julian nolan – [email protected] the role of ip and patents in enhancing the competitiveness of...
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Julian Nolan – [email protected]
The Role of IP and Patents in Enhancing the Competitiveness of Business
Julian Nolan
9th June 2010
Julian Nolan – [email protected]
Agenda
– What is IP?• And who cares about it• IP and business – Scipher case study
– The Business of patents• And their value• Using patents to build a business – BTG case study
– Creating value through patent licensing• Strategies and tactics• Licensing to 80% of the PC market – Sensaura case study
9th June 2010
Julian Nolan – [email protected]
Intellectual Property - what is it?
• Intellectual property is not just about patents.• It's about brand names, products, services,
music, software, paintings and many other creations of the mind.
Patents
Other IP
9th June 2010
Julian Nolan – [email protected]
Ways of thinking about IP
Trade Marks source identifierlogo’s, names, smells, shapes, packaging etc.
Patents technology protectorinventions, products, processes etc.
Designs protection to product shapeappearance: toys, clothes, household items etc.
Copyright protection of creativityartistic, aesthetic works, photography, books,
sculptures, computer code etc.
9th June 2010
© 2001 Lall & Sethi Advocates
Julian Nolan – [email protected]
Managing IP - a real business issue
‘My focus is IP, I’m convinced that the management of IP is how value added is going to be created at Xerox. And not only here. Increasingly companies that are good at IP will win. The ones that aren’t will lose.’ ….. Richard Thoman - CEO Xerox
‘We are reducing our dependence on the businesses based on heavy assets and fixed capital and growing fast in new and flexible businesses based on intellectual capital. …. Only by cultivating outstanding ideas …… and protecting them as a source of value creation can we assure that ABB will continue to be successful.’ ….. Markus Bayegen - Senior Corporate Officer, Group R&D and Technology ABB
‘Intellectual Property is the oil of the 21st Century. Look at the richest men a hundred years ago, they all made their money extracting natural resources or moving them around. All today’s richest men make their money out of Intellectual Property.’ …. Mark Getty - Founder of Getty Images
9th June 2010
Julian Nolan – [email protected]
Why?
Source OECD: Compendium of patent statistics 2007
USPTO patent applications
About USD500B of transactions per year !
9th June 2010
Julian Nolan – [email protected]
The business of IPIncrease competiveness... market/competitor intelligence
New revenue... licensing/sale of your technology
New products & services... acquiring technology
Limited monopoly... patents
Brand creation/protection... trade marks
differentiation copyright
designs
collective marks
Mutual advantage... cross-licensing
Attack / defence... litigation
Mergers & acquisitions... evaluation, due diligence
Lower costs... core / non-core IP
9th June 2010
Source: Stephen Potter
Julian Nolan – [email protected]
IP and business
Scipher case study
Source material in this section contributed by Dr. Stephen Potter.
Julian Nolan – [email protected]
1920 - 1979 “the world’s first multimedia company”
Innovations: electronic television, CT scanning
Production of CT scanners drives company to the wall
1979 - 1990’s Thorn - EMI conglomerate - >100 companies
licensing of scanner technology delivers >$150m
Conglomerates become unfashionable
EMI - the problem
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EMI’s Central Research Laboratory
Major innovations
Nobel Prize - Computerised Tomography stereo recording the “long tailed pair” first public television system first airborne radar systems
“corporate laboratory” ------- “business levy” formed in1924 - break the Westinghouse patents true corporate laboratory: “money over the wall”
+ levy on businesses
9th June 2010
Julian Nolan – [email protected]
1993 Focus the business: sell >120 companies
EMI - pure music company
Corporate laboratory: ~ 300 engineers, ~ 800 patents
= staff + IP £10m - ~£4.8/4.8m corporate/levy, ~£0.4 3rd party
Strategy: put the engineers on the street !
Unless corporate laboratory could be self funded.
Shut down the lab or spin it off.
EMI - the problem
9th June 2010
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1994
agreed budget: £1m loss T/O fell to £6,5m 30% loss of people form 10 potential groups using indigenous people
1995 agreed budget: £650K loss 5 groups left externally funded work rose to 95% of T/O
EMI Central Research Laboratory
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Transition to Scipher plc
1996
• Scipher plc formed from CRL + other unwanted EMI businesses
• November 1996 Management Buy Out for ~$5M
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Acquire IPassets
Acquire IPassets
Commercialise IP assets
Commercialise IP assets
Release IP asset value
Release IP asset value
IP generation
IP generationCompetencies
CompetenciesValue extraction
Value extractionCRL
CRL
Corporate partners
Corporate partnersBusiness opportunities
Business opportunities
Licensing- P a te n t lic e n s in g- Te c h n o lo g y tra n s fe r
Licensing- Patent licensing- Technology transfer
Technology- E le c tro n ic s , o p tic s ,
m a g n e tic s
Technology- Electronics, optics,
magneticsBusiness creation
- s p in -o u t b u s in e s s- J V
Business creation- spin-out business- JV
Licensing revenue
Licensing revenueR&D revenue
R&D revenueProduct sales
Product salesEquity holding
Equity holding
StrategicObjectives
StrategicObjectives
BusinessProcess
BusinessProcess
Capitalvalue
Assetcreation
Technology development & licensing
Technology development & licensing
Valuecreation
Valuecreation
Scipher’s patent based business model
9th June 2010
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Scipher plc
2000
• Initial Public Offering on the London Stock Exchange for
~ $1B (peak) !
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- novelty: product, method or process
- inventive step: not obvious to those skilled in the art
- industrial application: reduction to practice
----------------------------
- must not have been disclosed to the public (except under US patent law)
Patents
9th June 2010
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Use of ‘business method’ patents by Internet companies
– Amazon vs Barnes&Noble - one click process- Obtained court injunction against Barnes & Noble
– Priceline vs Expedia - reverse auctioning- Seeking patent infringement judgement- Marketel issued lawsuit against WalkerDigital for breaching trade secrets
– lBM & Dell - integrated order, build & ship process- $16bn cross licensing deal- IBM gains free access Dell’s 42 business process patents - Dell gains free
licence to IBM’s PC technologies on which competitors pay royalties – Wal-Mart vs Amazon - business process s/w (no patents)
- Out of court settlement with no financial compensation - Amazon agreed not to use poached staff to work in similar area
“you can get much further with a kind word and a gun than with a kind word alone” ……… Al Capone
Source: Stephen Potter
9th June 2010
Julian Nolan – [email protected]
0% 5% 50%
Val
ue
Portfolio
High Value Patents
Defensive Patents Overhead or Non-strategic Patents
But ... most patents are worthless
Source: Stephen Potter
9th June 2010
Julian Nolan – [email protected]
What to do with patented IP
None Alternative solution
ImprovementPatents
Technology/ Product concepts
Master Patents
No
ne
Tech
nic
al
skill
sTe
chn
ica
l E
xpe
rtis
e
Info
rmal
In
tell
ect
ua
l As
sets
Formal Intellectual Assets
High-tech product based spin-out opportunities
Consulting or Technology development spin-outs
IPR Licensing
Non-technology based spin-outs
IPR basedTechnology - transfer
‘Pro
prie
tary
K
no
w-h
ow
’
Know-how based Technology - transfer
But mostly ...
9th June 2010
Julian Nolan – [email protected]
Quartz crises in Switzerland
• GIRARD PERREGAUX– Invented
• But– Did not exploit
• Swiss watchmaking– Employed
• 90,000 in 1970• 30,000 in 1984
9th June 2010
Julian Nolan – [email protected]
BTG case study (1)
• BTG– Manufacturer of ceramic coated
blades for cutting paper/board• Reduces down time• Big impact on profitability
– High selling price of blade substantiated
• Patented– Used to initially protect margins ...
But what happens when the patents expire?
9th June 2010
Julian Nolan – [email protected]
BTG case study (2)
• Before the patent expired, BTG– Developed relationships with customers– Put in place class leading logistics– Onward developed the technology and filed new
patents• Result
– Small decline in revenues but largely business as usual
9th June 2010
Julian Nolan – [email protected]
What is licensing
Licensing is a direct way of creating value from IP
“A License is a written authority granted by the owner of a patent or other intellectual property (licensor) to another party (licensee) empowering the latter to make or use the article for a particular application.”
9th June 2010
Julian Nolan – [email protected]
The licensor sets the rules
…..and can limit the licensee’s use of the licensed material by:
• Market• Geography• Time• Specific Application• Grant of Rights Usage
• Make, have made, sell, market, sublicense, etc.
9th June 2010
Julian Nolan – [email protected]
Licensing deals can include ...
• Non-core or mature technology or patents• Core technology or patents• Struggling businesses or products (new or mature)• Non-strategic businesses or products (new or mature)• Services• Technology that can be applied to other markets• Trademarks• Patent Enforcement
9th June 2010
Julian Nolan – [email protected]
Sensaura case study (1)
• Sensaura Ltd. – London, UK– 3D audio technology
• Virtualises 3D audio from only two loudspeakers• Patents, software, documentation• Licensed to >80% of PC market + CE manufacturers
– Embedded in audio chipset
• Patents used to sustain competitive position
But, why license instead of selling hardware ?
9th June 2010
Julian Nolan – [email protected]
Sensaura case study (2)
– Resources• Technology development / licensing
Vs.
• Much broader investment
– Marketing• Value chain positioning• Ability to reach customers / sales cycle time• Industry dynamics
– Result• Licensing strategy resulted in successful business faster and at
lower risk than if company had moved up the value chain.• Acquisition by Creative Labs .
9th June 2010
Julian Nolan – [email protected]
Recap
• 80:20 flip between tangible and intangible assets
• Intellectual Property key for success in many industry sectors
• Patents are an asset (like any other)– Use them to make money– License-in to help grow business
9th June 2010
Julian Nolan – [email protected]
Thank-you
9th June 2010
Julian NolanPatriousAvenue des Alpes, 4PullySwitzerland
E-mail : [email protected] Column : http://news.bbc.co.uk/2/hi/business/8551808.stm