Innovation Monetization By Matthew Kroeger and Cheryl Kysh

Innovation Monetization Financial leveraging of intellectual assetsFinancial leveraging of intellectual assets Increase either:Increase either: 1. Revenue streams1. Revenue streams 2.Capital funding2.Capital funding  Emphasis on patents.

Patent law Title 35 of the US code issued by the (USPTO)Title 35 of the US code issued by the (USPTO) Patents issued to inventors/discoverers of a process, machine, manufacture, composition of matter, or improvement (paraphrase)Patents issued to inventors/discoverers of a process, machine, manufacture, composition of matter, or improvement (paraphrase) Once issued, patents are personal property that can be bought, sold, transferred or assignedOnce issued, patents are personal property that can be bought, sold, transferred or assigned Infringement is the making, using, offering to sell, selling, or importing a patented invention without authorization and is subject to civil remedies.Infringement is the making, using, offering to sell, selling, or importing a patented invention without authorization and is subject to civil remedies.

Historical Perspective Historical methods for patent monetization:Historical methods for patent monetization: LicensingLicensing Enforcing patent rights and licensing agreementsEnforcing patent rights and licensing agreements However, patent holders have since devised new techniques:However, patent holders have since devised new techniques: Sale of patentsSale of patents Middle menMiddle men SecuritizationSecuritization

Licensing Common form of patent monetizationCommon form of patent monetization Example: Microsoft’s patent license with Samsung for use of Android SoftwareExample: Microsoft’s patent license with Samsung for use of Android Software Risks include competition, obsolesce, or expirationRisks include competition, obsolesce, or expiration Example:Example: Obsolesce of floppy disks Obsolesce of floppy disks and zip disks and zip disks

Multi-Company Licensing Patent Pool and Cross-licensingPatent Pool and Cross-licensing Result of two companies withResult of two companies with similar innovations, or inventions that rely heavily on each other Negotiated in order to avoidNegotiated in order to avoidlitigation

Texas instruments First example of a patent holder taking a defensive position with regards to their patent licensing agreements- early 1990’sFirst example of a patent holder taking a defensive position with regards to their patent licensing agreements- early 1990’s Used a litigation strategy to ensure that licenses were renewed- or else the licensors could face a patent infringement suitUsed a litigation strategy to ensure that licenses were renewed- or else the licensors could face a patent infringement suit Forced royalties out of companies using TI’s innovation without authorization.Forced royalties out of companies using TI’s innovation without authorization. (No innovation without authorization)(No innovation without authorization)

Changing Perspective IP monetization into important part of strategic management processes.IP monetization into important part of strategic management processes. Five changes for change:Five changes for change: 1. Utilizing the large, untapped potential of IT1. Utilizing the large, untapped potential of IT 2. More expertise in structuring and executing IP strategies2. More expertise in structuring and executing IP strategies 3. Identification of IP suitable for financial engineering3. Identification of IP suitable for financial engineering 4. Rise of non-practicing entities4. Rise of non-practicing entities 5. Avoidance of litigation risk5. Avoidance of litigation risk

MiddleMen IP AggregatorsIP Aggregators Acquire patents and patent poolsAcquire patents and patent pools Provide capitalProvide capital Provide financingProvide financing Defensive Patent PoolsDefensive Patent Pools Offer protection for “high risk” patentsOffer protection for “high risk” patents Non-practicing Entities, aka The Patent TrollsNon-practicing Entities, aka The Patent Trolls Big topic in current newsBig topic in current news Very controversialVery controversial

Patent Trolls

Patent trolls Do not create, provide, or innovate products or services (NPE)Do not create, provide, or innovate products or services (NPE) Buy patents and patent portfoliosBuy patents and patent portfolios Receive revenues primarily through litigation, and threats of litigationReceive revenues primarily through litigation, and threats of litigation Critics:Critics: Exist only to sue othersExist only to sue others Don’t use patents, or participate in innovationDon’t use patents, or participate in innovation Stifle innovationStifle innovation “[Patent trolls] don’t produce anything, they just shake down anyone who does”“[Patent trolls] don’t produce anything, they just shake down anyone who does”

False Marketing It is illegal to mark a product as “patented” if it is notIt is illegal to mark a product as “patented” if it is not Fines up to $500Fines up to $500 Does not apply for expired patentsDoes not apply for expired patents

Patent Management As monetization options have increased, so has the complexities of patent management.As monetization options have increased, so has the complexities of patent management. Integrate strategies for individual patents as well as in conjunction with each other.Integrate strategies for individual patents as well as in conjunction with each other. Keep future innovation in mind in addition to current monetization strategiesKeep future innovation in mind in addition to current monetization strategies Include patents and innovation as part of an overall business modelInclude patents and innovation as part of an overall business model

Concluding Remarks The environment, and thereforeThe environment, and therefore the options, for patent monetization has changed drastically. More options than everMore options than ever Some companies useSome companies use their patents for good, some for evil