1. Portfolio Mining and Analysis Frank S. Farrell F.S. Farrell, LLC 7101 York Avenue South Suite 305 Edina, MN 55435 Phone: 952-921-3260 Fax: 952-216-0106 Email: frank@fsfarrell.com

2. MIPLA Corporate Practice CLE March 26, 2004 – Minneapolis, MN Presented by Frank S. Farrell Page 2 Portfolio Mining A systematic process of organizing and classifying an intellectual property portfolio with an eye to extracting value

3. MIPLA Corporate Practice CLE March 26, 2004 – Minneapolis, MN Presented by Frank S. Farrell Page 3 Today’s Situation Disconnect between technology roadmap and patenting –Patents become way to document product development, not innovation Disconnect between IP development and revenue generation –Patents obtained but sit unused

4. MIPLA Corporate Practice CLE March 26, 2004 – Minneapolis, MN Presented by Frank S. Farrell Page 4 Patents are a defensive tool Licensing your patents to others is expensive Licensing will make your competitors mad The returns aren’t worth the risk We’ll look greedy or opportunistic Original Assumptions - No Longer Valid

5. MIPLA Corporate Practice CLE March 26, 2004 – Minneapolis, MN Presented by Frank S. Farrell Page 5 How Did We Get Here? U.S. R&D spending continues to rise (R&D spending in 1999 was $244B, 44% of total worldwide R&D) Non-governmental (NG) R&D is 75% of total R&D License fee revenue is 10-15% of NG R&D dollars (Arora et al., Markets for Technology (2002)) R&D expenditures have fueled explosive IP growth –103,703 patents were applied for in 1983, with 59,400 filed by U.S. Applicants – 57,000 were granted –326,000 patents were applied for in 2001, with 173,000 filed by U.S. Applicants – 166,039 were granted

6. MIPLA Corporate Practice CLE March 26, 2004 – Minneapolis, MN Presented by Frank S. Farrell Page 6

7. MIPLA Corporate Practice CLE March 26, 2004 – Minneapolis, MN Presented by Frank S. Farrell Page 7

8. MIPLA Corporate Practice CLE March 26, 2004 – Minneapolis, MN Presented by Frank S. Farrell Page 8 Extracting Value From Existing IP Portfolios How to recognize value in your Portfolio How to capitalize on that value How to use that knowledge to craft your IP strategy

9. MIPLA Corporate Practice CLE March 26, 2004 – Minneapolis, MN Presented by Frank S. Farrell Page 9 How to Recognize Value in Your IP Portfolio Organizing your Portfolio Classifying the IP Identifying revenue producing opportunities

10. MIPLA Corporate Practice CLE March 26, 2004 – Minneapolis, MN Presented by Frank S. Farrell Page 10 Organizing Your Portfolio Organize by Technology Area –Easy, often can do automatically based on patent class Map Patents on Products –More difficult, requiring participation by product designers, but also more revealing

11. MIPLA Corporate Practice CLE March 26, 2004 – Minneapolis, MN Presented by Frank S. Farrell Page 11 Classifying Your IP –Core or Non-Core? Non-CoreCore US 4444444 EP xx/xxxxx TM xyz US 5555555 WO xx/xxxxx US 4444455 JP xx/xxxxx US 6666666 DE xxxxxxxx FR yyyyyyyy

12. MIPLA Corporate Practice CLE March 26, 2004 – Minneapolis, MN Presented by Frank S. Farrell Page 12 Classifying Your IP - Product or Potential Product? Never ProductPossible Product Product US 4444444 EP xx/xxxxx TM xyz US 4444455 JP xx/xxxxx US 5555555 WO xx/xxxxx US 6666666 DE xxxxxxxx FR yyyyyyyy

13. MIPLA Corporate Practice CLE March 26, 2004 – Minneapolis, MN Presented by Frank S. Farrell Page 13 Identifying Revenue Producing Opportunities Are there infringers? Are there any new business opportunities?

14. MIPLA Corporate Practice CLE March 26, 2004 – Minneapolis, MN Presented by Frank S. Farrell Page 14 Identifying Revenue Producing Opportunities How: –Competitive Technology Intelligence –Patent Mining of Competitors –Technology Forecasting –Engineers and Marketing Assessment of Competitors Brainstorming on alternative uses of patented technology

15. MIPLA Corporate Practice CLE March 26, 2004 – Minneapolis, MN Presented by Frank S. Farrell Page 15 Capitalizing on the Value In Your IP Portfolio Transfer the IP by Sale or Donation –Low risk, guaranteed reward Borrow against your IP Portfolio –Pro: Make use of an otherwise nonperforming asset (esp. M&A) –Con: Maintenance fees/annuities, interest

16. MIPLA Corporate Practice CLE March 26, 2004 – Minneapolis, MN Presented by Frank S. Farrell Page 16 Capitalizing on the Value In Your IP Portfolio License your IP –Pro: Potential for greater returns –Con: Maintenance fees/annuities, retain risks of invalidity and unenforceability Transfer IP to a Joint Venture –Pro: Potential for greater returns than above –Con: Risks of failure of any new business

17. MIPLA Corporate Practice CLE March 26, 2004 – Minneapolis, MN Presented by Frank S. Farrell Page 17 Capitalizing on the Value In Your IP Portfolio Enforce your IP –Pro: Potential for greatest returns –Con: Maintenance fees/annuities, retain risks of invalidity and unenforceability, high costs of litigation (if necessary)

18. MIPLA Corporate Practice CLE March 26, 2004 – Minneapolis, MN Presented by Frank S. Farrell Page 18 Adopt a Portfolio Management Strategy Decide whether you will license core technologies to competitors Decide whether you are going to pursue infringers to generate revenue or to keep them out of particular product areas Develop strategy for aligning patent acquisition with existing and planned products and services

19. MIPLA Corporate Practice CLE March 26, 2004 – Minneapolis, MN Presented by Frank S. Farrell Page 19 IP Revenue Methodologies – Core or Non-Core? Non-CoreCore License or sellLicenseNon- Competitor License or sellEnforce or Do Nothing Competitor

20. MIPLA Corporate Practice CLE March 26, 2004 – Minneapolis, MN Presented by Frank S. Farrell Page 20 IP Revenue Methodologies – Product or Potential Product? Never Product Possible Product Product License or Sell License, Sell or Joint Venture LicenseNon- Competitor License, Sell or Joint Venture Joint Venture or Do Nothing Enforce or Do Nothing Competitor

21. MIPLA Corporate Practice CLE March 26, 2004 – Minneapolis, MN Presented by Frank S. Farrell Page 21 IP Revenue Methodologies – Comp. vs. Noncomp. Value? Low Competitive Value High Competitive Value Sell or DonateEnforce or License(?) Low Non- Competitive Value License, Sell or Joint Venture Enforce, License for noncompetitive uses High Non- Competitive Value

22. MIPLA Corporate Practice CLE March 26, 2004 – Minneapolis, MN Presented by Frank S. Farrell Page 22 Crafting Your IP Strategy to Enhance Value Patenting to enhance revenue producing opportunities Pruning your portfolio Charting future development and patent strategies

23. MIPLA Corporate Practice CLE March 26, 2004 – Minneapolis, MN Presented by Frank S. Farrell Page 23 Patenting to Enhance Revenue- Producing Opportunities Patent to instantiate R&D dollars –Track patents to research and development goals Identify areas of patent weakness –Spend R&D $$ in core areas of technology where patent protection weak Identify areas where technology is moving Catch ideas outside of product lines

24. MIPLA Corporate Practice CLE March 26, 2004 – Minneapolis, MN Presented by Frank S. Farrell Page 24 Pruning Your Portfolio The cost of maintaining a patent increases nonlinearly as the patent ages –Review patent portfolio annually to determine if patents should be allowed to lapse, or should be sold or donated –Decision based on licensing potential/ revenue vs cost of maintaining

25. MIPLA Corporate Practice CLE March 26, 2004 – Minneapolis, MN Presented by Frank S. Farrell Page 25 Charting Future Development and Patent Strategies Patent to complement your biz strategy –Track patents to research and development goals –Patent in areas where competitors have to move Emphasize and invest in core areas of technology where patent protection weak Identify and exploit patent weakness on the part of competitors License or purchase patents that do above

26. MIPLA Corporate Practice CLE March 26, 2004 – Minneapolis, MN Presented by Frank S. Farrell Page 26 Conclusion Recognizing Value in Your IP Capitalizing on that value Using that knowledge to craft your IP strategy both in reducing expense and increasing value

27. MIPLA Corporate Practice CLE March 26, 2004 – Minneapolis, MN Presented by Frank S. Farrell Page 27 Recommendations Organize your IP portfolio to identify revenue opportunities Pursue the revenue opportunities Prune your portfolio Patent to complement your biz strategy –Track patents to research and development goals –Patent in areas where competitors have to move Emphasize and invest in core areas of technology where patent protection weak