   or  an  arRficial  device  implanted  into  the  recipients  body       CompaRbility  is  essenRal  to  avoid   body  rejecRon     Necessary  proacRve  due  diligence  process,  planning  and   execuRon  to  ensure  success     Pre-­‐transacRon  (pre-­‐operaRon)     FuncRonality  (organ  or  device  type),  originality  (source),  quality  (health),   compaRbility  (blood  type,  allergy),  etc.     The  required  transfer  procedural  review  (operaRon  planning)     TransacRon  (transplant  or  implant  operaRon)     Transfer  process  and  procedure  (transplant  the  organ  or  implant  the   device)     Post-­‐transacRon  (post-­‐operaRon)  –  lasRng  over  2  years     Field  data  gathering  (outpaRent  monitoring  &  check-­‐up)   Guangdong-­‐Hong  Kong  (Guangzhou  Nansha)  Science  Park  Investment  Services  Ltd.   21    
  22. 22. CIIPS’  IP  Commercializa7on  Ecosystem-­‐building  Efforts  in  China   Guangdong-­‐Hong  Kong  (Guangzhou  Nansha)  Science  Park  Investment  Services  Ltd.   22    
  23. 23. Ecosystem  Building  (for  Sustainability)   GD-­‐HKISP  as  the  host   organizaRon   CIIPS providing  Special-­‐ Overseas (Ecosystem policy  1C2S  support   IP Supplies; Training, Builder) Certification & Professional Manpower Workshops Training, Supports IP Demands Certification & Management Screened Certified Enterprises Professional IP Agents Services (IP Services) (IP Demands) Financial,  Legal  &   Technical  Service   CEC/EMCTC as Provider   New Valued the Training/ Plaaorms   Service Demands cert. Partner IP Trading Business Model for Scalability & Sustainable Growth Guangdong-­‐Hong  Kong  (Guangzhou  Nansha)  Science  Park  Investment  Services  Ltd.   23    
  24. 24. Sustainable  IP  Ecosystem  for  Buyers/Sellers Users Trading Platform Training Patent Trading Strategic IP Services Tools Alliance IP commercialization functionalities IP resources and know-how’s Tynax trading CEC Expert Pool platform (U.S.) Other Service Talent Pool resources providers 11/2/11 Guangdong-­‐Hong  Kong  (Guangzhou  Nansha)  Science  Park  Investment  Services  Ltd.   CIIPS Confidential 24    
  25. 25. CIIPS’  4-­‐Pronged  Approach    IP  Trading  &  Brokerage  (on  Tynax  IP  Trading  Plaaorm)     IP  Supply-­‐side:  Tynax  IP  Trading  Plaaorm  (>15K  items)     IP  Demand-­‐side:    CEC’s  corporate  members  (>540,000)    IP  Training  Programs  for  Registered  IP  Professionals   collaboraRng  with  China  Enterprise  ConfederaRon  (CEC)/ EMCTC  (     Principals:  IP  Manager,  Chief  IP  Officer     Service  providers:  IP  Trade  Agent,  IP  Analyst…     Social  network  for  trainees’  conRnuing  professional  developments      Patent  AnalyRcs  System  (Tools)     IP  landscape  mapping     Patent  quality  evaluaRon    IP  Professional  Services     Serving  China  enterprise  clients     Providing  back-­‐office  supports  to  overseas  clients   Guangdong-­‐Hong  Kong  (Guangzhou  Nansha)  Science  Park  Investment  Services  Ltd.   25    
  26. 26. CIIPS  as  an  IP  Business  PlaHorm  in  GD-­‐HKISP 3  Industrial  value-­‐chain  developments  can  drive  IP  professional  service  business     •  LogisRc  &  Supply-­‐chain  Management   Data  Special   •  3D  AnimaRon  ProducRon  &  ExhibiRon     Zone •  Intelligent  City  &  Smart  System  Designs     •  Professional    ICT  Services Three   •  Environment  Improvements   Industrial   •  Low-­‐carbon  Footprint  Management     Eco-­‐Tech •  New  Materials  &  Resource  Efficiency   Themes •  New  Business  Models:  Carbon-­‐Trade,  EMC   •  Solar  Photovoltaic   New     •  Tidal  Power  GeneraRon   Energies •  Smart  Grid    &  Power    SCM   •  Green  Building  ,  Electric  Vehicle…   Strategic  Enabling  Pillar  PlaHorms  (All  Megatrend  Game-­‐Changers)   IP  ProtecRon   Data  Security  &     Carbon  ReducRon   &  Sharing Privacy  ProtecRon   &  Credit  Trade Guangdong-­‐Hong  Kong  (Guangzhou  Nansha)  Science  Park  Investment  Services  Ltd.   26    
  27. 27. Addressing  China’s  IP  Prof.  Service  Needs     IP landscape mapping   Strategic IP pooling   Innovation/product/technology   World-class international IP legal roadmaps team Long-­‐term     IP acquisition (strategic)   Cross-license negotiation   Collaborative innovation   Long-term technology roadmap   Corporate culture for a learning for industrial standardization organization   IP protection assessment   Supply-chain IP landscape   Counter-measures against IP mapping (per industrial sector) infringement lawsuits Supply-chain IP protection Immediate       Patent quality improvement assessment (per sector)   IP portfolio development   IP licensing/trading   IP acquisition (tactical)   Defensive IP pooling   Effective innovation Individual  Company   Global/Plaaorm   Guangdong-­‐Hong  Kong  (Guangzhou  Nansha)  Science  Park  Investment  Services  Ltd.   27    
  28. 28. Hong  Kong’s  Role  on  GD-­‐HK  CEPA  IP  PlaHorm     Provide   Common  Law  plaaorm  for  IP  transacRon     One-­‐Country-­‐Two-­‐Systems’  “Offshore  Extension”  into   CEPA  Special-­‐policy  Pilot  Zone  at  Nansha,  Guangzhou     World  recognized  arbitraRon  process       HKIAC  as  an  example  (       Awards  enforceable  in  many  (~140)  regions,  including   China  &  Taiwan     Easy  access  to  enabling  third  parRes     Local  pool  of  technical  and  legal  experRse  and   efficient  support  services     Financial  and  IP  Escrow  Services   Guangdong-­‐Hong  Kong  (Guangzhou  Nansha)  Science  Park  Investment  Services  Ltd.   28    
  29. 29. Thank  You  Very  Much     For  Your  AeenRon!     al.kwok@ns-­‐  Guangdong-­‐Hong  Kong  (Guangzhou  Nansha)  Science  Park  Investment  Services  Ltd.   29