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Introduction to Patents and IP Commercialization

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Introduction to Patents and IP Commercialization. These are slides from a talk I gave at Venture Center NCL (National Chemical Laboratory) in Pune, India to a audience of scientists involved in nanotechnology.

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Introduction to Patents and IP Commercialization

  1. 1. Patents IP Commercialization Hasit Seth National Chemical Laboratory British Council Pune
  2. 2. Introductions <ul><li>Name: Hasit Seth </li></ul><ul><li>.edu = BSc (Computer Sci.), LL.B., LL.M (Mumbai Uni., Gold Medal), LL.M (Franklin Pierce, USA) </li></ul><ul><li>US Patent Office Exam </li></ul><ul><li>Bar – New York, Maharashtra & Goa </li></ul>
  3. 3. Work <ul><li>Current – Asia Patent Manager at US Fortune 200 Industrial Sector Corp. </li></ul><ul><li>Past – Harness Dickey (Detroit), F Chau (New York), IPVALUE (Bangalore/Silicon Valley/UK), Bombay High Court </li></ul><ul><li>Email: hasits at gmail dot com </li></ul><ul><li>Hobby site: www.indyvation.com </li></ul>
  4. 4. Disclaimers <ul><li>I am here in my personal capacity. </li></ul><ul><li>Views expressed are solely personal and may not be those of my present or past employers. </li></ul><ul><li>This is not legal advice and am not soliciting any legal work. </li></ul>
  5. 5. Contributing Author
  6. 6. PATENTS An Introduction
  7. 7. Property <ul><li>A bundle of rights </li></ul><ul><li>Two Kinds: </li></ul><ul><ul><li>Real Property – e.g., Land, Buildings, etc. </li></ul></ul><ul><ul><li>Intellectual Property – Trademarks, Patents, Copyrights </li></ul></ul><ul><li>IP – Another Term is Industrial Property </li></ul>
  8. 8. Species of IP <ul><li>Patents </li></ul><ul><li>Trademark </li></ul><ul><li>Copyright </li></ul><ul><li>Trade Secret </li></ul><ul><li>Designs </li></ul>
  9. 9. Criteria for Patentability <ul><li>Useful </li></ul><ul><li>Novelty </li></ul><ul><ul><li>Must not be published or known anywhere in the world </li></ul></ul><ul><li>Non-obvious </li></ul><ul><ul><li>Obvious combination or variation of a known thing or process </li></ul></ul>
  10. 10. Subject-Matter <ul><li>Machines / Systems </li></ul><ul><li>Processes </li></ul><ul><li>Articles of Manufacture </li></ul><ul><li>Chemicals/Substances </li></ul><ul><li>Biotechnology </li></ul>
  11. 11. Term <ul><li>20 Years from date of filing </li></ul><ul><li>Nobody other than patent owner can </li></ul><ul><ul><li>Make </li></ul></ul><ul><ul><li>Use </li></ul></ul><ul><ul><li>Sell </li></ul></ul><ul><ul><li>Offer for Sale, the invention… </li></ul></ul>
  12. 12. US PATENT 223,898 (1880) <ul><li>About what invention could this patent be about? </li></ul><ul><li>Who is the inventor? </li></ul><ul><li>Thomas Edison - 1,093 patents </li></ul>
  13. 13. US PATENT 1,647 (1840) <ul><li>About what invention could this patent be about? </li></ul><ul><li>Who is the inventor? </li></ul><ul><li>Morse Coding </li></ul><ul><li>S.F.B. Morse </li></ul>
  14. 14. US PATENT 13,661 (1855) <ul><li>About what invention could this patent be about? </li></ul><ul><li>Who is the inventor? </li></ul><ul><li>Sewing Machine </li></ul><ul><li>I.M.Singer </li></ul>
  15. 15. US PATENT 382,280 (1888) <ul><li>About what invention could this patent be about? </li></ul><ul><li>Who is the inventor? </li></ul><ul><li>AC Motor </li></ul><ul><li>Nikola Tesla </li></ul>
  16. 16. US PATENT 755,840 (1904) <ul><li>Who is the inventor? </li></ul><ul><li>J.C.Bose! </li></ul>
  17. 17. Patent - A Govt.-Inventor Barter INVENTOR GOVERNMENT Discloses Invention Details to Public 20 Years of Exclusivity Term of a Patent – 20 years from the date of filing
  18. 18. World-Wide Patent Filings
  19. 19. India – Patent Filings
  20. 20. Criteria for Patentability <ul><li>Useful </li></ul><ul><li>Novelty </li></ul><ul><ul><li>Must not be published or known anywhere in the world </li></ul></ul><ul><li>Non-obvious </li></ul><ul><ul><li>Obvious combination or variation of a known thing or process </li></ul></ul>
  21. 21. National Scope <ul><li>No world patent; need to get patent in each country </li></ul><ul><li>Patent Cooperation Treaty (PCT) a “postal system” – 18 months window </li></ul><ul><li>Paris Convention – 1 year window </li></ul>
  22. 22. First Indian Patent – 150 years <ul><li>Issued to Alfred De Penning in 1856 </li></ul><ul><li>“ An efficient Punkah Pulling Machine” </li></ul>
  23. 23. First US Patent to An Indian <ul><li>Jagdish Chandra Bose! </li></ul><ul><li>“ Detector For Electrical Disturbances” </li></ul>
  24. 24. US Patent Classification <ul><li>Class 977 </li></ul><ul><ul><li>700 – Nanostructures </li></ul></ul><ul><ul><li>839 – Mathematical Algorithms </li></ul></ul><ul><ul><li>840 – Manufacture, Treatment, Detection of Nanostructures </li></ul></ul><ul><ul><li>902 – Specified Use of Nanostructures </li></ul></ul><ul><ul><li>963 - Miscellaneous </li></ul></ul>
  25. 25. A Patent Example A Nanostructure (Class 977/700) Patent Issued by USPTO
  26. 26. Patent Parts <ul><li>Coversheet – Bibliographic Data </li></ul><ul><li>Drawings </li></ul><ul><li>Specification (Technical Description) </li></ul><ul><li>Claims </li></ul>
  27. 27. US Patent – 6,464,806 Inventors Assignee
  28. 28. Abstract
  29. 29. Drawings
  30. 30. Technical Description
  31. 31. Claims
  32. 32. Questions?
  33. 33. IP Commericialization
  34. 34. IP Royalty <ul><li>IP Royalties are a big business </li></ul><ul><ul><li>IBM > $1 billion </li></ul></ul><ul><ul><li>Thompson (Fr.) > $ 400 million </li></ul></ul><ul><li>Per Year !! </li></ul>
  35. 35. Terms <ul><li>IP Commercialization </li></ul><ul><ul><li>Achieved through “licensing” patents and/or technical know-how </li></ul></ul><ul><li>Patent Assignment -> Complete transfer of ownership of patent rights </li></ul><ul><li>Patent License -> permission regarding patent rights </li></ul>
  36. 36. Kinds of Patent Licenses <ul><li>Exclusive patent license -> Only one licensee </li></ul><ul><li>Non-exclusive patent licenses -> multiple license </li></ul><ul><li>Royalty Free license -> license required but no royalties </li></ul><ul><li>Field-of-use license </li></ul>
  37. 37. Kinds of Patent Licenses <ul><li>Cross-licenses; portfolio cross licenses </li></ul>
  38. 38. Where to Begin? <ul><li>Do you own a portfolio of patents? Or just one/two patents? </li></ul><ul><li>Portfolio of patents: </li></ul><ul><ul><li>Mine (filter) the portfolio for licensable patents </li></ul></ul><ul><ul><li>Mining criteria can be immediate target markets; size of market; royalty rates; industry practices </li></ul></ul>
  39. 39. Process Filter the portfolio for patents to license Find target markets where the patent can apply Prepare a financial forecasting model regarding licensing revenues Revenue maximizing strategy planning: Exclusive license? Non-exlusive license? Multi-year license? Royalty Sharing license? Royalty rate? Prepare a financial forecasting model regarding licensing revenues Initiate negotiations for licensing Sign licensing agreements
  40. 40. Licensing Strategies <ul><li>Exclusive or Non-exclusive license? </li></ul><ul><li>Multi-year license? Full patent term? </li></ul><ul><li>Royalty sharing license? </li></ul>
  41. 41. Licensing Strategies <ul><li>Royalty rate? </li></ul><ul><li>License upstream companies or end-users? </li></ul><ul><li>Growing markets (MEMS sensors) or shrinking markets (cordless home phones) or almost dead markets (pagers)? </li></ul>
  42. 42. Why Should I Take A License? <ul><li>Licensing has no “muscle” unless there is a credible possibility of successful patent litigation – an expensive process </li></ul><ul><li>Best done by corporations with “deep pockets” </li></ul>
  43. 43. University Licensing <ul><li>Designed to be not litigation oriented </li></ul><ul><li>Preference to non-exclusive licenses to maximize revenues </li></ul><ul><li>Finding a family of patents to license is tough </li></ul><ul><li>Know-how may be more valuable than patents to license </li></ul>
  44. 44. Example – US 6,464,806 <ul><li>Hypothetical licensing scenario for US patent ‘806 </li></ul><ul><li>Patent Filed: 5 Apr 2000 </li></ul><ul><li>Patent Issued: 15 Oct 2002 </li></ul><ul><ul><li>License term possible: ~ 18 years </li></ul></ul><ul><li>Nobody licenses expired patents (unless to “cleanse” past infringement) </li></ul>
  45. 45. Markets? <ul><li>Which Markets Can This Product Apply To? </li></ul><ul><li>What is the market size of those markets? </li></ul><ul><li>Is licensing common in these industries? Any established rates of royalties? </li></ul><ul><li>At what CAGR are these markets growing? </li></ul>
  46. 46. Markets? <ul><li>Digital Recording Media </li></ul><ul><ul><li>Memories: $17B market size </li></ul></ul><ul><ul><li>Profit Margin: - 7.3% </li></ul></ul><ul><ul><ul><li>Source: http://biz.yahoo.com/ic/831.html </li></ul></ul></ul><ul><li>How much of $17B market does this patent affect? </li></ul><ul><ul><li>May be 10 % </li></ul></ul>
  47. 47. Applicability <ul><li>If 10% market is covered by this patent, royalty can be expected from this segment </li></ul><ul><li>Royalty rate in semiconductor industry: 1% </li></ul><ul><li>Royalty Possible = 1% of $1.7b = $17 million </li></ul>
  48. 48. Royalty Strategy <ul><li>$17m is over 18 years of license term !! </li></ul><ul><li>How much to demand as upfront licensing fee? </li></ul><ul><li>Will asking less upfront fee help in developing market later on? </li></ul><ul><li>Discounts are possible in negotiations </li></ul>
  49. 49. Licensing Companies <ul><li>E.g. IPVALUE, Intellectual Ventures, BT Exact (UK), etc. </li></ul>
  50. 50. Questions
  51. 51. Thank you !

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