evaluate, then valuate
DESCRIPTION
Presentation about evaluating IPs and/or early stage technologies given for a classTRANSCRIPT
Evaluate, then Valuate: An Economical Approach to Building
Biotechnology
Patent Analysis
Market Analysis
Evaluation Valuation
Is there a scarcity/demand in the targeted technology area?
Scarcity creates a
need to make a
choice
Deman
d cr
eate
s sc
arcit
y
Scarcity determines
valueSc
arcit
y
influ
ence
s pric
e
Resource-Based View:
Barriers to Entry
• Government regulations• Patents/IP • Asset Specificity• Economy of scales (minimum efficient scale)
Robert M. Grant. The Resource-Based Theory of Competitive Advantage (1991) California Management Review 33: 114-135
Porter’s 5 forces
Patent Citations used to:
• Determine patent quality/value
• Determine business strategies
• Determine knowledge spillover
What can we learn from Patent Citations?
• Potential partners
• Potential competitors
• Licensing opportunities
• Surrounding technologies
• Potential Infringements
• Potential market direction
• Hot/Cold technologies
• IP barriers to entry
• New markets• Focused Patent landscape analysis based on patent counts
Co-citation Provides a Natural Clustering Mechanism
5862322 5848248 hot patents
6170002
6256664
6263362
6298352
62791256279042
6298457
6370567
6219668
6442594
next generation
citing patent
sConnie K. N. ChangDirector, Ocean Tomo Federal Services, LLC
Collaborative Expedition Workshop #71National Science Foundation
Ballston, VirginiaMarch 18, 2008
Comparison to related patents
Comparison to rivals
Assessing rival products
Determining key markets & assessing market pull
Determining rivals, rivals’ market share, & anticipate technologies that rivals are securing
Assessing current innovations & probable direction of the market
Patent AnalysisResource-based view
“Nothing can have value without being an object of utility”
Karl Marx
“Everything is worth what its purchaser will pay for it.”
Publilius Syrus
Valuation
1. Patent Legal Factors
2. Economic value of the market protected by the patent
3. Economic value of the technology
Value patent based on three factors:
Qualitative!!!
Quantitative:
1. Market-based approach (comparable approach)
2. Asset-based approach (cost approach)
3. Income-based approach (discounted cash-flow)
“…demand cannot be known without prices”Ludwig Von Mises
Infringements Market Share Innovation
“The first lesson of economics is scarcity: There is never enough to satisfy all those who want it. The first lesson of politics is to disregard the first lesson of economics.”
Thomas Sowell
“When a management with a reputation for brilliants tackles a business with a reputation for bad economics, it is the reputation of the business that remains intact.
Warren Buffett.
evaluation
Management
Environment/Politics
valuation
An Economical Approach to Building Biotechnology
The ULR contract market overcomes the inefficiencies of traditional bilateral licensing by providing:• Contract standards• Efficient distribution model• Market transparency• Price discovery• Consistency in enforcement strategy
Financial Exchange Focused on Intellectual Properties
Scarcity:• Q Ratio (Tobin's Q ratio)• What Does Q Ratio (Tobin's Q ratio) Mean?
A ratio devised by James Tobin of Yale University, Nobel laureate in economics, who hypothesized that the combined market value of all the companies on the stock market should be about equal to their replacement costs. The Q ratio is calculated as the market value of a company divided by the replacement value of the firm's assets:
• Investopedia explains Q Ratio (Tobin's Q ratio)For example, a low Q (between 0 and 1) means that the cost to replace a firm's assets is greater than the value of its stock. This implies that the stock is undervalued. Conversely, a high Q (greater than 1) implies that a firm's stock is more expensive than the replacement cost of its assets, which implies that the stock is overvalued. This measure of stock valuation is the driving factor behind investment decisions in Tobin's model.
By examining the characteristics of patents that were renewed relative to those that were abandoned, one can begin to make certain predictive assessments about the quality and likely value of other patents that share statistically similar attributes.
The Ocean Tomo Relevance Engine determines the most closely related patents and identifies their current owners based on USPTO Assignment records. This allows decision makers to quickly and objectively obtain information regarding relevant patents, technologies, potential partners, acquisitions or other strategic targets based on Patent information.
IPXI has qualified the following companies as having especially strong intellectual property, including patents, copyrights, and trademarks. In order to be included on this list of qualified equities, a company must meet at least one of the following criteria: OT300 Top Quartile
The company is rated in the top quartile of companies listed in the Ocean Tomo 300® Patent IndexAppraised Value
The value of the company's intellectual property, as determined by an independent, third-party appraiser, exceeds $1 billion Innovation Ratio
The Innovation Ratio (IP value/book value), as determined by an independent, third-party appraiser, exceeds 25% Licensing Revenue
Licensing revenue from intellectual property exceeds 15% of total revenues or 50% of earnings
Shows the citation relation between two patents: 1st generation = direct citation (i.e. they both cite the same patent); 2nd generation = they are linked via on patent citation removed; etc. (1st generation has 2 path between P1 and P2; 2nd generation has 3 paths betw P1 and P2, and etc.
The determined count of citational relationships at each generation 2-5 are provided as input predictor variables (independent variables) to a multi-variate probit regression model. The regression model is formulated and optimally adjusted to predict the existence or absence of a first generation citational relationship between documents P 1 and P 2 (whether such relationship actually exists or not) and/or some other objective relationship based on some or all of the input predictor variablesprovided. The resulting probability score (and/or a mathematical derivation thereof) is an objective and repeatable probabilistic quantification of the likely relevance between documents P 1 and P 2.
Market Share = Firm's Sales / Total Market Sales
Easy to enter market if: 1.Common Technology exist2.Little brand franchise exist3.Large access to distribution channels4.Low scale threshold (minimum efficient scale; MES)
Difficult to enter market if: 1.Patented or proprietary know-how is involved2.Difficulty in brand switching3.Restricted distribution channels exist4.High scale threshold (MES)
Easy exit, if there are:1.Salable assets2.Low exit costs3.Independent business
Difficult exit, if there are:1.Specialized assets2.High exit costs3.Interrelated businesss