Value Extraction LLC EXTRACTING VALUE FROM INTELLECTUAL ASSETS Henry Fradkin Principal Value Extraction LLC Garrison Street Dearborn, MI

Value Extraction LLC PURPOSE Provide technology commercialization strategy and some best practices Key topics: Define why many of us license Outline other ways to commercialize technology beyond in-house company use Discuss various ways to find and extract value Provide best practices through key “Lessons Learned”

Value Extraction LLC LET’S START WITH DEFINTIONS Intellectual Property-- legally protected Knowledge Intellectual Assets-- all codified Knowledge Intellectual Capital--all Knowledge

Value Extraction LLC WHAT CAN WE LICENSE? Wide range of Intellectual Assets available: Product Technology Processes, including manufacturing, CAD/CAE/CAM software, and testing Business Methods, including patents, copyrighted materials and processes Wide range of legal protection (“IP”): Patent, copyrights, and trade secrets (i.e., know-how)

Value Extraction LLC WHY SHOULD WE LICENSE? Generate new sources of royalty revenue Build specialized patent clusters for cross- licensing and other purposes Manage and resolve threats Reduce the cost to acquire new technologies; e.g., through: Joint developments Joint ventures Grant-backs

Value Extraction LLC MORE REASONS TO LICENSE OUT Set industry standards for economies of scale Gather competitive intelligence through negotiations Deter government anti-trust-actions Enter new markets economically--versus setting up a company, etc.

Value Extraction LLC AND MORE REASONS Use Your IP as collateral for loans Negotiate pre-paid royalties to generate an early cash flow to support development and new IP Increase the reputation and goodwill for the company

Value Extraction LLC THE #1 REASON TO LICENSE SHOW ME THE MONEY!

Value Extraction LLC WHY SHOULD SOMEONE LICENSE IN OUR TECHNOLOGIES? Reduce R&D costs Be faster to the market Reduce risk--license a proven technology Co-brand to penetrate new markets and command higher prices Secure key technical help from licensor Enter new markets--new technology, overseas, etc. Avoid litigation

Value Extraction LLC SHOULD YOU LICENSE COMPETITORS? Definitely yes…once you’ve established a competitive advantage: Everything else equal, they pay more…royalties Keeps them from designing around your technology Promotes new inventive efforts from your people Can establish an industry standard based on your technology Promotes economies of scale Minimizes risk of employee raids

Value Extraction LLC EXAMPLE-FORD MOTOR CO.

Value Extraction LLC TECHNOLOGY MINING--THREE MAJOR APPROACHES

Value Extraction LLC THE TOP FIVE MINING APPROACHES Referrals from the company’s technical and business communities Establishing an Intellectual Asset Management program Conducting Strategic Thinking Workshops or Meetings Working with experts to mine the technology portfolio Establishing a Process to Identify Licensing Opportunities in Invention Disclosures

Value Extraction LLC “LESSONS LEARNED” Success requires: Securing top management commitment Aligning efforts with company business and strategic needs Creating “win-win” commercialization arrangements…build relationships Staffing the office selectively…need diverse experience and backgrounds

Value Extraction LLC “LESSONS LEARNED” (CONT.) Technical support key to licensing out more than “bare” patents Find the right incentives...money works best! "At IBM, we went from a net payer for IP in to a net IP licensing revenues of US$1.7 billion to US$1.9 billion when I left in We didn't treat this money as profit, but circulated it back to the developers to encourage their co-operation with the licensing program.“…Marshall Phelps, ex VP, IBM IP

Value Extraction LLC “LESSONS LEARNED” (CONT.) Licensing office operational “musts”: Understand what it is selling before committing time, resources, and energy Be sure the company actually owns what you’re trying to license out or sell; e.g., all software Provide value-added to the business and technical community Know your customer

Value Extraction LLC “LESSONS LEARNED” (CONT.) Be proactive, creative and aggressive in marketing yourself: Inside the company…by contacting “roadshows,” participating in technical forums and staff meetings, etc. Outside of the company…make cold calls, network, follow up leads asap, etc. And walk away form any deal that looks like it’s going to be a bad one!!!