Utilizing IP to Access Funding


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Exploiting IP Through Licensing

IP can be more than just a protection of your ideas. It can be used to leverage unique non-equity funding alternatives. This lunch will explore whether your IP portfolio could be licensed to add cash to your business. The discussion will also touch on the advantages and pitfalls of licensing as well as the various kinds of licensing possibilities.


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Utilizing IP to Access Funding

  1. 1. Exploiting IP ThroughLicensingMay 22, 2013Steven J. FrankBingham McCutchen LLP
  2. 2. 2Types of Intellectual Property• CopyrightsRelevant to software as a “creative expression” and thus typicallyonly exact copying is prohibited; independent development is avalid defense.• Trade SecretsMeans to enforce fair competition, not grant rights. Dependentupon active prevention of disclosure, and independent developmentdefeats trade secret status.• PatentsProperty right to exclude others. Disclosure, use or sale can causeloss of rights, but independent development is not a defense.
  3. 3. 3Trade Secret vs. PatentTrade Secret• Numerous Solutions• Short Shelf Life• Black Box• Difficult to Detect Infringement• Large Competitive Landscape• Hard to LicensePatent• One Commercially ViableSolution• Long Life (e.g., > 3 years)• Must Disclose What is “Underthe Hood”• Easy to Detect Infringement• Competitors are Few andIdentifiable
  4. 4. 4Patent Offense vs. Patent DefenseOffense• Shut down competitors• But ...• Can you service the entiremarket?• Can you “police” the patent?• Are you ready to litigate?Defense• The fear factor: stop others fromstopping you• Trade and cross-license to avoidlitigation
  5. 5. 5What should IP cover?BusinessOpportunitiesStrategic“Sweet Spot”AvailableIP
  6. 6. 6The Special Case of Licensing
  7. 7. 7Types of Licenses• Non-exclusive Essentially a promise not to sue “Tax” vs. business opportunity• Exclusive Tantamount to ownership• Sole Also called “semi-exclusive”
  8. 8. 8What do you bring to the table?• Value of IP• Are you helping target solve a problem?• Is target already in the business?
  9. 9. 9Value of the IP• Patents tend to be most valuable Coverage is clear and infringement is “strict liability” But: licensing patent strategy  production patentstrategy!• Copyright is narrow Literal code Independent development is defense• Trade secrets are fugitive Courts care about unfair competition, not protectinginnovation
  10. 10. 10Are you helping target solve a problem?• Bare grant of rights vs. … Technical expertise Transfer of line of business Customers Tooling, “turnkey” operation• IP complementary to or improvement of existing products How much must target invest to bring product to market? How much can you help?
  11. 11. 11• Adjunct to collaboration or joint venture?• Complete rights package?Microsoft thought so when it licensed MP3 patents from Fraunhofer,but Alcatel-Lucent had additional patents(cont’d)Are you helping target solve a problem?
  12. 12. 12Is target already in the business?• Will think “tax” unless you deliver additionalvalue• Exclusive license: a new offensive weaponagainst target’s competitors• Sole license: are you one of thecompetitors?
  13. 13. 13What’s the price?• Royalty rate and royalty base Rate: fair split of profits based on …• Availability of non-infringing substitutes• Basis for consumer demand• Many other factors Base• Easiest is price of final product• Unless there’s a market for the IP-covered feature Highly dependent on type of license• Up-front payments: sometimes
  14. 14. 14Take-Aways• Forget about “Rembrandts in the attic” If it’s useless to you, it’s probably useless toothers• Think about the value you’re providing• Tailor your patent program to support alicensing strategy• Do your homework
  15. 15. 15BeijingBostonFrankfurtHartfordHong KongLexington (GSC)LondonLos AngelesNew YorkOrange CountySan FranciscoSanta MonicaSilicon ValleyTokyoWashingtonbingham.comBingham McCutchen®© 2013 Bingham McCutchen LLP One Federal Street, Boston, MA 02110-1726 ATTORNEY ADVERTISINGTo communicate with us regarding protection of your personal information or to subscribe or unsubscribe to some or all of our electronic and mail communications, notify our privacy administrator atprivacyUS@bingham.com or privacyUK@bingham.com (privacy policy available at www.bingham.com/privacy.aspx). We can be reached by mail (ATT: Privacy Administrator) in the US at One Federal Street, Boston, MA02110-1726 or at 41 Lothbury, London EC2R 7HF, UK, or at 866.749.3064 (US) or +08 (08) 234.4626 (international).Bingham McCutchen (London) LLP, a Massachusetts limited liability partnership authorised and regulated by the Solicitors Regulation Authority (registered number: 00328388), is the legal entity which operates in the UKas Bingham. A list of the names of its partners and their qualification is open for inspection at the address above. All partners of Bingham McCutchen (London) LLP are either solicitors or registered foreign lawyers.This communication is being circulated to Bingham McCutchen LLP’s clients and friends. It is not intended to provide legal advice addressed to a particular situation. Prior results do not guarantee a similar outcome.Circular 230 Disclosure: Internal Revenue Service regulations provide that, for the purpose of avoiding certain penalties under the Internal Revenue Code, taxpayers may rely only on opinions of counsel that meetspecific requirements set forth in the regulations, including a requirement that such opinions contain extensive factual and legal discussion and analysis. Any tax advice that may be contained herein does not constitutean opinion that meets the requirements of the regulations. Any such tax advice therefore cannot be used, and was not intended or written to be used, for the purpose of avoiding any federal tax penalties that the InternalRevenue Service may attempt to impose.