patents and finance : affording partners patents, attracting … · investment ! as an information...

Capr

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patents, attracting investors - a VC perspective

Marc Lambrechts OECD Expert Workshop on Patent Practice and Innovation

May 10, 2012 Paris

Capricorn Venture Partners

2 OECD Paris

Your speaker today

Dr ir Marc Lambrechts research in microsystems and PhD on biosensors

at KU Leuven industrial R&D experience at Terumo Europe RTD programme management experience at IWT + 10 years experience as senior investment manager in early stage

venture capital technology fusion as special area of interest active on the board of EpiGaN, Leuven.Inc and Punch Powertrain

Capricorn Venture Partners founded in 1993, independent and partners-owned pan-European activity, located in Leuven, Belgium hands-on venture capital & technology focus investing out of Capricorn Cleantech Fund (CCF I)

and Capricorn Health-tech Fund (CHF) merged with Quest Management

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Portfolio examples

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http://www.orthovita.com/�


The Venture Capital business model

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IP knowledge experience

+ proof of concept

business plan +

market +

customers .. entrepreneurs and team

board of directors investors

€ € € € € € € € € € € € € € € €

€


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Tech VC’s prefer to invest in

Entrepreneurs and a team Technology as sustainable competitive

advantage strong and clean intellectual property/capital proof of concepts exists and mode of action is

understood

A business model we understand and like Growing and huge markets ‘Need to have’ proposals with ‘identified

customer pain’ Focus combined with mutant potential Well funded and capital efficient companies Exit perspective @ 5 to 10 x multiple

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Business model

i.e. the architecture of revenue and profit The functions of a business model are to:

articulate the value proposition, that is, the value created for users by the offering based on the technology;

identify a market segment, that is, the users to whom the technology is useful and for what purpose;

define the structure of the value chain within the firm required to create and distribute the offering and determine the complementary assets needed to support the firm’s position in this chain;

to specify the revenue generation mechanism(s) for the firm and estimate the cost structure and target margins of producing the offering, given the value proposition and value chain structure chosen;

describe the position of the firm within the value network linking suppliers and customers, including identification of potential complementary firms and competitors;

formulate the competitive strategy by which the innovating firm will gain and hold advantage over rivals.

Based on : Open Innovation, Henry Chesbrough, HBS Press

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Choosing the business model

Leo Baekeland on the IP license business model "I firmly intended to escape the recurrence of business occupations, as in my Velox days. So I planned, instead of manufacturing myself, to grant licenses to established manufacturing concerns, especially experienced in plastics. But I soon was confronted with a repetition of my former experience with Velox: that it was very difficult to teach new methods to men who had acquired routine in older processes. The preparation of the new resinoid and its molding compositions, which to me seemed very simple, appeared either very difficult or needlessly complicated to others. Reluctantly I had to start manufacturing the raw materials in a sufficiently advanced stage so that the users had only to complete the operation of molding and polymerization.“ See also ”The Baekeland story - Lessons for today’s ventures in new materials” http://be.linkedin.com/in/marclambrechts

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http://be.linkedin.com/in/marclambrechts�


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Importance of patents

Patents are important in any phase of a VC investment ! As an information source for deal selection Before making an investment During the investment period At exit (most likely via M&A transaction)

OECD Paris


Patent database = information source

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Patents are important in any phase of a VC investment ! As an information source for deal selection Before making an investment

Strong and clean IP ( co-ownership, right of first refusal, inventor rights, …)

Full ownership of patent(s) by the company remains the preferred model!

Exclusive license with transfer rights and right/obligation to defend source IP?

FTO - Freedom to operate is key During the investment period At exit (most likely via M&A transaction)

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FTO – hybrid drive trains

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Source : Ambercite – Griffith Hack http://www.ambercite.com/downloads/ambercite_hybrid_car_report.pdf


FTO – hybrid drive trains

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Source : Ambercite – Griffith Hack http://www.ambercite.com/downloads/ambercite_hybrid_car_report.pdf


First patent for hybrid

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Patents are important in any phase of a VC investment ! As an information source for deal selection Before making an investment During the investment period

Expand and strengthen the IP position by own R&D, partnerships, …

Create a unique IP fingerprint addressing a sizeable market Patent maps and landscapes as tool IP bundling opportunities IP pipeline agreements with R&D centre(s)

At exit (most likely via M&A transaction)

OECD Paris


Patent mapping

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Source : www.patanalyse.com


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Patents are important in any phase of a VC investment ! As an information source for deal selection Before making an investment During the investment period At exit (most likely via M&A transaction)

Beware of “Change of Control” clauses Tough IP due diligence (patents, trademarks, use of open

source, ..) Reps and warranties Not the most interesting moment to receive patent

infringement claims Value of patents at exit?

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Value of IP at exit : FillFactory Case

Source : SEC files Cypress


Value of patents at exit

In case of a failed business that received + € 7 M from investors, clients, subsidies, …

… all assets have been acquired for +/- € 50k

Source : final report of the receiver

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For further discussion

Most of the patents are about a unique feature not a sellable (whole) product a valuable patent is only part of a valuable business

Patent cost versus patent value : taking a patent maintaining a patent + translations defend yourself in case of litigation follow-up in case of infringement of your patent portfolio

IP protection in open innovation models IP litigation as a business model – what about NPE’s? IP and developing economies

China : not infringing but building own IP portfolio

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An example : smartphone patent war

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Source : Verizon/Forbes

Capricorn Venture Partners Patent monetization : threat or opportunity for a VC backed company?

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For more information

Contact: Marc Lambrechts

Capricorn Venture Partners marc [at] capricorn.be

Lei 19/1, B-3000 Leuven, Belgium Tel. +32 16 28.41.00 Fax +32 16 28.41.08

http://www.capricorn.be

2012-05-10

http://creativecommons.org/licenses/by-nc-sa/3.0/

http://www.capricorn.be/�

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