Generic patent monetization basics 2 26-16
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A presentation on dos and don'ts on selling patent portfolios.
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Generic patent monetization basics 2 26-16
- 1. INTELLECTUAL PROPERTY ANALYTICS Patent Portfolio Monetization I Issues to debate before creating a corporate monetization strategy
- 2. INTELLECTUAL PROPERTY ANALYTICS Agenda • Common patent portfolio Issues • Monetization program goals & objectives • Patent family value drivers • Deal structures to consider • Monetization mistakes 2
- 3. INTELLECTUAL PROPERTY ANALYTICS Common Portfolio Problem #1: Evolutionary Fugue • Unclear patent holdings due to mergers, acquisitions, divestitures, lost records, and lack of a useful grading scale • Patent value confusion from changing court and PTO decisions and processes, and a lack of a simply stated inventive distinction and the PTO limitation(s) for each patent family • Lack of precision regarding technology and product line areas covered by each family, and how they read on adverse parties • Lack of database tools to easily manage the portfolio for BOTH product line and IP departmental success • Suspicion that substantial $$ wasted on maintenance fees for worthless patents, but no easy way to determine which ones Result: lack of portfolio alignment with business objectives 3 “Fugue Blanket,” by www.nemobott.com
- 4. INTELLECTUAL PROPERTY ANALYTICS Common Portfolio Problem #2: Cultural Confusion • The IP department is typically a cost center, not a P&L center, so portfolio management is under-resourced and “budget-adjustable” • Ad-hoc portfolio organization, planning, and decision-support systems (e.g. spreadsheets, licensing agreements, patent family growth, maintenance payments, product line issues, etc.) • Product line groups subconsciously think of a patent as a long term asset to be kept in a safe place for defensive emergencies • IP Dept. subconsciously thinks a patent is like like dry ice in the sun, so it needs to be used before it vaporizes over time • IP Dept. has no engineering resource; product line groups have it, but need it to maintain product line sales growth; both suffer from lack of portfolio knowledge Result: Inability to properly address threats and opportunities, and efficiently manage the company’s patent portfolio 4
- 5. INTELLECTUAL PROPERTY ANALYTICS Corporate Patent Portfolio Perspective • When Nortel went under, the company was sold off in pieces • Business divisions were sold: § Ericsson (CDMA & LTE assets) = $1,130m § Avaya (Enterprise Solutions) = $900m § Ciena (Metro Ethernet Networks) = $770m § Ericsson (GSM Business) = $100m § Genband (Carrier VoIP) = $100m § Ericsson (Multiservice Switch) = $65m Total sale price for all 7 = $3.065B • Nortel’s residual 6,000 patents sold for $4.5 Billion— 50% more than all of its business divisions put together! 5
- 6. INTELLECTUAL PROPERTY ANALYTICS Strategic Corporate Program Goals • Leverage exclusionary rights: u Protect competitive advantage u Maintain freedom to operate u Create powerful negotiating chips for competitive IP issues • Enhance profitability via monetization: u Maximize ROI on development $$ u Minimize maintenance fees u Recoup $$ outlays for inbound license fees u Maximize company’s valuation 6
- 7. INTELLECTUAL PROPERTY ANALYTICS Monetization Objectives To Support Strategy • Analyze, grade, and organize patent families such that: u Inventive distinctions and critical limitations are identified for each family u Product lines and IP Dept. can mine the patent database easily u Identify technology areas with too many or too few good patent families u Monetize excess good patent families in oversupplied areas u File or acquire good patents in areas of deficiency u Find & abandon patents of no value § Before the 11.5-yr $7400 maintenance fee for the parent patent + foreign fees… § Before the 7.5-yr $1600 fee for each child patent + foreign fees • Create Innovative deal structures to leverage company’s IP • Transform IP Dept. to a P&L operation that can afford: u Resource levels to consistently weed and feed the the company portfolio u Outside analysis and reverse engineering expertise to analyze patent families and determine which company patents are being infringed, and by whom 7
- 10. INTELLECTUAL PROPERTY ANALYTICS Patent Rating Chart Parameters* 10 *Techinsights, an Ottawa reverse engineering company, broadly distributes this chart—a good way to rank patents for further diligence
- 11. INTELLECTUAL PROPERTY ANALYTICS Monetization Deal Architectures to Consider • 2-stage private auction (6 mo.) • Stalking-horse bid invitation preceding private auction (8-9 mo.) • Directed 1-on-1 negotiated transaction • Recording bid (buyer proposes X families— seller rejects Y, & X-Y families ~ relate to $ bid) • Privateer model • Syndicated transactions 11
- 12. INTELLECTUAL PROPERTY ANALYTICS Operating Companies Pursuing a Privateer Model 12 Operating Company Sponsors IP Privateers serving Operating Company Palm (Under HP today) Smartphone Technologies LLC Hitachi / SANDISK Solid State Storage Solutions LLC ETRI SPH America LLC HP/Cisco, others? AMBATURE LLC Nokia/ Sony MMI LLC Alcatel Lucent Multimedia Patent Trust LLC GE CIF Licensing LLC Hitachi Mednis LLC Micron Technology Round Rock Research LLC SHARP SHARP Technology Venture
- 13. INTELLECTUAL PROPERTY ANALYTICS Multi-Lot Parallel Patent Auction Strategy 13 Negotiations carefully timed to avoid negotiation overlap
- 15. INTELLECTUAL PROPERTY ANALYTICS Showstoppers for Patents Chosen for Monetization • High encumbrance load on the chosen patent families • Restrictions mandated by company (e.g. No NPE’s) • Degraded quality of patent families selected: u Less than 15-20% good Evidence of Use charts for number of patent families u Poor litigation/licensing history u Reexamination in process u Terminal disclaimer to patent not in the portfolio u Examiner limitations that narrow applicability to a small market u Government investment in IP creation u Complex technology + horrible claim language (poor English) u Intervening rights u Low apportionment factor 15
- 16. INTELLECTUAL PROPERTY ANALYTICS Typical Seller Mistakes • Hang on to patents they don’t need until close to expiration • Selling leftovers after filtering out the good stuff • Hide vulnerabilities hoping none are discovered • Unrealistic price expectations • Internal changes to patent list late in the process • Monetization goals not supported by management • Unrealistic PPA terms (buyer drafts PPA, seller warrants facts) 16