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IP  and  innovation:  the  academic  view
U.Spagnolini
Politecnico di  Milano
http://spagnolini.faculty.polimi.it/
Innovation Protection in  the  ICT  – Politecnico  di  Milano  June 3,  2014
How  academia  look  at  IPs
Goal	
  of	
  the	
  academia:
• High	
  quality	
  research	
  with	
  students
• Publish	
  methods/results	
  to	
  be	
  peer	
  reviewed	
  by	
  peers
• Exchange	
  ideas	
  and	
  methods	
  with	
  other	
  peers	
  to	
  improve	
  the	
  
research
• Patents	
  are	
  not	
  the	
  main	
  focus	
  of	
  researchers	
  as	
  «slow-­‐down	
  the	
  
cycle»	
  (=delay	
  publications	
  &	
  exchange	
  ideas)
Goal	
  of	
  the	
  industry:
• Spend	
  in	
  R&D	
  with	
  minimum	
  risk	
  to	
  maximize	
  the	
  ratio	
  income	
  to	
  
R&D	
  expenditure
• Have	
  the	
  most	
  innovative	
  and	
  unique	
  product	
  that	
  creates	
  value
2
Research
Publications
Exchange  
w/peers
new  ideas
Standardization (3GPP,  ETSI,  ITU,…)  is crucial to  guarantee the  interoperability
among  devices  from  different  vendors (with  scale  economy)
(in  ICT  we do  not  consider  the  case  1patent=1product=1company)
Innovation Protection in  the  ICT  – Politecnico  di  Milano  June 3,  2014
Innovation  cycle:  industry  vs  academia
A	
  simplified	
  model	
  of	
  the	
  innovation	
  loops
3
Research
Patents
Standard
Products  
Royalties €
€
Industry Academia
Research
Publications
Exchange  
w/peers
new  ideas
€
€
cooperation
Governments,  
EU,  etc...
€€
Innovation Protection in  the  ICT  – Politecnico  di  Milano  June 3,  2014
Patent  as  “technical  contract”
Assuming	
  that	
  a	
  researcher	
  is	
  willing to	
  patent	
  an	
  idea:
• Researcher	
  is	
  focused	
  to	
  highlight	
  the	
  innovative	
  methods	
  
as	
  these	
  are	
  valued	
  by	
  peers	
  (but	
  NOT Patents)
• Patent	
  is	
  just a	
  technical	
  contract	
  where	
  “words”	
  are	
  used	
  in	
  Claim	
  structure	
  to	
  protect	
  
the	
  innovation	
  (wording	
  is	
  the	
  only	
  part	
  used	
  by	
  Court	
  to	
  defend	
  your	
  rights)
• Patent	
  attorney	
  does	
  not	
  just	
  “translate	
  the	
  scientific	
  paper	
  into	
  legal	
  words”	
  but	
  rather	
  
forecasts	
  all	
  legal	
  issues	
  that	
  might	
  raise	
  to	
  legally	
  defend	
  the	
  idea	
  in	
  Court	
  in	
  future	
  
(Patent	
  Attorney	
  writes	
  the	
  technical	
  contract)
Patent	
  is	
  different	
  from	
  a	
  scientific	
  publication	
  (and	
  not	
  always	
  coincide)
Example:	
  A	
  and	
  B	
  communicate	
  in	
  noisy	
  environment	
  but	
  they	
  need	
  to	
  set	
  a	
  common	
  language
• Researcher	
  view:	
  find	
  the	
  “best	
  algorithm”	
  to	
  let	
  A	
  and	
  B	
  communicate	
  (methods,	
  limits,	
  equations!)
• Patent	
  Attorney	
  view:	
  in	
  order	
  to	
  let	
  A	
  and	
  B	
  communicate,	
  they	
  need	
  to	
  agree	
  before.	
  Claim	
  the	
  
hand-­‐shake	
  signaling	
  is	
  a	
  stronger	
  patent	
  (=easier	
  to	
  be	
  defended	
  in	
  Court)	
  than	
  the	
  algorithm	
  and	
  
equations!
4
Innovation Protection in  the  ICT  – Politecnico  di  Milano  June 3,  2014
Few  facts:  the  in-­flow/out-­flow  of  royalties
5
20  x  IMU’12  
(IMU’12=4B€)
+15  x  IMU’12
-­6  x  IMU’12
IMU (Imposta  Municipale  Unica)  is  a  property  tax  
on  the  estate  in  Italy,  approx  4BEuro  in  year  2012
Innovation Protection in  the  ICT  – Politecnico  di  Milano  June 3,  2014
R&D  expenditure
6
R&D	
  expenditure	
  alone	
  is	
  not	
  enough	
  to	
  justify	
  the	
  unbalance	
  between	
  EU	
  and	
  US
Innovation Protection in  the  ICT  – Politecnico  di  Milano  June 3,  2014
Tablets  and  IPs
7
May  2005
Innovation Protection in  the  ICT  – Politecnico  di  Milano  June 3,  2014
Value  of  damages and  patents (an  example)
8
IMU’12
4B€
Apple  vs  Samsung  
(Aug.’12)
Bridge  to  Sicily  8.5B€
Apple  vs  Samsung  
119M$  (May  ’14)
Innovation Protection in  the  ICT  – Politecnico  di  Milano  June 3,  2014
Standard  &  Standard  Essential  Patents
• One	
  smartphone	
  stacks	
  multiple	
  patents	
  (up	
  to	
  	
  250.000!),	
  and	
  Standard	
  compliancy	
  
guarantees	
  the	
  interoperability	
  of	
  multivendor	
  devices	
  (scale	
  economies)	
  but	
  there	
  is	
  an	
  
apparent	
  contradiction	
  as	
  any Standard	
  compliant	
  device (=uniformity)	
  stacks multiple	
  
patents where each inventor	
  must	
  be	
  guaranteed
How	
  to	
  rule	
  this	
  complex	
  equilibrium?
• Every	
  industry	
  offers	
  to	
  others	
  its	
  patents	
  to	
  be	
  part	
  of	
  the	
  Standard	
  (e.g.,	
  GSM,	
  UMTS,	
  
LTE,...)	
  at	
  FRAND	
  (Fair,	
  Reasonable,	
  and	
  Non-­‐Discriminatory)	
  licensing	
  conditions.
• Licensing	
  a	
  patent	
  in	
  FRAND	
  terms	
  is	
  mandatory	
  before	
  the	
  innovation	
  is	
  considered	
  to	
  
become	
  part	
  of	
  standard	
  specifications	
  approved	
  by	
  technical	
  Working	
  Groups
• Every	
  patent	
  can	
  be	
  self-­‐declared	
  (to	
  ETSI)	
  as	
  Essential	
  for	
  the	
  Standard	
  and	
  it	
  is	
  in	
  a	
  
database	
  of	
  Essential Patents (www.etsi.org/services/ipr-­‐database)
• Any	
  patent	
  self-­‐declared	
  as	
  «essential»	
  is	
  not	
  always	
  truly	
  essential.
9
Innovation Protection in  the  ICT  – Politecnico  di  Milano  June 3,  2014
3GPP&3GPP2  essential  patents
10
Approx.  21%  of  declared  patents  are  actually  essential
[Goodman  &  Myers,  IEEE  2005]
Innovation Protection in  the  ICT  – Politecnico  di  Milano  June 3,  2014
Royalty  in  LTE?
11
Start of  LTE  
standardization
Number	
  of	
  patents	
  vs	
  time	
  shows	
  an	
  exploding	
  situation	
  where	
  players	
  are	
  preparing	
  for	
  a	
  big-­‐business
Innovation Protection in  the  ICT  – Politecnico  di  Milano  June 3,  2014
Royalty  vs  Hardware  in  a  $400  smarthphone?
12
From:	
  The	
  Smartphone	
  Royalty	
  Stack	
  by	
  A.Armstrong,	
  J.J.Mueller,	
  T.D.Syrett	
  (draft	
  paper)
Hardware:  $120-­150
Innovation Protection in  the  ICT  – Politecnico  di  Milano  June 3,  2014
Royalty  vs  Hardware  in  a  $400  smarthphone?
13
From:	
  The	
  Smartphone	
  Royalty	
  Stack	
  by	
  A.Armstrong,	
  J.J.Mueller,	
  T.D.Syrett	
  (draft	
  paper)
WiFi:  $50.23  (12.5%)
Innovation Protection in  the  ICT  – Politecnico  di  Milano  June 3,  2014
Royalty  vs  Hardware  in  a  $400  smarthphone?
14
From:	
  The	
  Smartphone	
  Royalty	
  Stack	
  by	
  A.Armstrong,	
  J.J.Mueller,	
  T.D.Syrett	
  (draft	
  paper)
LTE:  $54.30  (13.5%)
Innovation Protection in  the  ICT  – Politecnico  di  Milano  June 3,  2014
Royalty  vs  Hardware  in  a  $400  smarthphone?
15
From:	
  The	
  Smartphone	
  Royalty	
  Stack	
  by	
  A.Armstrong,	
  J.J.Mueller,	
  T.D.Syrett	
  (draft	
  paper)
Royalty:  $121-­124  (30-­31%)
Hardware:  $120-­150  (30-­38%)
Innovation Protection in  the  ICT  – Politecnico  di  Milano  June 3,  2014
A  new  role  of  academia  in  ICT  innovation
• Gain	
  more	
  sensitivity	
  to	
  the	
  patenting	
  process	
  in	
  ICT
• Sell	
  research/innovation	
  and	
  take	
  risks/benefits	
  (not	
  just	
  selling	
  patent	
  applications)
• Gain	
  insight	
  in	
  the	
  Intellectual	
  Property	
  scenario
16
Innovation Protection in  the  ICT  – Politecnico  di  Milano  June 3,  2014
A  new  role  of  academia  in  ICT  innovation
• Gain	
  more	
  sensitivity	
  to	
  the	
  patenting	
  process	
  in	
  ICT
• Sell	
  research/innovation	
  and	
  take	
  risks/benefits	
  (not	
  just	
  selling	
  patent	
  applications)
• Gain	
  insight	
  in	
  the	
  Intellectual	
  Property	
  scenario
17
Innovation Protection in  the  ICT  – Politecnico  di  Milano  June 3,  2014
It’s  an  equilibrium  among  existing  players
• Patents	
  and	
  royalties	
  are	
  part	
  of	
  peer-­‐to-­‐peer	
  equilibria (between	
  
inflow&outflow)	
  that	
  can	
  be	
  ruled	
  by	
  agreements,	
  IPR	
  exchange	
  or	
  Courts
• Any	
  new-­‐entry	
  is	
  impaired	
  by	
  IPR	
  with	
  respect	
  to	
  these pre-­‐existing equilibria
• Lawsuits and	
  Court	
  are	
  heartquakes that change these equilibria and	
  let the	
  
players to	
  better value their inventions
18
€€
€

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IP and innovation: an academic view June 2014 by Prof. U.Spagnolini

  • 1. IP  and  innovation:  the  academic  view U.Spagnolini Politecnico di  Milano http://spagnolini.faculty.polimi.it/
  • 2. Innovation Protection in  the  ICT  – Politecnico  di  Milano  June 3,  2014 How  academia  look  at  IPs Goal  of  the  academia: • High  quality  research  with  students • Publish  methods/results  to  be  peer  reviewed  by  peers • Exchange  ideas  and  methods  with  other  peers  to  improve  the   research • Patents  are  not  the  main  focus  of  researchers  as  «slow-­‐down  the   cycle»  (=delay  publications  &  exchange  ideas) Goal  of  the  industry: • Spend  in  R&D  with  minimum  risk  to  maximize  the  ratio  income  to   R&D  expenditure • Have  the  most  innovative  and  unique  product  that  creates  value 2 Research Publications Exchange   w/peers new  ideas Standardization (3GPP,  ETSI,  ITU,…)  is crucial to  guarantee the  interoperability among  devices  from  different  vendors (with  scale  economy) (in  ICT  we do  not  consider  the  case  1patent=1product=1company)
  • 3. Innovation Protection in  the  ICT  – Politecnico  di  Milano  June 3,  2014 Innovation  cycle:  industry  vs  academia A  simplified  model  of  the  innovation  loops 3 Research Patents Standard Products   Royalties € € Industry Academia Research Publications Exchange   w/peers new  ideas € € cooperation Governments,   EU,  etc... €€
  • 4. Innovation Protection in  the  ICT  – Politecnico  di  Milano  June 3,  2014 Patent  as  “technical  contract” Assuming  that  a  researcher  is  willing to  patent  an  idea: • Researcher  is  focused  to  highlight  the  innovative  methods   as  these  are  valued  by  peers  (but  NOT Patents) • Patent  is  just a  technical  contract  where  “words”  are  used  in  Claim  structure  to  protect   the  innovation  (wording  is  the  only  part  used  by  Court  to  defend  your  rights) • Patent  attorney  does  not  just  “translate  the  scientific  paper  into  legal  words”  but  rather   forecasts  all  legal  issues  that  might  raise  to  legally  defend  the  idea  in  Court  in  future   (Patent  Attorney  writes  the  technical  contract) Patent  is  different  from  a  scientific  publication  (and  not  always  coincide) Example:  A  and  B  communicate  in  noisy  environment  but  they  need  to  set  a  common  language • Researcher  view:  find  the  “best  algorithm”  to  let  A  and  B  communicate  (methods,  limits,  equations!) • Patent  Attorney  view:  in  order  to  let  A  and  B  communicate,  they  need  to  agree  before.  Claim  the   hand-­‐shake  signaling  is  a  stronger  patent  (=easier  to  be  defended  in  Court)  than  the  algorithm  and   equations! 4
  • 5. Innovation Protection in  the  ICT  – Politecnico  di  Milano  June 3,  2014 Few  facts:  the  in-­flow/out-­flow  of  royalties 5 20  x  IMU’12   (IMU’12=4B€) +15  x  IMU’12 -­6  x  IMU’12 IMU (Imposta  Municipale  Unica)  is  a  property  tax   on  the  estate  in  Italy,  approx  4BEuro  in  year  2012
  • 6. Innovation Protection in  the  ICT  – Politecnico  di  Milano  June 3,  2014 R&D  expenditure 6 R&D  expenditure  alone  is  not  enough  to  justify  the  unbalance  between  EU  and  US
  • 7. Innovation Protection in  the  ICT  – Politecnico  di  Milano  June 3,  2014 Tablets  and  IPs 7 May  2005
  • 8. Innovation Protection in  the  ICT  – Politecnico  di  Milano  June 3,  2014 Value  of  damages and  patents (an  example) 8 IMU’12 4B€ Apple  vs  Samsung   (Aug.’12) Bridge  to  Sicily  8.5B€ Apple  vs  Samsung   119M$  (May  ’14)
  • 9. Innovation Protection in  the  ICT  – Politecnico  di  Milano  June 3,  2014 Standard  &  Standard  Essential  Patents • One  smartphone  stacks  multiple  patents  (up  to    250.000!),  and  Standard  compliancy   guarantees  the  interoperability  of  multivendor  devices  (scale  economies)  but  there  is  an   apparent  contradiction  as  any Standard  compliant  device (=uniformity)  stacks multiple   patents where each inventor  must  be  guaranteed How  to  rule  this  complex  equilibrium? • Every  industry  offers  to  others  its  patents  to  be  part  of  the  Standard  (e.g.,  GSM,  UMTS,   LTE,...)  at  FRAND  (Fair,  Reasonable,  and  Non-­‐Discriminatory)  licensing  conditions. • Licensing  a  patent  in  FRAND  terms  is  mandatory  before  the  innovation  is  considered  to   become  part  of  standard  specifications  approved  by  technical  Working  Groups • Every  patent  can  be  self-­‐declared  (to  ETSI)  as  Essential  for  the  Standard  and  it  is  in  a   database  of  Essential Patents (www.etsi.org/services/ipr-­‐database) • Any  patent  self-­‐declared  as  «essential»  is  not  always  truly  essential. 9
  • 10. Innovation Protection in  the  ICT  – Politecnico  di  Milano  June 3,  2014 3GPP&3GPP2  essential  patents 10 Approx.  21%  of  declared  patents  are  actually  essential [Goodman  &  Myers,  IEEE  2005]
  • 11. Innovation Protection in  the  ICT  – Politecnico  di  Milano  June 3,  2014 Royalty  in  LTE? 11 Start of  LTE   standardization Number  of  patents  vs  time  shows  an  exploding  situation  where  players  are  preparing  for  a  big-­‐business
  • 12. Innovation Protection in  the  ICT  – Politecnico  di  Milano  June 3,  2014 Royalty  vs  Hardware  in  a  $400  smarthphone? 12 From:  The  Smartphone  Royalty  Stack  by  A.Armstrong,  J.J.Mueller,  T.D.Syrett  (draft  paper) Hardware:  $120-­150
  • 13. Innovation Protection in  the  ICT  – Politecnico  di  Milano  June 3,  2014 Royalty  vs  Hardware  in  a  $400  smarthphone? 13 From:  The  Smartphone  Royalty  Stack  by  A.Armstrong,  J.J.Mueller,  T.D.Syrett  (draft  paper) WiFi:  $50.23  (12.5%)
  • 14. Innovation Protection in  the  ICT  – Politecnico  di  Milano  June 3,  2014 Royalty  vs  Hardware  in  a  $400  smarthphone? 14 From:  The  Smartphone  Royalty  Stack  by  A.Armstrong,  J.J.Mueller,  T.D.Syrett  (draft  paper) LTE:  $54.30  (13.5%)
  • 15. Innovation Protection in  the  ICT  – Politecnico  di  Milano  June 3,  2014 Royalty  vs  Hardware  in  a  $400  smarthphone? 15 From:  The  Smartphone  Royalty  Stack  by  A.Armstrong,  J.J.Mueller,  T.D.Syrett  (draft  paper) Royalty:  $121-­124  (30-­31%) Hardware:  $120-­150  (30-­38%)
  • 16. Innovation Protection in  the  ICT  – Politecnico  di  Milano  June 3,  2014 A  new  role  of  academia  in  ICT  innovation • Gain  more  sensitivity  to  the  patenting  process  in  ICT • Sell  research/innovation  and  take  risks/benefits  (not  just  selling  patent  applications) • Gain  insight  in  the  Intellectual  Property  scenario 16
  • 17. Innovation Protection in  the  ICT  – Politecnico  di  Milano  June 3,  2014 A  new  role  of  academia  in  ICT  innovation • Gain  more  sensitivity  to  the  patenting  process  in  ICT • Sell  research/innovation  and  take  risks/benefits  (not  just  selling  patent  applications) • Gain  insight  in  the  Intellectual  Property  scenario 17
  • 18. Innovation Protection in  the  ICT  – Politecnico  di  Milano  June 3,  2014 It’s  an  equilibrium  among  existing  players • Patents  and  royalties  are  part  of  peer-­‐to-­‐peer  equilibria (between   inflow&outflow)  that  can  be  ruled  by  agreements,  IPR  exchange  or  Courts • Any  new-­‐entry  is  impaired  by  IPR  with  respect  to  these pre-­‐existing equilibria • Lawsuits and  Court  are  heartquakes that change these equilibria and  let the   players to  better value their inventions 18 €€ €