PMG Oct 2011 Patents and intellectual property 101 for product managers final

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Recent sales of patent portfolios for billions of dollars are leading executives to revisit potential dormant value. With visible portfolio valuations such as Nortel and Motorola IP making headline news, the value of Intellectual Property has never been higher than in today's economy. As a result, Product Managers are now being challenged with understanding basic patent protection, strategy and valuation.

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  • - Claim ownership of new technology areas. - Slow down or prevent competitors. Protect market share. - Assist in marketing of products. - Provide ability to countersue if competitor sues first. - Provide revenue stream from licensing of patents.
  • What is Smart IP Growth? A business-based approach to creating IP wealth based on patents Step 1: Strategize - Develop goals for creating and protecting your IP assets. Step 2: Select – Categorize and value your technology assets. Step 3: Secure – Obtain protection for your high-worth assets. What is not smart about traditional patent programs? Traditional patent programs are driven by technology, not business: Engineers identify clever technical ideas. Someone collects the ideas and sends them to the patent attorney. The patent attorney drafts the patent application based on the technology, but not the business context.
  • In today’s information-based society, the most valuable assets of a company is often its intellectual property IP rights are the driving force behind biotechnology and high technology companies Intellectual Property (IP) includes various valuable, intangible corporate assets IP is distinguishable from tangible article embodying or incorporating IP Everyone is free to compete Patents and trade secrets are often the most important types of IP for technology companies IP assets should be treated like other corporate assets KEY - IP must be properly managed to maximize value
  • Provides the owner the right to prevent others from making using and selling the invention claimed --does not give positive right to do anything --Using your patented invention may infringe an earlier patent But Patent can add value to a company --- attract financing Compete effectively –prevent competitors from obtaining patent Generate revenue : sell or use as an asset; license for royalties; cross license for new technologies; use as collateral Bargaining chip in commercial or legal negotiations (infringement)
  • Good candidates for trade secrets are process inventions or products that cannot be reverse engineered Only work if secrecy maintained – someone else could patent Petty patents available in much Europe including France/Germany and in other countries such as Australia, China, Japan, Korea Limited term/ less expensive/ lower standard of obvious/ may not be examined Combination – patenting main technology and publication of improvements to stop others in area
  • e.g., perpetual motion machine
  • e.g., perpetual motion machine
  • An NDA is also known as a confidentiality agreement Used to maintain confidentiality of a trade secret where one party wants to disclose to another party No public disclosure : (no offer for sale, use NDAs, MTAs)
  • Review – have person from marketing/manufacturing on review Pay up front costs saves money Analogy of cheep contractor – save money initially but costs in long run and may do irreparably harm
  • Patents are a good asset for a company. Recently valuations of patents and applications have been reached hundreds of thousands of dollars per document. See The Economist Blog: Babbage, Aug 17 2011, http://www.economist.com/blogs/babbage/2011/08/valuing-patents. Notes how Google bought an operating business and patents but it was as if the business was handed over for free with the patents. On April 26, 1976, 12 patents were asserted in the U.S. District Court of Massachusetts. Polaroid Corporation, prevailed after a 75 day trial on 7 of these. The case was decided in October 11, 1985 but did not settle out until 1991. In todays dollars, the settlement was worth about 1.5 to 2.25 G$.
  • So how does one arrive at these values other than recording what a seller paid a buyer. Here are some examples.
  • But really the value comes from the rights. The rights depend on the claims. From the right of enforcement all other value is derived. What a competitor would pay to continue to operate? What can you get from a competitor? A patent is not a publication or an award at the price you pay for it. It is an award, it is a publication, but you can either of these things faster and cheaper than a patent. You patent better be, on average, worth more than what you paid. Otherwise, you are better off spending monies on other things.
  • How can you improve the value? By keeping in mind the three perspectives that all patent matters need to be analyzed from: strategy, technology, and law. If you fail to secure patents that are in conformance with an aspect of law that is bad. Same for your aspects of your business. What is an example of an alternative strategy? How about when a quasi-medical device becomes a status symbol e.g. eye controlled pointer in a W.I.M.P. GUI? What is meant by what technology will be like in the future. C.f. Gretzky “skate where the puck's going”. Consider what a phone looked liked 20 years ago and now. What is the same what is different. Hence be holistic in your thinking and prescient.
  • PMG Oct 2011 Patents and intellectual property 101 for product managers final

    1. 1. Patents and Intellectual Property Strategy / Protection/ ValuationRecent sales of patent portfolios for billions of dollars are leading executives to revisit potential dormant value.With visible portfolio valuations such as Nortel and Motorola IP making headline news, the value of Intellectual Property has never been higher than in todays economy. As a result, Product Managers are now being challenged with understanding basic patent protection, strategy and valuation. BCTIA - Product Management Group – Oct 25, 2011 - Facilitator Derek Pettingale – Regional Product Marketing Manager Schneider Electric - Renewable Energies
    2. 2. The goal of the Product Management Group is to promote and enhance theprofession of Product Management in BC’s technology industry. The BCTIAwith Members of the Product Management Group work collaboratively to:• Promote Product Management as a recognized discipline• Encourage the sharing of best practices in a non-competitive environment• Provide networking and peer building opportunities for product managersProduct Management Group events are open to product managers, productmarketing managers or those responsible for product management in theirorganization. Attendees must work for a BC based technology company inany technology sector, whose core business is the development and/ordistribution of technology-based products or services.
    3. 3. Product Management Group Advisory Committee:Derek Pettingale, Product Marketing Manager APAC - Schneider Electric Renewable EnergiesEdna Menon, Product Management ConsultantHelen Goddard - Rockfern Consulting Inc.Nenad Furtula, VP Product Management - Bluestream SoftwareStewart Rogers - ACL ServicesConnect with the BCTIA and your PMG Peer Group through LinkedIn Groups.
    4. 4. Coming Feb 2012Open Call for Organizing Volunteers and Sponsors… See me afterward.
    5. 5. Next Event - Nov 8, 2011Secrets of a Successful Product Launch David Daniels from Pragmatic Marketing and creator of Pragmatic Marketing’s “Product Launch Essentials” seminar explores how to plan for a product launch and provides his top tips on where to focus to achieve the best result.
    6. 6. Tonight’s Speakers - Strategy / Protection/ Valuation Brent York, P.Eng, MBA, MIES CEO of Tangenesys Consulting Chris Metcalfe Lawyer, Gowling Lafleur Henderson LLP Miles Steininger IP Advisor, SAP AG BCTIA - Product Management Group – Oct 25, 2011 Facilitator Derek Pettingale – Regional Product Marketing Manager Schneider Electric - Renewable Energies
    7. 7. World Intellectual Property Organization http://www.wipo.intIP.com Products and Services• Free Patent and Non-Patent Literature Database• Defensive Publishing• Prior Art Research and IP Analytics• Intellectual Property Web Log http://ip.com
    8. 8. United States Patent and Trademark Office http://www.uspto.govEuropean Patent Office http://www.epo.org
    9. 9. • Growth in Intangible Value Brent York, P.Eng, MBA, MIES CEO of Tangenesys Consulting
    10. 10. Growth in Intangible ValueStudy by Ocean Tomo (Chicago, June 16, 2010) Study by Ocean Tomo (Chicago, June 16, 2010)“Our further research shows that aasignificant portion of this intangible value is “Our further research shows that significant portion of this intangible value isrepresented by patented technology”. J. Malackowski ––Chairman ––Ocean Tomo. represented by patented technology”. J. Malackowski Chairman Ocean Tomo.
    11. 11. Smart IP Strategy – Where does it fit?Corporate Vision Corporate Strategies IP Strategic FrameworkWhere’s the business going? ValueWho do you want to be? CreationHow are you going to IP Strategy get there? Value How is success measured? (mkt. Extractionshare, capital value, products)
    12. 12. Typical Portfolio RolesType RoleCore Covers core technologyGuard Covers improvements, enabling technology, featuresApplications Covers applications of the basic technologyNumbers-building Increases the patent countCounterstrike Covers competitor’s products
    13. 13. Typical Start Up Portfolio @2yrs Core (1-3) Numbers Counterstrike (1-2) Applications or Guard (2-5)
    14. 14. How to Visualize an IP Estate – Technology “B” Technology “C” Core TechnologiesTechnology “A” Technology “D” P = Patent ID = Innovation TS = Trade Secret Technology “G” Technology “E” Technology “G” Technology “F”
    15. 15. Innovation X-Technology Framework Typical Industry focus ––nearest neighbour innovation Typical Industry focus nearest neighbour innovationEg: Solar PV Solar Cell Quantum Collection Power Energy Storage Grid TieGrid Tie Optimization Efficiency Technology Management OptimizationSolarOptimizationCell QuantumEfficiencyCollectionTechnologyPowerManagementEnergy StorageGrid TieOptimization
    16. 16. Strategic Framework – (Examples for illustration only). Near Term – Current Market Mid-Term – Market Transition Value Long Term – Visionary ValueMarket - 100 MW Scale Facilities - MW Commercial Local - Scalable KW ResidentialSegmentsTechnology - Adaptive tracking - Passive Collection Systems - Passive flexible solar - Thin film Solar Cells shingles and siding materials connected to local storage/grid tieIP Focus - Optimization of $/kw - Efficient integration into local - Integration into - System optimization environment and grids construction standards. - Local distribution & storage - Energy storageCollateral - Collaboration on - Integration of prototype - Zero net energyOutputProof of national scale projects - system in commercialExistence application. - Neighborhood residential trialsStrategic - Federal scale funded - Storage vs grid tie modeling. - Combining form &Initiatives projects – Nat’l labs function of materials with energy needs
    17. 17. • Protection Chris Metcalfe Lawyer, Gowling Lafleur Henderson LLP
    18. 18. • What is Intellectual Property? – Assorted rights to exclude others – National in scope – Some harmonization through international treaties & conventions
    19. 19. • Types of Intellectual Property– Patents– Trademarks– Copyright– Industrial Designs– Trade Secrets / Confidential Information– Other
    20. 20. • Pros of Patenting? – Competitive Advantage – Blocking patents – Royalty Stream – Attract Investment – Negotiation – cross license
    21. 21. • Cons of Patenting – Expense – National protection – Publication required – Definite term (20 years) – Patent not right to practice • Freedom to operate • Regulatory approval
    22. 22. • Alternatives to Patenting • Trade secrets – Inexpensive – Immediate protection – Can protect inventions not protected by patents – Potentially indefinite term – No publication required – Secrecy must be maintained – Does not prevent independent creation • Publication – Prevent others from obtaining patent protection
    23. 23. • Requirements for Patent – Statutory Subject Matter – Novelty – Inventive Step (non-obviousness) – Utility
    24. 24. • Statutory Subject Matter –“any new and useful art, process, machine, manufacture or composition of matter” or any improvement thereto. –Certain exclude subject matter • Methods of medical treatment, higher life forms, abstract theorems, (business methods???)
    25. 25. • Utility –Real world, specific utility • described in the patent application –No patents for inventions that defy scientific principles (e.g. perpetual motion)
    26. 26. • Novelty – Invention must be new in view of any public disclosure before application filed • single disclosure
    27. 27. • Inventive Step – Not obvious in view of any public disclosure before application filed • multiple disclosures may be considered • from a variety of sources
    28. 28. • Public Disclosure (Prior Art) – Made available to public by: • Publication • Public use • Sale/offer to sell (US) • Oral disclosure (conference proceeding; thesis defense) • Grant applications • Internet postings – Disclosure must be: • Non-confidential • Enabling – Grace period: • available in limited countries
    29. 29. • Maintaining Confidentiality – Avoid publicly disclosing your invention – Consider Non Disclosure Agreements (NDAs) – If prior public disclosure is unavoidable, grace periods are available in some countries
    30. 30. • You have an invention – now what? – Internal review – Comprehensive invention disclosure – Maintain confidentiality – Conduct a patent search (in-house/externally) – Patentability opinion – may be oral – Determine inventorship – Determine ownership – check employment/contractor agreements – Obtain executed assignments – Use patent agent to draft and file application
    31. 31. • Valuation Miles Steininger IP Advisor, SAP AG
    32. 32. • Valuation, recent sales – 2010 Dec, Novell, sold: 882 “patents” × $510,204 each = $450 Million – 2011 July, Nortel, sold: 6,000 “patents” × $750,000 each = $4.5 Billon – 2011 Aug, Motorola, sold: 24,500 “patents” × ≤ $510,204 each ≤ $12.5 Billon• Highest damages collected after trial – 1991, Polaroid v. Kodak, 12 patents, $77 million each, $925 Million (between $1.5 and $2.25 Billion today)• Valuation, lowest – $0, or less
    33. 33. • Valuation Calculations – What you paid for the patent procurement – The profit potential or cost savings the invention brings to your business – Reasonable portion of savings over a reasonable set of licensees less enforcement costs – Comparable patent sales – Time and risk discounting to the above – Option based pricing – e.g., variation of Black- Scholes
    34. 34. • Valuation – The value of the patent is based on the option a patentee has to go to court to enforce their claims – From the above all other value flow – e.g., licensing revenue, asset sale, cross-licensing, royalties, and the like – There is nothing elsewhere of value that is worth paying for – i.e., not a publication nor an award – The value is not related to the cost of the patent’s procurement but you will want to track this
    35. 35. n• Valuation – The value increases when the claims align with strategy, technology, and law • Getting one aspect wrong is bad • Strategy is not only your own but reasonable alternatives • Technology is future state of art not current • Be holistic and prescient – The value increases when bundled with other assets
    36. 36. Questions or Comments for Tonight’s Speakers? Brent York, P.Eng, MBA, MIES CEO of Tangenesys Consulting Chris Metcalfe Lawyer, Gowling Lafleur Henderson LLP Miles Steininger IP Advisor, SAP AGBCTIA - Product Management Group – Oct 25, 2011 Facilitator Derek Pettingale – Regional Product Marketing Manager Schneider Electric - Renewable Energies

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