2010 26 aprile_counterfeit_summary of myhrvold's idea_full

filippo.zanella@gmail.com

Nuove Frontiere d’Innovazione nel Mercato della Proprietà
Intellettuale e
Trasferimento Tecnologico

Filippo Zanella - 26 Aprile 2010


Intellectual Property defined
 "Intellectual Property Rights" exist to stimulate artistic and technological F
creation and hence to foster economic growth and development


The “perpetual beta”: welcome to the
Information Age
F
In the Information Age business is
increasingly dependent upon knowledge
and is no longer “business as usual”

Nowadays it is way easier for the folks to
“invent” and “start” a new
businesses...

…and this paradigm shift is challenging the
traditional mechanism of IP protection


What are the available instruments of
intellectual property protection
Instrument Description Protection
Patent •An invention that must be new, it The government grants a temporary
must involve an inventive step, it monopoly to the inventor
must be capable of industrial Typical duration is 20 years
application, and the grant of patent
must not be excluded
Trademark •The law provides protection for any Negative right to their owner to
symbol or distinctive sign prohibit others from using the same or
a similar sign to distinguish their own
products/services in certain
circumstances
Copyright •Provides protection for literary and • Not such a strict monopoly as patents
artistic works and registered trademarks.
• The copyright owner can only prevent
actual copying of the work.

Know-how •Confidential information, and is Protected by contractually obtained
defined for the purposes of confidentiality, recognised via various
competition law legal dispositions


Emerging instruments of intellectual
property protection
 Creative Commons
 Customize your rights
 Enforce by law
 Enforce by “peer pressure” and through social networks


Higher Education System is the
innovation engine
 University research departments have helped to drive
innovation in everything from design to entertainment

85
…of all the high-growth business
% created in US in the past 20 years
were launched by college
graduates


Innovation Ecosystem
Technology Transfer is critical
Typical budget order of magnitude

Technology Transfer
Sponsored
Education Market
Research
Budget (start-up, corporations)
Budget
Contract Licensing Spin-off
research with
industry

• Technology transfer is considered as a marginal and relatively
unimportant activity by many Research Institutions
• Education and research budgets dwarf the proceeds from technology
transfer


R&D numbers
 3% EU target: 2% private, 1% public
 The actual state of R&D in EU (Europ Res. Area 2008-
2009)


Revenues from License (2007)
HE-BCI (UK)
TechTrans (DENMARK)
Respondent 160
Respondent 13
Average Revenue 296,1 K€

RedOTRI (SPAIN)
Respondent 61
Average Revenue 32,1 K€ NETVAL (ITALY)
Respondent 65

Fonte: ProTon Europe, 2009


Reinforce Technology Transfer: trends
Typical budget order of magnitude

Technology Transfer
Education Sponsored
Research Market
Budget (start-up, corporations)
Budget
Contract Licensing Spin-off
research with
industry

1 2 3
TEACHING SCIENTIST DISINTERMEDIATE CREATING A CAPITAL
how to raise capital R&D building research and MARKET for Research
through schools that cover inventors networks outside and Invention, similar to the
issues from regulation to the corporations. Venture Capital Market that
entrepreneurship. funds start-ups.


1. Teaching scientist how to raise capital
 Il CNR si appoggia a “Rete ventures”, società partecipata
del CNR per il trsferimento tech ed sviluppo industriale
che opera nel campo dei materiali innovativi e tecnologie
avanzate
 Netval, rete delle università italiane


2. Disintermediation of R&D
Emerging ecosystems

InnoCentive connects BootB is the Pitching crowdSPRING is a network
companies, academic Engine that brings Brand of more than [58,770]
institutions, public sector Builders and Creative creatives from [170]-plus
and non-profit Brains together countries who vie to
organizations, with a global provide logo, website and
network of more than collateral design to
200,000 of the world's primarily small and
brightest minds medium-size business
clients

 A new breed of ecosystems sprout to aggregate would-be
inventors and creative minds
 These systems provide solid rewarding mechanisms to value
intellectual products


3. Creating a Capital Market for Research
and Invention
 Patent Trolls


Qual’è la via italiana?

<< if we learn anything from the history of
economic development, it is that
culture makes almost all the
difference.>>*
* David Landes: Economic Historian.


An introduction in Intellectual Property
Rights
 "Intellectual Property Rights" (IPR) exist to stimulate artistic and technological creation and hence to
foster economic growth and development.
 IPRs are negative exclusive rights in that they grant the holder the right to exclude others from doing
what is their object. Thus they confer a monopoly to their holder and are an exception to freedom of
competition and in particular freedom of copying products, services and processes from competitors.
This monopoly is however limited in time and the duration of IPRs varies according to their type.
 As compensation for granting this temporary monopoly, society reaps the benefits of encouraging
innovation and stimulating the economy, either by the creation of artistic works (protected by copyrights
or neighbouring rights); by the disclosure of how to carry out inventions (protected by patent law); or by
the commercial exploitation of this innovation.
 IPRs can therefore be seen as the result of a trade-off between individuals and society: the creator /
inventor gets a temporary monopoly over his work / invention, while society gets the economic
advantage of innovation.
 "Industrial property" generally refers to aspects related to the industrial world and designates, on the
one hand, rights protected by patent law, trademark law, industrial design law and plant variety law
and, on the other hand, know-how
 "Literary and artistic property" generally relates to the "artistic" world and is covered by copyright and
copyright related (or neighbouring) rights.
 Alternatively, the decision can be taken not to formally protect intellectual property (IP). Intellectual
property can be left totally open or, on the contrary, kept secret. The choice of whether and how to
protect IP is a strategic decision, depending largely on the nature of the intellectual property and, in the
case of IP presenting a commercial potential, the characteristics of the target market.


Patent
 Patent law provides protection for inventions. A patent is the grant, by a
government, of a temporary monopoly to an inventor in return for a
written disclosure of how to carry out his/her invention.
 There are generally four conditions for the patentability of an invention: the
invention must be new, it must involve an inventive step, it must be capable
of industrial application, and the grant of patent must not be excluded.
 The length of protection granted by a patent is of 20 years as per the
date of filing of the application.
 For twenty years, the patent owner can exclude third parties from, without
his/her consent, manufacturing, developing, selling or offering for sale, using,
importing and exporting the patented product, or from using or offering
for use the process object of the patent.
 The patent owner can also decide to grant third parties the right to
accomplish one or more of the above-described activities (through
licensing) or to fully transfer his rights to a third party.


Trademarks
 Trademark law provides protection for any word, symbol or
other distinctive sign used to distinguish an organisation’s
product or service from those of its competitors.
 A trademark acts as a "badge of origin" or "badge of quality",
which informs the public that the goods or services with
which it is associated originate from a certain company and
are guaranteed to be of a certain quality. From the trademark
owner’s perspective, a trademark is also an important tool of
recognition and marketing and can represent an important
intangible asset.
 As for patent law, trademarks protect these signs by granting a
negative right to their owner to prohibit others from using the
same or a similar sign to distinguish their own
products/services in certain circumstances.


Copyright
 Copyright provides protection for literary and artistic works, being understood that these
terms should be read without any implication of aesthetic merit.
 Copyright is not such a strict monopoly as patents and registered trademarks.
 The copyright owner can only prevent actual copying of the work.
 An independent creation of the same work does not infringe.
 Nor are the ideas or information contained in the copyright work protected as such since
copyright does not protect the idea underlying a work, but rather the form in which it is
expressed.
 Copyright is the most international of intellectual property rights.
 Works are automatically protected by copyright without formalities in almost all industrialised
and most developing countries as a result of international agreements.
 In all EU countries and in the US the protection granted by copyright lasts for 70 years after
the author's death. During that period, and subject to a number of exceptions, the copyright
owner is exclusively entitled to a number of rights, including reproducing the whole or a part
of the work in any material form ("copying"), putting copies into public circulation, selling,
offering for sale or letting the work for hire, performing the work in public, broadcasting the
work or including it in a cable programme, making an adaptation of it, or authorising anyone
to do any of the above. These rights are called "patrimonial rights".


Know How
 Know-how is a sort of confidential information and is defined for the purposes of competition
law, for example, as a package of undisclosed, non-patented practical information, resulting
from experience and testing, which is secret, substantial and identified.
 "Secret" means that the know-how is not generally known or easily accessible, i.e. that it has
the necessary quality of confidence.
 "Substantial" means that the know-how includes information which is significant and useful for
the production of products or the application of processes.
 "Identified" means that it is possible to verify the actual content of the know-how, for example
when it is described in any written form.
 Classic examples of confidential information include trade secrets, minor innovations to a
(even patented) product or process, commercial details such as customer lists, or the know-
how which may be necessary to maximise the efficiency of any kind of industrial or
commercial operation.
 know-how is not protected by a set of dedicated legal provisions that would grant the
know-how proprietor a negative right to exclude others from doing predetermined acts.
 Rather, know-how can typically only be protected by contractually obtained confidentiality and
this obligation of confidentiality is recognised via various legal dispositions.


Licensing
 The estimated volume of licensing between Research Organisations and industry in
Europe is around EUR 300 million,47 which represents 1% of the total R&D
budgets within Research Organisations.
 In the licensing model, the Research Organisation grants user rights to its
intellectual property in the form of a license, which enables the industrial partner to
develop and commercialise products and / or processes covered under the license
in return for license fees and / or royalty income related to its commercial returns.
 For Research Organisations, the licensing model has a number of advantages when
compared with the collaborative model. The Research Organisation retains a higher
level of control over its research. Furthermore, the technology can prove valuable
to a broad range of industrial partners in different technical fields. In such cases, the
Research Organisation is able to grant licenses to a broader range of partners, and
the technology is more widely available to potentially interested users. However, in
the licensing model, the Research Organisation typically obtains financial benefits
only once its Intellectual Property is commercialised and starts to generate
revenues.
 For the industrial partner, the licensing model can also be attractive in that the
company pays for the tangible results of research. Licensing agreements can be
tailored to better satisfy the needs of both parties.


Collaboration Industry – Research
Organisation
 In Europe, the volume of industry – Research Organisation collaboration is
estimated at EUR 2.2 billion
 This represents 7% of the estimated total European research and
development budget in Research Organisations.
 It is useful to draw on the usual distinction between two types of research
 collaboration.
 Contract research where the Research Organisation is typically paid to apply
existing knowledge and expertise to a particular situation. This is usually the case
in projects aiming at improving technology that is already in existence.
 Collaborative research, where parties engage in more wide-ranging collaboration
and significant intellectual input is provided by the Research Organisation. This
type of research is expected to contribute to the advancement of scientific
understanding. The intellectual expertise of the Research Organisation is sought
to identify novel solutions or explore new territory and industrial partners are
prepared to support the efforts of the Research Organisation, both financially
and through other resources.


Technology Transfer Office
 Technology Transfer Office is "a dedicated entity which provides,
continuously and systematically, services to publicly funded or co-
funded Research Organisations in order to commercialise their
research results and capacities“
 the bridge between
 a technology "push" process aiming to improve the uptake of
technology coming from the science base and
 a technology "pull" process related to the promotion of the demand
for new technology in the business sector.
 Encompasses a broad set of activities and development
vehicles, aimed at a range of related activities including
encouraging invention disclosure, applying for patents,
marketing to prospective licensees, managing industry
relationships, coordinating research sponsorships, supporting
start-up companies, and managing equity stakes in spinouts.


Technology Transfer Mechanism
"Technology transfer" defines the process of transformation of
the results of Research and Development (R&D) into marketable
products or services


Technology Transfer
"Technology transfer" defines the process of transformation of
the results of Research and Development (R&D) into marketable
products or services


Structural weaknesses of EU technology
transfer: Scale
Europe suffers from a very significant, growing gap compared to US clusters


Structural weaknesses of EU technology
transfer: Positioning
• Technology transfer is still often considered as a marginal and relatively
unimportant activity by many Research Institutions
• Education and research budgets dwarf the proceeds from technology transfer


A Benchmark excercise (FY 2006)


Higher education-business and
community interaction survey (HE-BCI)


America Entrepreneurialism Advantage
First Pillar: Mature Venture-capital industry

10.000 plausible business plan
per year

A solid business plan
scrutiny funnel is a
1.000 meeting
reference for “in pectore”
entrepreneuers

400 company
visits

10-20
investment


Second Pillar: universities-industry relations
 America’s universities are economic engines with:
 Science parks
 Technology offices
 Business incubators
 Venture funds
 Stanford University gained around 200M$ in stock when
Google went public
 50% of Silicon Valley start-ups have their roots in the
university


Third Pillar: Immigration policy
 52% of Silicon Valley start-ups have their roots in the
university were founded by immigrants
 Around 25% of High Tech start-ups, generating 52 billion$
and employing 450.000 people


Monetising inventions.
Is there a new market in the Terra Incognita of
modern Finance?

Some consideration on the “Intellectual Ventures” model of
Nathan Myhrvold


Common Myths about Inventing
1. Inventing can’t be a business in its own right
2. Inventing is too risky
3. Inventions are too intangible to generate sufficient
profits
4. Inventing can’t be separated from companies that turn
ideas into products
5. The idea of a liquid market for inventions is absurd


Looking back:
the birth of Venture Capitalists

“Before”; in the 1930’s “After”; in 1946 a.f.
 George Doriot and an Harvard
 Professional venture Business School professor
capitalists did not exist founded American Research and
Development Corporation
 Entrepreneurs had to (ARDC)
borrow from  Switched the funding mechanism
from debt to equity
 rich relatives or  An investor could put the money
into an ARDC fund
 college friends
 An entrepreneur could approach
ARDC with a business plan
 A scalable and predictable model
to raise and invest capital


Looking back:
the birth of the Software Industry

“Before”; in the 1970’s “After”; three decades later

 In the 70’s the software  Software owes its ascent
was deemed valuable only to two crucial
to sell mainframes and developments:
minicomputers  Respect of intellectual
 Very few independent property through user
software vendors existed education and lawsuits
 Overcoming system
 As a business, software incompatibilities, developing
was hopeless solutions running on many
brands of computer

<<Invention is set to become the next
software: a high-value asset that will serve
as the foundation for new business models,
liquid markets, and investment
strategies>>*
* Nathan Myhrvold: CEO and a cofounder of Intellectual Ventures, a company that makes a
business out of invention. Former chief technology officer at Microsoft.


A New Financial Order for Research and
Inventions
“The primary subject matter of finance is the management of risks.
Unfortunately, the insights of finance have been applied in only a
limited way” *

“We need to extend finance beyond our major
financial capitals to the rest of the world” **

*) and **) Prof. Robert J. Shiller – The New Financial Order 2003 – Princeton University Press


Some relvant Issues and Facts
about Research & Invention


The Issues of Invention
 Inadequate funding for applied research
 Inefficient market for connecting companies with the
inventions they need and for monetizing inventions
 Balkanization of the inventors and inventions required to
tackle big problems
 Enforcement and arbitration system that:
 permits too much infringement
 relies too heavily on lawsuits to determine price


Fact #1.
Charity is not what “Inventors” ask
 Outside the pharmaceutical and biotech industries, few
companies consider inventing, or producing patented
intellectual property, to be their primary mission
 At universities and government agencies
 Published research is rewarded, but invention usually is not
 Research grants are gifts, not investments
 At corporations
 Their leaders rarely run research as a business in its own right
 They fund research as an act of faith, that the ideas produced
will somehow create value


Fact #2.
Cross-disciplinary approach pays back
 Most US federal funding goes to traditional research
programs focused on individual disciplines.
 Innovative cross-disciplinary teams are much better
equipped to come up with solutions to the increasingly
complex challenges the world faces


Fact # 3.
Government Funding is not dependable
 US Federal spending on basic and applied research,
adjusted for inflation, declined by 14% from 2003 to 2007,
according to the National Science Foundation
 From 1983 to 2007
 Federal spending on academic research rose by 60% (Inflation
adjusted)
 Investments in the business sector by the U.S Venture Capital
and Private Equity Industries soared by 1,140% and 1,940%,
respectively
 $1.6 trillion (in 2008 US $) invested by Venture Capital and
Private Equity Firms is three times the $537 billion that the
U.S. government spent on academic research


Fact # 3 (cont.).
Government Funding is not dependable
From 1983 to 2007
Investments in the
business sector by the
U.S Venture capital and
%
private equity
industries soared by
1,140% and 1,940%,
respectively

60
In the same period, Federal
% spending on academic
research rose by only 60%
(inflation adjusted)


The barriers to creating a new financial
order for Research & Invention


Manging the Risk
 A huge challenge in attracting investors is the highly risky
nature of inventions
However…
 Other industries have found ways to manage high risk.
 Insurance companies dilute risk by aggregating policies into large
portfolios
 A single invention is typically very risky.
 If you build a diversified portfolio of 10.000 of inventions that span a
wide range of technologies, the aggregate risk becomes quite
manageable
 Upside potential – Some inventions will be successful - and a
few will be blockbusters :
 If only one patent in a portfolio of, say, 2,000 patents is really
successful, it could generate $1 billion in revenues, returning many
times the cost of the entire portfolio


Manging the Risk (cont.)
 Difference between investing in invention capital funds and
investing in venture capital and private equity funds:
 Typical VC or PE fund lasts 10 years and often generates handsome
returns within 5 years
 Invention capital funds require much greater investor patience: the
lifetime of a patent is 25 years
 What investors has that kind of patience?
 Pension funds, university and foundation endowments, and wealthy
families and individuals who see invention capital similar to
derivatives, hedge funds, private equity, and real estate
 Strategic investors because, more than just a direct financial return,
are seeking help in coming up with game-changing ideas, or they
want early licenses to the patents


Giving Patents the Respect they Deserve
 In affluent nations, product companies too often see
inventors and other patent holders as adversaries, and
vice versa
 Product companies should see inventors as wellsprings of
innovation and should trust them - and invention capitalists-
enough to tell them what new technology the companies
actually need
 Inventors should see manufacturers and invention capitalists as
customers and should trust them to pay fair prices for the
ideas they use
 In Asia rights to patented inventions and other intangible
property are too often simply ignored


Giving Patents the Respect they Deserve
(cont.)
 Respecting intellectual property rights is a cornerstone of
some high-tech industries branded pharmaceuticals, biotech,
medical devices, and wireless
 Not the case in software, computing, and other internet-
related sectors
 Extreme competitive pressure on young firms to increase their
market share by any means necessary, even copying the ideas of
others
 Patents as a defensive weapon to be used mainly in retaliation
against any competitors that sue them for infringement
 This strategy of mutually assured destruction usually resolves itself in
cross-licensing or a stalemate
 It breeds a disdain for inventors


Building a Professional Industry
 All complex systems face in their early days the need to achieve a critical
mass of key players
 Key Success Factors
 mass of expertise
 more liquidity
 greater pricing visibility
 better set of options for inventors and patent users alike
 Clear rules and a timely Justice system
 Dealing with IP is a cross-disciplinary game
 Scientists
 Engineers
 Patent analysts
 Attorneys
 Finance experts
 Licensing sales agents
 Judiciary


Invention Capital Market


Benefits of an Invention Capital Market
INVENTORS ACADEMIC INSTITUTIONS
•Provide funding • Provide funding
•Ident ify fertile topics for inventions • Match areas of scientific discovery with
•Assess the marltet for specific inventions industry needs
•Establish market rates for inventioos • Structure deals when multiple organizations
•Provide reliable compensation have a stake in a patent
•Help produce strong patents • Help monetize inventions
•Market and license inventions • Enforce patent rights
•Bundle inventions from multiple
sources to increase their value Invention
Capital
Market

PRODUCT MANUFACTURERS SOCIETY AT LARGE
• Provide one-stop shopping for patents • Accelerate progress in technology
• Bring together outside inventors to meet • Reduce dependence on government funding
company specific needs for research
• Lower the risk of lawsuits by providing access • Foster respect for intellectual property rights
to patents • Efficiently recycle good ideas offailed ventures
• Serve as a ready market for patents a • Increase competition and consumer choice
company wants to license or sell


Final Take
 Research in areas like astronomy and fundamental physics that is
very long range and has diffuse benefits for society that’s right, it
should be funded by the government
 HOWEVER…
 the funding of the invention of useful technology that can make
money in a relatively short period of time say, 10 years, shouldn't be
the government's job only. The private sector must play a pivotal
role (in the proper regulatory environment)
 A functioning Invention Capital Market and The Industries can well
interplay and enable inventors around the globe to create hundreds
of thousands more inventions each year than are being made today
 Some of those inventions will be silly or useless…
 HOWEVER …
 what matters is the top 1% of those inventions. Those that will
make our lives vastly richer and better

2010 26 aprile_counterfeit_summary of myhrvold's idea_full

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