Second Edition Entrepreneurship and Innovation Copyright © 2011 Tilde University Press Chapter 10:...

Second Edition

Entrepreneurship and Innovation

Copyright © 2011 Tilde University Press

Chapter 10:IP Management & Commercialisation


Learning outcomes

• Understand the nature of IP Rights• Review basic legal frameworks and

sources of IP protection• Understand the relationship between

IP, innovation and business growth• Understand the process of

commercialisation• Review government policy support for

commercialisation• Understand the process of

commercialisation


Introduction

The patent process is like a baby, you have to feed it all the time – the expected length of time is likely to be 20 years…

the design is constantly challenged by others, that claim their products are similar.

– Chris Speight, inventor Smartaflow Chlorisafe system.


The nature of intellectual property

• Intellectual Property (IP)– The creative ideas generated from

within you mind or intellect or

proprietary knowledge

accumulated within the business

venture

• Types of IP– Requiring Formal Registration:

• Patents; Trade Marks;

Registered Designs

• Plant Breeders Rights;

– Automatically Granted:

• Copyright;

• Circuit Layout Rights

• Confidentiality & Trade

Secrets

Source: IP Australia (2010)


What are intellectual property rights?

Black & Decker FAST TOAST TM

The full range of intellectual property instruments can be utilised to protect a new product.


• A Patent Is:– An official right, granted by a sovereign state to a patent owner for

exclusive title to the use, sale and licensing of a device, substance, method or process

• Patent must meet three criteria:1. It must be new

2. It must involve an inventive step

3. It must have an industrial application• Patent application must:

– Provide a clear description of the invention or process, including drawings that provide sufficient detail for a skilled person to replicate the invention

– Define the scope of the protection being sought• Patent Rights

– Have a time limit (e.g. 20 years) & are restricted to the jurisdiction that grants them

Patents



Innovation patent• Provides initial protection for IP in

product and process innovations for up to 8 years.

• Requires IP Australia to examine the patent to have legal effect.

• Case example “Boardsling”:– "It was a half mile's walk to the surf

break, and carrying a big board was awkward and hard on the arms, shoulders and back. People don't like to take their board bags because they can be stolen or they get full of sand that then mixes with the wax on their board.

– "So I started looking at a way to create a sling-type surfboard carrier that would do the job."



Patent case – orbital engine

• Australian Patent No: 467415

lodged 6 July 1970

– WA inventor Ralph Sarich

– Original patent is 16 pages

long with 4 drawings

• 1973 appeared on ABC TV show

“The Inventors”

– BHP Ltd formed joint venture

with Obital.

• Orbital Technologies now holds

540 patents and licensing

agreements with major automotive

and marine engineering firms.



Patents

Method of Allocating Resources

American Airlines, Inc.

Patent Number : Au 657877

CLAIM : The invention relates to an inventory control method and

architecture for maximising revenues derived from the sale of a

given inventory resource to a customer. In particular, the present

invention comprises a method and architecture of accessing

availability information on a computer system and continuously

computing a new minimum acceptable price for a given itinerary

based on the current market value of the itinerary, thus allowing

the resource provider to maximise incoming revenues from the

sale of its inventory of reservations.

USA Patent Number : 5,446,919 Date of Patent : 29.8.1995

Communication System and Method with Demographically orPsychographically Defined Audiences

Viewers of all channels are sent to the appropriate (as defined by the group) channel for commercial advertisements.

________________________________________________________________Demographic Group Targeted Event

(Household Income) Advertisement Authorisations

________________________________________________________________

<20,000 Hyundai 02

$20-80,000 Ford 28

>80,000 Mercedes 81

The channel selector / decoder unit associated with each member’s receiver compares the selection profile with the demographic /psychographic information about the audience member and selects the appropriate media message for that audience member.


Trade marks• A Trade Mark Is:

– A letter, number, word, phrase, sound, smell, shape, logo, picture, aspect of packaging or any combination of these used to distinguish between one supplier and another.

• A Trade Mark:– Cannot be a generic name (e.g. lawnmower;

hairdresser)– Does not need to be registered but prior ownership

may be contested

• Trade Mark protection lasts 10 years and can be extended

• Non-use of a trade mark can lead to loss of rights

• To be registered the Trade Mark must NOT be:

– Identical to another Trade Mark, or so similar as to deceive or cause confusion, in respect of the same or related goods or services

– One of a group of restricted signs e.g. national flag– Descriptive of the goods and/or services of interest– A geographical indicator for goods from a related

locale (e.g. Champagne)



Trademark case - redheads

• Bryant & May’s first match

factory est. 1909, Richmond

Victoria

• “Redheads” name came from

the ‘Safety’ match red striking

head

• Logo first created 1946

– “Miss Redhead”

– Only four updates since

• 1958, 1975 & 1980

• Used across a wide range of

products not just matches



Registered designs• A Design is:

– The visual aspects of a logo or product resulting from the features of, in particular, the lines, contours, colours, shape, texture or materials of the product or its ornamentation

• Examples:– Chairs– Electrical goods – Motor vehicles– Bottles & Packaging (e.g. coke

bottle)

• Must be new & distinctive for certified registration

• Protects the specific look of the article



Design case – sebel stacking chair• Designer Harry Sebel registered

the “Sebel Metal Frame Chair October 1957

• Initial design was “Stak-a-bye” chair of 1953

• Australian Registered Design AU-S-35886 lodged 16 October 1956

• Has international design registration

• Tubular frame stacks neatly inside another chair of same design

• Ideal for schools and halls where space saving is needed

• Highly successful design and now held at Powerhouse Museum, Sydney as an Australian design icon



• Copyright:– Is granted automatically upon creation of the work and covers artistic work,

music, literary work, broadcast media and software– Prohibits unauthorized copying or reproduction of works

• Protection:– Lasts for lifetime of author plus 70 years from date of publication

• Varies across jurisdictions• Subject to legislative change

– 70 years for films and sound recordings from date of production– Offered internationally via the Universal Copyright Convention– Law amended in 2005 following US-Australia free trade agreement with greater

protection for musicians and performers in sound recording:• Includes criminal provisions for copyright infringement• Broader protection for electronic rights management• Wider range of protection against unauthorized reproductions

• Formal registration is not needed– Placement of copyright notices on all works is advised


Copyright


Circuit layout & plant breeder’s rights

• Circuit Layout Rights:– Is granted automatically upon creation of integrated circuit or computer

chip design

– A form of copyright

– Administered by Attorney Generals Department

– Prohibits unauthorized copying or reproduction of works

• Plant Breeders Rights:– Protect development of new varieties of plant that are uniform and

stable allowing licensing and royalties

– Does not cover seeds or crops produced

– Will not restrict other breeders developing from original stock

– Protection last 25 years for trees and 20 years for other plants



Confidentiality & trade secrets• No official registration needed• Firms should

– Make use of confidentiality and non-disclosure agreements– Applied to employees, sub-contractors and suppliers– Secrecy is an alternative to patents

• E.g. Coca Cola’s “Formula X” is the longest running trade secret

• Cannot stop leaks or espionage – but can provide support for future legal action



The full range of intellectual property instruments can be utilised to protect a new product.

What are intellectual property rights?

Copyright © 2011 Tilde University PressSource: Williams & Bukowitz, 2001

Developing IP strategyO

wn

ersh

ip

Strategic Alignment

Intellectual Property

Intellectual Assets

Intellectual Capital

VALUE

Tacit Knowledge

Explicit Knowledge

• Patents• Trade Marks• Copyright


Licensing – what does a license do?

• A license is a right to prevent others from exploiting the claimed inventions

• Can apply to:– Patents– Trade Marks– Registered Designs– Copyright – Trade Secrets


Licensing IP

Annual licensing revenues for U.S.

patents growth of $15 billion in 1990 to $115

billion in 1999.

IBM $1.7 billion in licensing revenue in

2000; estimated 40% from patent licensing;

98% profit margin.

Texas Instruments 2 recent patent licensing deals with Samsung

and Hyundai, each $1 billion.

Qualcomm reported $705

million in licensing revenue for 2000.

Hitachi reported $428 million in

patent licensing revenue for 1996

Universities of Stanford and Columbia each > $60 million in

licensing 1998.


IP case examples – positive & negative

Listerine Aerogard

• 1881 - Dr J.J. Lawrence licenses a formula for an antiseptic compound to J.W. Lambert.

• 1959 - Warner-Lambert sues Reynolds (licensor) to terminate payments formula no longer secret but

• Warner Lambert via the licence had obtained a head start which proved incredibly valuable over the years.

• 1998 - Warner Lambert (now Pfizer) retained over 50% of the US market in these products and is still paying royalties

• 1960s CSIRO Entomology research

• The Queen’s influence

• Easy come, easy go

• CSIRO’s return – 12 cans of Aerogard


IP strategy in the commercialisation process

Seed

Develop Product

Market Entry

GrowthStability

• Staff have assigned IP and signed NDAs

• Management has working knowledge of IP

• Key IP identified • IP protection in place• Standard NDA• IP addressed in customer & JV

agreements

• Management aware of core IP• IP policies and processes in place (e.g. staff

induction and exit processes)• Formal NDA processes and reviews• Formal IP policies in place re contractors,

suppliers, customers• Establish and review rights to use third party IP

• Management aware of core company IP and established IP strategy

• IP in staff lifecycle - recruitment, commencement, departure

• Annual IP reviews to assess against best practice policies

• Assess portfolio against current business objectives

• Annual reviews of third party agreements and compliance with permitted uses


IP management checklist• Identify all IP associated with your business and itemize them in your business plan.

• Check that you really do own all IP used in your business or that you have the right to use it.

• List registered IP and place a dollar value on identified assets.

• List unregistered IP and give it a dollar value.

• List other valuable assets such as client lists and corporate knowledge.

• Identify key staff involved in developing, maintaining and protecting your IP and get them to sign agreements relating to confidentiality and competition.

• Educate staff on the nature of IP, how to protect it and their responsibilities.

• Consider ways you can use the IP system in your overall business strategy. Decide which markets (including overseas ones) you wish to pursue before going public.

• Develop an infringement strategy. Consider insuring your IP against infringement and against your infringement of someone else's IP.

• Search the patent, trade mark and design databases, as well as other literature and the Internet to ensure your ideas are new and to avoid infringing the rights of others. You can also search for new business opportunities and keep a tab on what your competition is doing.

• Maintain secrecy and be first to market.

• Make effective trade marks the core of your brand and image building strategy.



InnovationProcess

IntellectualAsset

Portfolios

ObtainTechnologyInternally

ObtainExternal

Technology

StoreCommercialize

$

SimpleCompetitiveAssessment

BusinessStrategy &

Tactics

ProductMarket

Mix

CommercializationDecisionProcess

Coarse Valuationof the

Opportunity

PatentingCriteria and

Decision Process

Need for NewInnovationDecisionProcess

Source: Harrison & Sulliivan, 2000

Intellectual asset management system


Valuing IP assets

• Cost Based Valuations– Includes cost of R&D, prototype development, patent registration and

legal fees plus any marketing costs

– Useful where a clear trading history exists

– Assumes buyer would need to spend the same amount of money to

replicate the IP assets

– Requires careful record keeping of development costs

• Market Based Valuations– Follows similar logic to how real estate is valued

– Requires market equivalent asset for comparison

• Income Based Valuations– Uses NPV analysis

– Requires ability to forecast future earnings stream from IP assets

– Not suitable for early stage innovations Source: Tenebaum (2002)


Considerations in IP asset valuation• What is the economic life of the IP asset?

• What is the lifecycle of the technology in which the IP asset resides?

• Is there legal protection of the IP asset (e.g. patents)?

• How transferable is the IP asset from one owner to the next?

• Are there any restrictions on the exploitation of the IP asset?

• What is the level of R&D required to maintain the IP asset?

• What is the nature of the competitive environment?

• What is the normal financial return associated with the development of such an IP asset?

• What is the extent of functional and/or technological obsolescence?

• What are the forecasts for economic and technological trends in the industry?

• What is the likely cost of developing competing IP assets?

Source: Bertolotti (1995)


Best practice in new product development• Project visioning

– Clear vision and well established goals

• Management support– Strong support and encouragement from senior management

• New product development process proficiency– Well-established systems for project management and stage-gate

control

• Team processes– Multi-functional and experienced teams with excellent culture

• Documentation systems– Thorough documentation of all processes and reporting

• Communications– Effective formal and informal communications within team and outside

• Established project deadlines– Set realistic but firm deadlines and push to achieve them

Source: Akgun, Lynn & Byrne, (2004)


Innovation diagnostic diamond

Source: Mazzarol & Reboud (2011)

Market Index

Innovation Index

Resource Index

Strategy Index 5.5

6.5

7.5

Lo R&D Intensity Hi R&D Intensity

Market IndexGetting to market, customer needs, pricing strategy, adoption-diffusion rates.

Resources IndexHuman, financial and capital equipment resources needed to

fully develop the innovation

Innovation IndexTechnical, legal and engineering issues to bring the new product

from prototype to full production.

Strategy IndexBusiness planning, strategic alliance partnering, compliance, and corporate governance controls


Case study: AQ2 smartaflow

• In Groups– Discuss the questions– Present your findings


Case study: Who owns the patent?

• In Groups– Discuss the questions– Present your findings

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