The document discusses various aspects of intellectual property (IP), focusing on the distinction between proprietary software and free/libre/open source software (FLOSS), along with the implications of licensing and copyright. It highlights the legal case of Jacobsen vs. Katzer, showcasing the importance of copyright in software development, and touches on the valuation of IP through different methodologies like market-based, cost-based, and income approaches. Additionally, it addresses challenges in valuing intangible assets and outlines the significance of understanding the purpose and nature of the assets being evaluated.

1. IP in IT
FOCUS SESSION
Swapna Sundar, CEO, IP DOME

2. 2 categories of computer software
(vis à vis ownership, use patterns and possibilities,
and IPimplications)
(a) Proprietary software: owned as private property by
a company or individual software developer
(b) FLOSS (Free / Libre / Open Source Software)
1. Free Software
2.Open Source Software.
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3. Proprietary software licensed under End User License
Agreement.
• cannot be copied, shared, modified, redistributed,
or reverse engineered by other software
developers or users.
• Their business model permits use of the software
on only 1 computer and/or require extra fees for
each additional computer or work station
Recommend application programmes which are
compatible with the code found in the operating
system.
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4. FLOSS
• users must have open access to the source code
over which no ownership is exercised
Free software (Copyleft Principle)
 Use the software however they wish
 fit it to their needs
 Redistribute it to other users for free, or at a
charge, not fixed beforehand, who could themselves
use it according to their own needs.
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5. Open Source Initiative (OSI) principles:
1. No royalty or other fee
2. Availability of the source code.
3. Right to modify and create derivative works.
4. May require modified versions to be distributed as
the original version plus patches.
7. All rights granted must flow through to/with
redistributed versions.
8. The license applies to the program as a whole and
each of its components.
9. The license permits the distribution of open source
and closed source software together.
OS allows ownership of contribution.
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7. Do You Want an Open Source License At All?
When you release s/w under OSS, you have no control over who get
to use it or how it is used. Even if you sell it, your customer can
redistribute it.
Do you want to give the right to proprietary forks - an new line of
development, independent of your own efforts. Not permitted under
GPL
Do you have to keep track of who is using the s/w for license fee?
Is the license you are currently using compatible with the OSS you
want?
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8. Do you want contributors? Then you must pick a recognizable
license.
You can write your own license too.
Do you want to make a lot of money from a small pool of users?
ISSUES
Difficult to say what is a derivative work
s/w once released under OSS license cannot be taken back even
though © belongs to you
Attribution notices must be meticulously followed
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9. JACOBSEN Vs. KATZER
Robert Jacobsen is a member of the Java Model Railroad Interface
(JMRI) Project, and Matthew Katzer, is the owner of a proprietary
vendor of model train software called KAMIND associates.
Katzer incorporated code written by Jacobsen into Katzer's software,
and deleted the copyright notices included in that software in the
process. From the F/OSS perspective, one of the most important
questions involved whether a developer of software that made its
code available for free - which, like most open source projects the
JMRI Project did - can collect damages for copyright infringement.
F/OSS licences include obligation of a commercial developer to "give
back" its own changes to the code for the benefit of others and an
obligation to acknowledge the authorship of those that had created
the earlier code.
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10. The court found in favour of Jacobsen on three key points:
1. The code in question was sufficiently original to be entitled to
copyright protection. While not unique to F/OSS code, this was a
legal issue on which Jacobsen had to prevail in order to assert
claims under copyright law.
2. While the JMRI Project made its code available for free, there
was "evidence in the record attributing a monetary value for the
actual work performed by the contributors to the JMRI project,"
thus laying the basis for monetary damages.
3. The removal of the copyright and authorship data contained in
the pirated code was a violation of the Digital Millennium
Copyright Act, thus providing a basis for suit for that action in
violation of the JMRI license.
Katzer settled paying Jacobsen US$100,000.
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11. Layout designs (topographies) of integrated circuits are protected
under sui generis Law. India has the Semiconductor Integrated Circuits
Layout Design Act, 2000 to project unique novel and original
Semiconductor Integrated Circuit. Term: 10 years from date of filing or
date of first exploitation(two years).
Defined as a product having transistors and other circuitry elements,
which are inseparably formed on a semiconductor material or an
insulating material or inside the semiconductor material and designed
to perform an electronic circuitry function.
Semiconductor intellectual property core, or IP block - a reusable
unit of logic, cell, or chip layout design may be licensed to another
party or can be owned and used by a single party alone.
There are also providers of open source cores.
OpenCores.org offers a wide variety of designs.
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12. A database right is considered to be a property right in
EU and UK, comparable to but distinct from copyright,
to recognise the investment made in compiling a
database, even when this does not involve the
'creative' aspect. TERM: 15 years.
Protection for databases in India which provided under
the traditional copyright regime which includes under
section 2 (o) …compilations including computer
databases. Term: 60 years
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13. In India, a person is entitled to a patent if
1. He is the owner of the invention
2. the invention is the proper subject matter for a patent, and
3. the invention is "useful", "new", and “inventive“
4. The invention should not have been published with some narrow
exceptions
In India, s/w per se is not a patentable subject matter
In re Bilsky: "the invention is not implemented on a specific
apparatus and merely manipulates [an] abstract idea and solves a
purely mathematical problem without any limitation to a practical
application, therefore, the invention is not directed to the
technological arts."
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14. - Mathematical algorithms Computer algorithms unrelated to
mathematics
- Algorithms that are Computer algorithms that pertain
expressed as mathematical to the operations of the hardware
formulas
or apparatus that use computer
- algorithms which appear to programs as a component
replicate human decision-
making skills
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15. Software copyright is not essentially different from any other sort of
copyright. Specifically, it is unlawful for anyone other than the owner
of the rights to run the program, copy the program, modify the
program or distribute the program, except with the permission of the
rights owner.
No registration, copyright notice, or other such formality is needed to
establish copyright. Copyright protection is automatic.
Copyright protects only the computer program itself, and not the
ideas behind the program. That is to say, it is perfectly permissible to
take a computer program written by someone else, and write
another that does the same thing.
Ownership: Employer/Programmer; Moral rights: Programmer
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16. Wholly unlicensed use: for example, copying a piece of software from
a friend, or over the Internet, etc., where the licence for the software
does not explicitly permit this.
Overuse: for example, buying a piece of software licensed for one
computer, and installing it on two.
Failure to have a licence assigned, or to relicense: if you acquire
hardware second-hand, this does not necessarily transfer all software
licenses, and you must take steps to ensure that your use is lawful.
Shareware abuse: where software is licensed "for evaluation
purposes only" or the like, it is copyright infringement to exceed
these terms.
Obtaining software fraudulently: for example, getting a reduced rate
by11/25/2012
pretending that your business issundar, 2012
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17. "Warez" copyright infringement: making warez copies, running
warez sites, and the people who download and use warez copies
are all copyright infringers.
Illicit "special offers" from hardware vendors: a hardware vendor
sells a computer with unlicensed software installed.
Making an unlawful copy of software on a burnable CD-ROM, or the
like, for the purpose of giving it to someone else. Making a back-up
copy is usually lawful.
Counterfeiting: this is the making of unlawful copies of software on
burnable CD-ROM, or the like, on a commercial scale, and having
them sold under the pretence that they are lawful copies (by
putting them in deceptive packaging, etc.)
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18. Lockheed Martin forced Turbo Squid a 3D graphics stock image
site to remove 3D illustrations of World War II bomber aircrafts
on the grounds that it infringed their copyright and Trademark.
What do you think?
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20. Use of HEAVY DESIGN ELEMENTS SUCH AS FLASH PRESENTATIONS slow
loading of a website. If a visitor to your site has to wait between 5 and
15 seconds for a page to load, (c) swapnaare more likely to leave.
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23. Law
Lab Market
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24. Goods
Animal
organisms
Organisation 1 People technological Organisation 2
Organisation knowledge
Technical docs
training
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25. Goods
Animal
organisms
Organisation 1 People technological Organisation 2
Organisation knowledge
Technical docs
training
ROYALTY (agreed payment or fee)
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26. Rs.
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31. © Linda Katehi, University
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of California, 2010

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39. IP IMPACT OF VALUATION TRANSLATION
PATENT Lose value over time Sustainable competitive
advantage
TRADEMARKS Gain value over time Sustainable market
advantage
TRADESECRETS Gain value over time Limits probability of
derivation
COPYRIGHTS Lose value over time Allow derivation of
technology
PLANT BREEDERS RIGHTS Lose value over time Sustainable competitive
advantage
GEOGRAPHICAL INDICATION Gain value over time Sustainable market
advantage
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41. The Valuation Purpose refers to the primary usage of the valuation analysis.
Transaction Strategy: A strategic purpose for valuing IP is when one is
considering buying, selling, or transferring the asset in a licensing arrangement
or acquisition. Usually, the transaction strategy end-purpose is a ‘go versus no
go’ recommendation. That is, at what price am I willing to enter into this
proposed transaction?
Financial Reporting: Valuing IP and other prescribed intangible assets for
reporting on public financial statements. The end deliverable is usually a report
specifying the value and change in value of the subject assets.
Litigation: A high-profile purpose of intellectual property valuation is to
compute damage awards in an infringement lawsuit.
Bankruptcy: During a corporate bankruptcy and reorganization, often the most
valuable assets remaining are IP-related. Valuation is required by the
Bankruptcy Court to properly dispose of the assets and reorganize the company,
if necessary.
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42. The Foundation of IP valuation analysis consists of four building blocks,
each with an associated question:
•Purpose – Why are we valuing the asset?
•Description – What is the asset?
•Premise – How will the asset be used?
•Standard – Who is the assumed buyer of the asset?
1. For instance, a litigation matter requires complete and thorough
documentation whereas for a technology transfer valuation, a lower
level of documentation will suffice, generally.
2. understanding these foundational questions will ensure that the
valuation will address all relevant considerations.
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43. Methods for the Valuation of Intangibles
- market based,
- cost based, or
- based on estimates of past and future economic benefits.
Challenges in determining market value: the search for a comparable market transaction
becomes almost futile.
This is not only due to lack of compatibility,
sales are usually only a small part of a larger transaction and details are kept extremely
confidential.
There are other impediments that limit the usefulness of this method, namely, special
purchasers, different negotiating skills, and the distorting effects of the peaks and troughs
of economic cycles. Cost-based methodologies, such as the “cost to create” or the “cost to
replace” a given asset, assume that there is some relationship between cost and value and
the approach has very little to commend itself other than ease of use. The method
ignores changes in the time value of money and ignores maintenance.
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44. The methods of valuation flowing from an estimate of past and future economic benefits/
income methods
1. The capitalization of historic profits arrives at the value of IPR’s by multiplying the
maintainable historic profitability of the asset by a multiple arrived at after assessing a
brand in the light of factors such as leadership, stability, market share, internationality,
trend of profitability, marketing and advertising support and protection. This capitalization
process pays little regard to the future.
2. Gross profit differential methods are often associated with trade mark and brand valuation.
These methods look at the differences in sale prices, adjusted for differences in marketing
costs. That is the difference between the margin of the branded and/or patented product and
an unbranded or generic product.
3. The excess profits method looks at the current value of the net tangible assets employed as
the benchmark for an estimated rate of return. This is used to calculate the profits that are
required in order to induce investors to invest into those net tangible assets. Any return over
and above those profits required in order to induce investment is considered to be the excess
return attributable to the IPRs.
4. Relief from royalty considers what the purchaser could afford, or would be willing to pay,
for a licence of similar IPR. The royalty stream is then capitalized reflecting the risk and return
relationship of investing in the asset.
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45. Discounted cash flow (“DCF”) analysis sits across the last three methodologies and is
probably the most comprehensive of appraisal techniques. Potential profits and cash
flows need to be assessed carefully and then restated to present value through use of a
discount rate, or rates. DCF mathematical modelling allows for the fact that 1 Rupee in
your pocket today is worth more than 1 Rupee next year. The time value of money is
calculated by adjusting expected future returns to today’s monetary values using a
discount rate. The discount rate is used to calculate economic value and includes
compensation for risk and for expected rates of inflation.
The operating environment of the asset is to be considered to determine the potential
for market revenue growth. The projection of market revenues will be a critical step in the
valuation. The potential will need to be assessed by reference to the enduring nature of
the asset, and its marketability, and this must subsume consideration of expenses
together with an estimate of residual value or terminal value, if any.
The discount rate to be applied to the cashflows can be derived from a number of
different models, including common sense, build-up method, dividend growth models
and the Capital Asset Pricing Model utilising a weighted average cost of capital. The latter
will probably be the preferred option.
These processes must quantify remaining useful life and decay rates: physical, functional,
technological, economic and legal. It is often not credible to forecast beyond say 4 to 5
years. When undertaking an IPR valuation, the context is all-important, and the valuer will
need to take it into consideration to assign a realistic value to the asset.
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46. IP STRATEGY ADVISORS
At the intersection of the Law, the Lab and the Market
No. 7/8 Flowers III Lane
Chennai 600084
Phone: 0091 44 26430474
Mobile: 09841282396
Email: swapna@ipdome.in
www.ipdome.in
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