Are Patents Promoting Product Innovation? The Role of IP Strategy in the Global Marketplace

ARE PATENTS PROMOTINGPRODUCT INNOVATION?

THE ROLE OF IP STRATEGYIN THE GLOBAL MARKETPLACE ‘

The Product Management Event 2013

March 4-5, 2013, San FranciscoEfrat Kasznik, Founder & President

Foresight Valuation Group, LLC

Foresight Valuation Group © 2013

The Patent Dilemma…


About Me: Efrat Kasznik

Founder and President, Foresight Valuation Group (Palo Alto, CA), a Silicon-Valley based intellectual property, valuation and start-up advisory firm.

Lecturer on IP Strategy, Stanford Graduate School of Business (MBA class)

Licensing Executives Society (LES), High Tech Sector - Leadership Committee; Chair, Nanotechnology Committee

Intellectual property (IP) valuation and strategy expert, with 20 years of experience analyzing IP portfolios for mergers & acquisitions, financial reporting, technology commercialization decisions, tax compliance, transfer pricing, litigation damages and business liquidations.

Work with corporate clients across industries, from Fortune 100 to start-ups, as well as law firms, universities, research institutions, inventors, IP brokers and patent funds.

Co-founder, CFO and adviser to startups in the fields of telecom, media, cleantech and healthcare.


Outline

Products and IP IP Marketplace Overview IP Strategy in Product Lifecycle Case Studies IP Best Practices in Product

Innovation


Types of IP

Patents Copyrights

Trademarks

Trade Secrets


IP in Consumer Products

Copyrights

Trade Secrets

Patents

Trademarks


IP in Digital Products

Patents

Copyrights

Trade Secrets

Trademarks

Angry Birds


Type Definition Criteria Life Example

Copyrights

Original works of authorship: literary, dramatic, musical, artistic, etc

Automatic protection Author’s life + 70 years

Trademarks

Word, name, symbol, device used in trade to distinguish goods.

Unregistered (first to use – common law), or registered with USPTO

No expiration as long as used commercially

Trade Secrets

Business items/info:1. Economic

value2. Kept

confidential

No need to show novelty, or disclose publicly; need to take measures to keep confidential (stamp, lock up)

Indefinite

Patents Right to exclude others from making, using or selling products covered by invention in a defined territory

Novel, Non-obvious, Clearly described; Granted by the USPTO

20 years from filing

Comparison of IP Rights


250k Patents Going into Smartphones

Design PatentsEx. ‘slide to unlock’ featureRounded square icons

Utility PatentsEx. Enlarging documents by tapping screenSingle touch and multi touch gestures ‘pinch to zoom’


The State of IP in Mobile Devices


Outline


Innovation


Source: The Guardian and New York Times

The Mobile Patent Wars


Mobile Market Patent Activity

Redistribution of IP holdings through Land-grab and Turf-wars…

Global Litigation Global court battles: Apple-Samsung (2011) Non-Practicing Entity (NPE=”Troll”) litigation:

NTP-RIM $612.5 MM in damages (2006) Multi-billion Dollar IP-driven

Transactions Patent acquisitions: Nortel patent auction (2011) Company Acquisitions: Google/Motorola mobility

(2011)


Apple, Microsoft, Research in Motion, EMC, Ericsson, and Sony joined together in a consortium to win an auction for the 6,000 patents of the bankrupt Nortel at a price of $4.5 billion.

Google, the losing bidder in the Nortel auction, announced the $12.5 billion acquisition of Motorola Mobility, whose IP portfolio includes 17,000 issued patents and 7,500 patent applications.

June 2011 Aug 2011

Multi-Billion Dollar Deals Involving IP


A “Perfect Storm” in the IP Marketplace

IP Litigation at an all time high

Very active patent transaction

markets

USPTO Overloaded, Underfunded ;

Moves to “First to File” system in March

2013 (The America Invents Act = AIA)

Global competition is

changing the IP playing field.

IP Marketplac

e


US Patent & Trademark Office (USPTO) By The Numbers - 2012

Over

350,000 patent

applications filed annually

6,700 patent

examiners

16 hours of examination time per patent

Patent prosecution fees

can exceed

$25,000


USPTO Pendency and Backlog Increase

Pendency time is close to three years… … while application backlog is

around 700,000


Source: Northwestern Law, Searle Center

More than 2,500 Patent SuitsFiled Annually Since 2001


The New Patent Marketplace in 21st Century – Rise of the Intermediaries

Intermediaries:• Non-practicing entities (NPEs)• Patent Funds/Aggregators

(Intellectual Ventures)• Market Makers (Auctions, patent

exchange)• Financial services (securitization,

litigation finance)

IP Creators- Operating Companies- Independent Inventors- Universities- Research

Institutions- Gov’t labs

IP Users- Operating Companies- OthersPatent

Sales/licensing

Enforcement

(Litigation)

Cross Licensing


Troll Litigation is a Serious Problem!

“This year, about 61% of all patent

lawsuits filed through

December 1 were brought by

patent-assertion entities, as

compared to 45% in 2011 and 23% five years ago”

Source: Patent Troll Cases Now Dominated by “Trolls”, Study by Colleen Chien, Reuters, December 10, 2012


Startups Most Litigated by Patent Trolls

Companies with less than

$100MM annual revenue

represent at least 66% of Patent Trolls* defendants

At least 55% of unique

defendants in Patent Troll

lawsuits make under $10MM

per year

Source: Startups and Patent Trolls, Colleen Chien, Santa Clara University School of Law, Legal Studies Research Paper Series, September 2012

* Patent trolls, also known as Non-practicing Entities (NPEs) are companies engaged in holding patents for purposes of enforcing them in the marketplace against operating companies, in the form of licensing or litigation


America Invents Act (AIA) Highlights

Represents the most significant overhaul to the US patent system since 1952. Main Changes include:

US moves from First to Invent to a First to File system (Section 102) – aligns the US with the rest of the world –Effective March 16, 2013

Post-Grant Review process for Business Method Patents at the USPTO (Section 18)

Joinder of parties >> Bars plaintiffs from suing multiple defendants (Section 299)

End of False Marking Claims (Section 16(b))


Outline


Innovation


Developing IP Position

Portfolio commercialization &

monetization

Portfolio liquidation

IP Strategy Throughout the Product Lifecycle


Developing IP Position

IP Strategy – New Product

Goals: • Freedom to operate• Block competitors• Support future products• Hedge against litigation


Sources of Product IP

Internal R&D

Manufacturing Marketing

Tech Transfer

Sources of outside innovation:

• In-licensing (companies, universities)

• Buying start-ups, competitors

• Universities, research institutions

• Collaborative R&D outfits (Xerox PARC)


The Open Innovation Movement

Chesborugh ©

What is open innovation?

“Open innovation is a paradigm that assumes that firms can and should use external ideas as well as internal ideas, and internal and external paths to market, as the firms look to advance their technology” - Henry Chesbrough, Center for Open Innovation at the University of California, Berkeley


Outline


Innovation


Product IP Strategy Scenarios

IP strategy can determine a product’s success, market share, and profitability Freedom to operate Block competitors Support future products Hedge against litigation Attract buyers, investors

Case studies demonstrate that a failure to properly address IP issues can result in loss of market share, margin erosion, and reduced market competitiveness


Support Future Products: Xerox PARC

Product: Graphical User Interface (GUI)

Overview: In 1979, Xerox’s PARC (Palo Alto Research Center) decided not to patent its invention of the GUI because Xerox management didn’t see value or business in then small PC market. Xerox had written patent applications for some of its GUI technologies but decided not to proceed with its filings.

Outcome: A loss in potential revenues - had Xerox patented the GUI, even at 1% royalty rate on sales, license fees Xerox could have eared from 84-98 from Mac and windows sales would have topped half a billion dollars.

Insight: Failure to patent results of innovative research can lead to huge financial and strategic losses.


Freedom to Operate: Polaroid and Kodak

Product: Instant Camera

Overview: Kodak launched “Project 130” to develop instant cameras and films – going after Polaroid’s patented innovation. Kodak was aware of potential infringement dangers, since Polaroid was fanatical about surrounding its products with patents, but went ahead with its R&D strategy.

Outcome: Kodak found to have infringed on seven of twelve Polaroid instant photography patents and ordered to pay $925M in damages to Polaroid.

Total cost - $3B (700 employees layoff, $1.5B manufacturing plant, $500M buyback cost of 16M instant cameras, and$100M legal fees).

Insight: Kodak’s patent strategy focused on having Polaroid’s patents ruled invalid if challenged in court instead of designing around the patents and developing more advanced inventions of their own.


Hedge Against Litigation:Honeywell Int. vs. Nest Labs, Inc.

Product: Home Thermostat

Overview: Honeywell filed a multi-patent infringement lawsuit against Nest Labs for allegedly infringing on seven Honeywell patents – sought cease and desist order and collection of damages – not licensing fees.

Outcome: Nest filed for reexamination of Honeywell’s patents.

Insight: Companies can no longer concern themselves with being innovative – they must plan for litigation from other competitors in similar markets (particularly startups and large incumbents)


Block Competitors: Lululemon vs. Calvin Klein

Product: Yoga pants

Overview: Lululemon sued CK for allegedly infringing design patents for its “Astro” yoga pants’ signature waistband and design

Outcome: Lululemon has withdrawn lawsuit filing after companies agreed on confidential settlement.

Insight: The importance of design patents


Outline


Innovation


Elements of IP Strategy

Sources of IP

In-licensing (university, government

labs)

Internal R&D(filing

patents) Buying IP (patents, trademar

ks)

Offensive:Enforcement/monetization

Defensive:Product centered

IP Strategy Goals


Developing IP position


monetization


IP Strategy Throughout the Product Lifecycle


Developing IP position

IP Strategy – New Product

Goals: • Freedom to operate• Block competitors• Support future

products• Hedge against

litigation• Attract buyers,

investorsSources of IP:• Internal R&D filing

patents• Buying patents• In-licensing (university,

government labs, etc)


IP Best Practices: Later Phase

Defensive Goals – Manage Litigation Exposure Don’t panic! Be Prepared… Assess your options, use litigation data - not only legal

analysis (prob. of success, anticipated damages, etc) Mitigate the risk (patent defense funds) – be proactive!

Offensive Goals – Enforcement & Monetization Be ready to enforce your IP Monetize your portfolio regularly Manage royalty, maintenance payments



monetization


Strong IP Portfolio Supports Later Phases

Use Internally

License

Sale

Joint Venture/Sp

in Off

Enforcement


Patent Licensing Scenarios

Invention

Patent

Royalties & Licensing $$

Infringement >> Lawsuit

Patent

Pool


Is Your Industry the Next Litigation Battleground?

Attribute Characteristics Mobile Your Industry

?

Market Size

Explosive Market, large economic stakes

??

Products/Services

Multiple features in one productMultiple layers of Services in Platform

??

IP Landscape

Patent thicket – overlapping claimsBusiness method patents – broad claims

????

Competitive Dynamics

Incumbents with large IP holdingsNewcomers entering markets without IP NPE (trolls) patent holders

??????


About Foresight Valuation GroupWe Are

Foresight Valuation Group, LLC (FVG) is a Silicon-Valley based intellectual property (IP) consulting firm, providing high

quality analytical services.

We ProvideA full suite of services designed to help our clients increase their bottom-line results through valuing, strategically managing and

monetizing their IP assets.

IP Valuations IP Strategy Economic Analysis & Business Valuations Litigation Support Startup Advisory

THANK YOU!Efrat Kasznik

President, Foresight Valuation Group

[email protected]

www.linkedin.com/in/ekasznik650-561-3374

www.foresightvaluation.com

Presentation available upon request

Date post:	08-May-2015
Category:	Business
Upload:	foresight-valuation-group
View:	1,375 times
Download:	4 times