This presentation discusses the value of intellectual property in today's global market, and identifies reasons to value your company's intellectual property, and for performing continual and ongoing IP audits. Viewers will also learn the role an IP attorney plays in the process. Patents and their value are also reviewed.

1. Role of IP Attorney in
Continuous IP Valuation
By: David Banko, Attorney at Law

2. ABOUT JACKSONWHITE
We offer a full range of legal
services to assist individuals,
families, and businesses.
JacksonWhite was founded in
1983.
The firm has grown steadily
to include 21 highly
experienced attorneys.
We are proud to be one of the
largest law firms in the East
Valley.

3. Steven J. Laureanti
slaureanti@jacksonwhitelaw.com
David A. Banko
dbanko@jacksonwhitelaw.com
480-464-1111
www.jacksonwhitelaw.com

4. Outline of Presentation
≫ The value of intellectual property
≫ Reasons to value intellectual property
≫ Role of IP attorney
≫ Reasons for continual or ongoing audits
≫ Discussing patents specifically
≫ How defects in a patent affect its value

5. “If this business were split up, I would give you the land
and bricks and mortar, and I would take the brands and
trade marks, and I would fare better than you.” — John
Stuart, Chairman of Quaker (ca. 1900)

6. IP and IA

7. The Economist’s Patent Valuation
Analysis
• In an Aug, 17, 2011 article titled “Doing the Math,” The
Economist presented the following analysis:
• In December of 2010, Novell sold off its portfolio of 882 patents
for $450 Million. A simple division calculation leads us to a
value of $510,204.08 per patent;
• Google‘s $12.5 billion acquisition of Motorola Mobility is widely
regarded as being about Motorola's patents, which Google needs to
defend itself from a spate of recent lawsuits;
• Forgetting that Motorola also makes mobile phones, let’s say the
entire value of the acquisition was in their 24,500 patents and
applications. At a $12.5 billion price tag, that equates
to…$510,204.08 per patent!
• Therefore, in the Motorola acquisition, Google bought a patent
portfolio and got a mobile phone business thrown in for free.

8. More from The Economist on Patent
Valuation
• The same Economist article continues with the following
analysis:
• If Google's acquisition of Motorola was indeed priced solely on a
cost-per-patent basis, as looks likely, it would set a benchmark for
valuing an intellectual property portfolio.
• In July 2011, six IT firms including Microsoft, RIM and Apple paid
$4.5 billion for 6,000 patents owned by Nortel, a bankrupt
Canadian manufacturer of telecommunications gear.
• Using the same simple math, the group paid a clean $750,000
per patent. If Google's latest acquisition was pricey, that one was
downright exorbitant.

9. One More Comparison: Nortel vs.
MMI
• Finally, the IAM Magazine published a blog titled “Why
Google is much better off with the Motorola patents than the
Nortel ones,” which includes the following analysis:
• The following tables show the essential patent counts for both
Nortel Networks Ltd and Motorola Mobility Inc.
• This comparison is of interest because it is quite rational for
defensive purposes to assign the value of a portfolio to the
standard essential patents within it.
Motorola Mobility Inc
Total declared essential US patents in
portfolio: 1,369
Portfolio cost ($mm): 12,500
Cost per essential US patent : $9.1M
Nortel Networks Ltd
Total declared essential US patents in
portfolio: 107
Portfolio cost ($mm): 4,500
Cost per essential US patent: $42.1M

10. “This is a lucrative time for intellectual property.
Earlier this year, Kodak, the bankrupt company that invented the digital
camera, sold its portfolio of 1,100 digital photography-related patents to a
dozen licensees, including Apple, Microsoft, and Google for $525 million
($477,272.72 per patent).
Last spring, Google bought Motorola Mobility, with its 24,500 patents, for
$12.5 billion, to protect its Android mobile operating systems from rivals
($510,204.08 per patent).
Also last year, Microsoft acquired 800 patents from AOL for more than $1
billion, ($1.25 million per patent) only to turn around and sell 70% of them
to Facebook for $550 million in cash ($982,142.86 per patent).”
Forbes, “How To Tell What Patents Are Worth” (2013).

11. IP and IA
≫ Intangible assets are economic resources, often created in the normal
course of business, that lack physical presence, but have value due to
the rights, benefits, and privileges they convey to their owner:
› Brand names
› Customer lists
› Non-compete agreements
≫ Intellectual properties comprise a subset of intangible assets that are
created consciously through the intellectual effort of specifically
identifiable individuals, and are registered and legally protected by
federal and state statute:
› Patents
› Copyrights
› Trademarks
› Trade secrets
› Know-how

12. At least 9 reasons for valuing IP:
1. Exploitation- A basis for negotiations involving sale, licensing, or exchange of IP.
2. Taxation - Transfer of IP from parent to subsidiary company; Donation of IP as a tax-free
gift to some institution; Estate planning
3. Raising Funds and Securing Financing- IP may serve as a collateral with banks; IP
value helps startups raise venture capital
4. Profit Sharing - When there are multiple IP owners- As in a R&D consortium that
involves multiple companies contributing - to determine the allocation of net income;
Joint ventures and strategic partnerships
5. Assessing damage claims in a dispute, infringement or breach of contractual rights.
6. Financial Reporting
7. Transfer Pricing- What price is right, for transfer of patents, licensing a trademark,
within the firm?
8. In any restructuring or liquidation procedure - As in mergers, spin-offs or bankruptcy.
9. IP Drives Market Value of Stock - Not only for smaller startups without significant real
assets, but increasingly for larger companies such as IBM

13. One more reason
“Nevertheless, the role of intellectual property rights ( IPRs) and intangible assets
in business is insufficiently understood. Accounting standards are generally not
helpful in representing the worth of IPRs in company accounts and IPRs are often
under-valued, under-managed or under-exploited. Despite the importance and
complexity of IPRs, there is generally little coordination between the different
professionals dealing with an organization’s IPR.”
Kelvin King, The Value of Intellectual Property, Intangible Assets and Goodwill (2011).

14. Valuing IP is a team effort
Client
• Usually in the best position to
evaluate the marketplace;
• Averse to spending upfront costs
for indefinite gains
IP Attorney Accountants
• Identifies,
protects, and
maintains IP
• Claim
interpretation
• Evaluate new
case law’s impact
on portfolio
• Determines the value of IP;
• Advises on the CBA of depth of
audit

15. Role of the IP Attorney
• Identification, organization, and review of a client’s intellectual
property assets and potential liabilities
• Ownership
• Recordation of transfers
• Perfection of security interests
• Compliance with statutory formalities
• Infringement of third party rights (FtO)
• Client’s rights being infringed
• Could be
• General Purpose IP Audit
• Event Driven Audit
• Narrow Focus Audit

16. Why perform an IP Audit?
• Other than quantifying the value
• Identify, organize, and review existing IP portfolio
• Resolve current issues in IP management practices (IP case law
changes rapidly)
• Establish procedures to ensure protection of assets in the future
• Better guarding of trade secrets
• Docketing system for payment of fees and renewal filings
• Assignments of IP in employment and consulting agreements
• Especially Problematic for Copyright
• Better marking of products
• Add value to the company
• What IP assets are underutilized
• What are the potential value creators

17. How fast does case law change?
• Mayo v. Prometheus, 132 S. Ct. 1289 (2012)
(biotech.) - invalidated patents for diagnostic tests that measured the amount
of metabolites in the blood.
• Association for Molecular Pathology v. Myriad Genetics, 569 U.S. 12-
398 (2013)
(biotech.) – invalidated patents for genes.
• Alice Corp. Pty. Ltd. v. CLS Bank Intern., 134 S. Ct. 2347 (2014)
(software) – invalidated patents for computer systems that embody economic
processes.

18. Benefits of IP Audit
“A patent is like real estate. When you own a piece of real estate you might put a
fence around it to keep people from trespassing on your property. The fence is the
metaphorical claims in your patent. Well-constructed claims are worth a lot more
than flimsy ones.” - Joseph G. Hadzima
• Prevent asset losses
• Make effective economical use of IP assets
• Address gaps in licensing and agreement procedures
• Minimize risk of third party infringements
• Determine position in relation to competitors

19. Other issues unearthed in IP Audit
• Defects in title to IP
• Assignments of ownership from consultants
• Employee inventions within the scope of work
• License rights from third parties to make derivative works
• Third party joint ownership
• Defects in patents (copyrights or trademarks as well)
• Requests for reexamination or reissue of a patent
• Amendments to applications
• Certificates of correction

20. Types of Patents
Utility Patents
* Non-provisional
* Provisional
* Continuation / Continuation-in-part
Design Patents - (Google v. Samsung – initially $2
billion, but now $639.4)
Plant Patents

21. Discounts on Value: Guidelines
for Assessing Patents
1. Status of the patent
2. Ownership and contractual issues
3. Patentability / Invalidity
4. Freedom-to-Operate
5. Scope of the claims
6. Circumvention and breadth of the coverage
7. Detectability and Enforceability
Malte Köllner, Due Diligence Or Discount Monetary Effect Of
Legal Aspects In Patent Valuation (2009)

22. • Questions?