Intellectual Property Strategy: Challenges and Opportunities in the Cloud

Intellectual Property Strategy: Challenges and Opportunities

in the Cloud Efrat Kasznik, Founder & President

Foresight Valuation Group, LLC

December 12, 2012

Foresight Valuation Group © 2012

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. Extensive telecom expertise, including: AT&T, Avaya, Juniper Networks.

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

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Outline

The IP (Patent) Marketplace in the US Mobile Wars Ecosystem and Forces

Is the Cloud Market the next Litigation Battlefield? How is Cloud Similar to Mobile? Early Indicators of Patent/Litigation Activity

What to Expect in the Next 5 Years? Best Practices in IP Portfolio Management

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Source: The Guardian and New York Times

The Mobile Patent Wars

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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

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http://online.wsj.com/article/SB10001424052702304584004576418962301518284.html?KEYWORDS=nortel+patents+apple+microsoft�

http://dealbook.nytimes.com/2011/08/15/googles-big-bet-on-the-mobile-future/?ref=todayspaper�


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)

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A “Perfect Storm” in the IP Marketplace

IP Marketplace

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

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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 - Others

Patent Sales/licensing

Enforcement (Litigation)

Cross Licensing


Is Cloud the Next Patent Battleground?

Attribute Characteristics Mobile Cloud?

Market Size Explosive Market, large economic stakes ??

Products/ Services

Multiple features in one product Multiple layers of Services in Platform

IP Landscape Patent thicket – overlapping claims Business method patents – broad claims

?? ??

Competitive Dynamics

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

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Market Size: Explosive Growth

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Products/Services: Multiple Cloud Service Layers

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Cloud Patent Landscape: Accelerated Patenting Activity

Note: The search has been conducted from 2003 onwards. Number of patents for 2011 & 2012 may be incomplete because some of the applications might not have been published yet. The counts are indicative and not comprehensive.

248 512

837

1143

1556

2090

2781

3867

4801

5154

0

1000

2000

3000

4000

5000

6000

2003 2004 2005 2006 2007 2008 2009 2010 2011 2012

Cum

ulat

ive

Cou

nt o

f Pa

tent

Fam

ilies

Filing Year

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Note: The search has been conducted from 2003 onwards. The subsidiaries of the assignees have not been considered for the analysis. Number of patents for 2011 & 2012 may be incomplete as some of the applications might not have been published yet. The counts are indicative and not comprehensive.

694

333 293

125 103 97 82 78 75 51

0

100

200

300

400

500

600

700

800

IBM MICROSOFT HEWLETT PACKARD

HITACHI ORACLE Hon Hai Precision Industry

CISCO FUJITSU LTD AMERICAN POWER

CONVERSION

NEC CORP

Cou

nt o

f U

S pa

tent

s Fa

mili

es

Assignee

Cloud Competitive Dynamics: Incumbents with Large Patent Holdings

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Cloud Computing – Taxonomy Cloud Computing

Architecture (1237)

Management (1761) Security (889) Services (2412) Storage (584)

Deployment Models

Cloud Engineering

Virtualization

Provisioning

Load Balancing

Resource Management

Performance Management & Billing

Scalability & Maintenance

Bandwidth Management

Access Control

Fault Tolerance

Cryptography & Secure Transmission

Cloud Firewall/Gateways

APIs

Web Services & Enterprise Applications

Mobile Applications

Cloud Client Software

Software as a Service

Infrastructure as a Service

Platform as a Service

Storage System/Hardware

Storage Platform

Storage Virtualization

Data Storage

• Dell Service Cloud Implementation Packages

• Oracle Automatic Storage Management

• VMware vSphere

• Citrix Cloud Platform

• Amazon CloudWatch

• Amazon EC2

• BMC Cloud Lifecycle Management

• VMware vCenter Operations Management Suite

• IBM Hosted Application Security Management

• Citrix Cloud Gateway

• Symantec.cloud

• Symplified Cloud Access Manager

• Amazon Relational Database Service (RDS)

• Apple iCloud

• AWS Amazon Cloud Drive

• IBM Sterling B2B Integration Services

• Cisco MDS 9000 Family Solution

• Amazon EC2 Instance Storage

• EMC VPLEX

• IBM SmartCloud Archive

Tech

nolo

gies

Pr

oduc

ts*

* Product list is indicative and not comprehensive

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Cloud Patents by Technology Area (Since 2003)

1237

1761

889

2412

584

0

500

1000

1500

2000

2500

3000

Architecture Manangement Security Services Storage

Cou

nt o

f Pa

tent

Fam

ilies

Note: The search has been conducted from 2003 onwards. Number of patents for 2011 & 2012 may be incomplete because some of the applications might not have been published yet. The counts are indicative and not comprehensive.

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Cloud Litigation/Collaboration Trends

No signs of litigation between any of the large IP holders, not likely either Cross Licensing between large players Likely to see litigation between startups/large players

Early signs of troll litigation Early signs of collaboration:

Facebook’s Open Compute Project technologies as open hardware: “… our goal is to develop servers and data centers following the model traditionally associated with open source software projects…”

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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

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Are Trolls Coming to the Cloud?

Clouding IP LLC (2012) Rackspace Hosting

Amazon.com / Amazon Web Services

Apple

Google

Microsoft

Oracle

Motorola Mobility

PersonalWeb Technologies (2011-2012)

Amazon/Amazon Web Services

Autonomy

Caringo

EMC

Google/YouTube

NEC Corporation of America

NetApp

VMware

Apple

Dropbox

Facebook

Microsoft

IBM

Nexsan Technologies

Rackspace

Yahoo

“Patent Trolls Are Hindering Innovation at Rackspace—And Our Customers”

-Alan Schoenbaum, SVP, General Counsel and Secretary at Rackpsace (October, 2012)

Source: Pacer, CRN.com

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IP portfolio building

Portfolio commercialization & monetization

Portfolio liquidation

IP Strategy Throughout the Lifecycle

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Portfolio commercialization & monetization

Portfolio liquidation

The Chasm as a Critical IP Juncture: Liquidation or Litigation?

Litigation

Liquidation

“About 35% of startups that have raised $50 - $100

million have been sued on a patent, as have

20% of the companies that have raised $20

- $50 million”

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IP portfolio building

Portfolio Building – Early Phase

Goals: • Freedom to operate • Block competitors • Support future products • Hedge against litigation • Attract buyers, investors

Sources of IP: • Internal R&D filing patents • Buying patents • In-licensing (university,

government labs, etc)

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IP Best Practices: Early Phase

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Rely on patent analytics Guide future R&D >> white spaces

Know your competition>> patent landscape (by family, industry)

Identify external sources of IP

Identify potential buyers

Seek legal advice Patentability assessments, prior art searches, claim drafting

Don’t do it (all) by yourself!

Start early! AIA (First to File) kicks in 3/16/2013 Don’t compromise key filing deadlines by lack of funding

Use “roadmap” approach to filing

Don’t forget your foreign filing


IP Best Practices: Later Phase

Keep Building Your Portfolio as a Strategic Business Asset Have a clear filing strategy, aligned with your corporate vision

Monitor the industry for buying opportunities (companies, patents, technologies) or licensing opportunities (universities, labs)

Monitor your competitors

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 you IP

Monetize your portfolio regularly

Manage royalty, maintenance payments

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Is Cloud the Next Patent Battleground?

Attribute Characteristics Mobile Cloud?

Market Size Explosive Market, large economic stakes ??

Products/ Services

Multiple features in one product Multiple layers of Services in Platform

IP Landscape Patent thicket – overlapping claims Business method patents – broad claims

?? ??

Competitive Dynamics

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

WHAT DO YOU THINK?

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THANK YOU!

Presentation available upon request

Efrat Kasznik President, Foresight Valuation Group [email protected] 650-561-3374 http://www.linkedin.com/in/ekasznik

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