1. 2008-08-28 FröhlingVolvo Technology Corporation1 The Interconnection between Patents, Trademarks, Designs and Domain names - Business Models & IP in Collaboration Scenarios Werner Fröhling CONOPA Annual Conference Copenhagen, 28-29 August 2008

2. 2008-08-28 FröhlingVolvo Technology Corporation2 Some Basics IP or Intellectual Property: IP filed with & registered by patent offices and unregistered IP of similar nature –Patents & utility models –Designs –Integrated circuit topography protection –Plant protection –Trademarks, company names, domain names –Database protection –Copyright (software) –Confidential know-how –... Focus here: patents

3. 2008-08-28 FröhlingVolvo Technology Corporation3 Some Basics Business is based on (fair) competition & profit Copying is one important element in competition; it is not only allowed but also wanted in order to serve the needs of the market and of society in an optimal way unless it is forbidden by law Innovation is another important element in competition; it creates new products & new services and is an important prerequisite for sustainable economical growth and societal wealth Knowledge is a prerequisite for innovation - Reduction of knowledge to practice (”know-how”) creates said new & innovative products & services which in turn might be based on concrete inventions - Technical inventions which are new, based on an inventive step & susceptible of industrial application can be protected by patents* Patents are negative monopolies which stimulate & foster innovation - They encourage innovators & investors to invest in R&D - They force 3rd parties to develop alternative (better) solutions (”work arounds”) * US patentability requirements: novelty, non-obviousness & usefulness; no patentability restrictions regarding technical character of inventions

4. 2008-08-28 FröhlingVolvo Technology Corporation4 Some Basics The original “classical” role of a patent - as defined by law: A Patent is a negative monopoly right which the society grants to the patent holder in return for the disclosure of the invention forming the base for said monopoly right to the public which is limited in time and geographical coverage and which gives the patent holder the right to forbid any third party to commercially use the subject matter protected by that monopoly right Further roles of patents - as developed in practice: Patents are effective & multi-facetted business tools for setting up an appropriate business model for the commercial exploitation of an innovation in a specific business environment; they are a strong currency to get access to complementary technologies controlled and/or patent protected by third parties (cross licenses) a strong tool to increase the attractiveness of a technology or product concept for third parties a strategic asset for co-operations, M&A, JV, and strategic alliances an efficient tool for securing exclusivity on the market of brand-identifying features or other competitive advantages of products & services an official certificate of the innovator’s technological competence & leadership an efficient tool for blocking competitors and controlling suppliers in their activities a strategic asset increasing the innovator’s value for shareholders, investors, banks & rating companies a strategic tool in connection with international standards a prerequisite for an active licensing policy...

5. 2008-08-28 FröhlingVolvo Technology Corporation5 Some Basics Knowledge Technical Knowledge Public Non-Public Proprietary Free Non-Proprietary Protected Proprietary Non- Accessible Unregist’d IP Regist’d IP Market Knowledge Business Knowledge Public Know-How -Publications -Presentations... Non-Retrievable - Foreign Languages - Oral only... SW Copyright Database Prot.... Patents Utility Models IC mask works Designs... Confidential Know-How

6. 2008-08-28 FröhlingVolvo Technology Corporation6 Some Basics Unpublished Invention Unpublished Patent Application (18 months) Published Patent Application or Patent Unpublished Published Patents Confidential Know-How Confidential Know-How Non-Public Proprietary Non-Protected Public Non-Proprietary Non-Protected Public Proprietary Protected Type Published & Expired Patent Application or Patent Time

7. 2008-08-28 FröhlingVolvo Technology Corporation7 Profitability & Growth Profitability Growth Mainstream R&D Caught in the Box Does mainstream R&D within the core business as any other actor in that business Files patent applications focused on details/components of existing products Creates (i) profitability within the core business at the expense of growth or (ii) growth at the expense of profitability, but creates usually only little profitable growth (if any) Core Business

8. 2008-08-28 FröhlingVolvo Technology Corporation8 Profitability & Growth Profitability Growth Breaking down the Walls Creates innovations related to core business Files patent applications focused on concepts of next generation products, systems, technologies & new materials Expands the core business and creates profitable growth in the expansion area Mainstream R&D Innovations Core Business Extended Core Business

9. 2008-08-28 FröhlingVolvo Technology Corporation9 Profitable Growth Profitability Growth Thinking outside the Box Creates break-through innovations focusing on customer needs (total customer solutions) and connecting core business with other businesses Files patent applications focused on strategic new product and service concepts and emerging technologies Creates considerable profitable growth in new businesses Mainstream R&D Core Business Extended Core Business New Business Break-Through Innovations

10. 2008-08-28 FröhlingVolvo Technology Corporation10 Make, Collaborate or Buy Strategy Collaboration with 3 rd party (e.g. technology provider) Company’s own internal core competence Buy as standard component (”off-the-shelf”) Collaboration with 3rd party (e.g. supplier) Uniqueness of Technology Uniqueness of Product Feature High Low

11. 2008-08-28 FröhlingVolvo Technology Corporation11 Technology Access Accessing Technology from the Outside* 1900 1960 2000 20% 10% 0% Time * Taken from: EIRMA: Technology Access for Open Innovation – Summary of Working Group 63 Report; page

12. 2008-08-28 FröhlingVolvo Technology Corporation12 Players* Basic R&D – academic research –Universities Operative R&D – reduce to practice –Universities –Research institutes –Research companies –Companies Process development & up-scaling - industrialisation –Research companies –Companies Business – market penetration –Companies * Taken from: EIRMA: Technology Access for Open Innovation – Summary of Working Group 63 Report; page 2

13. 2008-08-28 FröhlingVolvo Technology Corporation13 Basic Innovation Concepts Closed Innovation* –Successful innovation requires the control of the innovation by the innovator in order to create value for him (Henry Chesbrough’s solid funnel) Open Innovation* –Successful innovation makes use of external & internal ideas, and internal & external paths to market defined by an appropriate business model in order to create value for the actors involved (Henry Chesbrough’s porous funnel) Public Innovation –Given to the public without any restrictions –Non-proprietary & free accessible to everybody –Spirit of Humboldt (universities) Hybrid Innovation Concepts –Given to the public, but with restrictions –Proprietary, but free accessible to everybody –Example: Open Source community (software) * based on Henry Chesbrough: Open Innovation (Havard Business School Press, Boston, 2004, pages xx, xxiv)

14. 2008-08-28 FröhlingVolvo Technology Corporation14 Business Model An attempt to approach the meaning of the term* Business Model definitions in literature: –The definition of a business model is murky at best. Most often, it seems to refer to a loose conception of how a company does business and generates revenue. Yet simply having a business model is an exceedingly low bar to set for building a company. Generating revenue is a far cry from creating economic value, and no business model can be evaluated independently of industry structure. The business model approach to management becomes an invitation for faulty thinking and self-delusion (Porter, 2001) –The terms “business model” and “strategy” are among the most sloppily used in business. People use them interchangeably to refer to everything – so they mean nothing. But no organization can afford fuzzy thinking about these fundamental concepts. A business model and a strategy are two different animals. One explains who your customers are and how you plan to make money by providing them with value; the other, how you’ll beat competitors by being different (Magretta, 2002) * Taken from: Günter Gromeier: Business Models for Software Components in the Automotive Industry (ERTS 2004 Congress, Toulouse)

15. 2008-08-28 FröhlingVolvo Technology Corporation15 Business Model Another approach to the meaning of the term Business models are the outline of all transactions needed to make a profitable business* Business models in collaborations between independent parties are the outline of all transactions needed to make a profitable business or to create benefits of similar nature for all parties involved * Taken from: Günter Gromeier: Business Models for Software Components in the Automotive Industry (ERTS 2004 Congress, Toulouse)

16. 2008-08-28 FröhlingVolvo Technology Corporation16 Patent & Know-How Exploitation A patent or technology/know-how can be subject of many kind of transactions as for instance sale, license, or donation, however, the base for such transactions and their value are completely different The value of a patent is primarily based on its - negative – monopoly –A pure patent license for instance is principally nothing else but an undertaking of the patentee/licensor not to assert his patent monopoly against the rightfully acting licensee The value of technology/know-how is primarily based on the - positive - fact that knowledge has been successfully reduced to practice –A pure technology/know-how license for instance is principally nothing else but an undertaking of the proprietor/licensor to provide the rightfully acting licensee with this (confidential and proprietary) technology/know-how and to help him that he can reduce it successfully to practice, too

17. 2008-08-28 FröhlingVolvo Technology Corporation17 Evolution of Public Prior Art Public Prior Art Inventiveness Time Patent Scope of Protection Patent Filing Date Patent Grant DatePatent Expiry Date Patent Exploitation Window

18. 2008-08-28 FröhlingVolvo Technology Corporation18 Technology Value vs Patent Value X-Party’s Use: N licensed Systems 1997200720122017 A-Party System (before 1997) A-Party System (1997) X-Party System (before 2007) X-Party System (2007) X-Party System (2012) Public Prior Art Protected Area A-Party Patent Patent Expiration 2017 A-Party I X-Party Technology/System Valuation Patent Valuation Free Development 5 Years A-Party: Patentee & Licensor X-Party: Licensee

19. 2008-08-28 FröhlingVolvo Technology Corporation19 Key Factors for Successful Collaborations Key factors for successful collaborations, in particular in Open Innovation scenarios are –Suitable business model –Professional contract managment –Covering the generation (R&D) phase & exploitation phase

20. 2008-08-28 FröhlingVolvo Technology Corporation20 The Core of Collaboration Foreground & Background Foreground (”FG”): Knowledge generated within the frame of a collaboration between parties Background (”BG”): Knowledge generated outside the frame of the collaboration, but necessary for the generation, use & exploitation of Foreground –Background I: generated before the collaboration start –Background II (”Sideground” or ”SG”): generated during the development phase, but independent of the collaboration Improvement: further development/enhancement of FG & BG after the end of the development phase of the collaboration Other Assets: Knowledge not necessary for the generation and exploitation of Foreground Knowledge: confidential know-how, copyrights (software), demonstrators, prototypes, test results, data bases, inventions, patents, patent applications, designs, design applications, etc. –Demonstrators, prototypes and other tactile/visible realisations and results comprising Foreground & Background of one, some or all collaboration parties – often in a severable form –Software programs comprising Foreground & Background of one, some or all collaboration parties – often in an amalgamated & non-severable form –Patents, patent applications and other IP owned or controlled by one, some or all collaboration parties – often dependent on each other –Data bases, test results and other collections of information of one, some or all collaboration parties – often in an amalgamated & non-severable form

21. 2008-08-28 FröhlingVolvo Technology Corporation21 Puzzle & Lego The Construction Principles Behind Puzzle - “Closed Construction“ –a selection of a limited number of different building elements enables the construction of one single 2-dimensional object Lego - “Open Construction“ –a selection of a limited number of different but standardised building elements enables the construction of numerous different 3-dimensional objects Standardised high quality building elements Standardised connection of building elements Different types of building elements

22. 2008-08-28 FröhlingVolvo Technology Corporation22 Management by Lego The Virtuoso

23. 2008-08-28 FröhlingVolvo Technology Corporation23 Management by Lego The Equilibrist

24. 2008-08-28 FröhlingVolvo Technology Corporation24 Management by Lego The Cubist

25. 2008-08-28 FröhlingVolvo Technology Corporation25 Contract Management by Lego Collaboration between Parties Party A Background I Party B Background I Innovation (Foreground) Generation (Party A Other Assets) (Party B Other Assets) Time Party A Background II (Sideground) Party B Background II (Sideground) R&D StartExploitation Start Innovation (Foreground) Exploitation Party B BG Improvements Party A BG Improvements FG Improvements Collaboration

26. 2008-08-28 FröhlingVolvo Technology Corporation26 Phase 1: Preparing the Playground The Collaboration & Exploitation Contract Party B BackgroundParty A Background Party B Other Assets Party A Other Assets Party A Sideground Party B Sideground Collaboration & Exploitation Contract

27. 2008-08-28 FröhlingVolvo Technology Corporation27 Phase 2: Building the Lego-House The R&D Phase Party B BackgroundParty A Background Generation of Innovation (Foreground) Party B Other Assets Party A Other Assets Party A Sideground Party B Sideground

28. 2008-08-28 FröhlingVolvo Technology Corporation28 Phase 3: Selling the Lego-House The Exploitation Phase Party B BackgroundParty A Background Exploitation of Innovation (Foreground) & Further Developments Party B Other Assets Party A Other Assets Party A Sideground Party B Sideground Party B BG/SG Impr’tsParty A BG/SG Impr’tsParty B FG Improvements Party A FG Improvements

29. 2008-08-28 FröhlingVolvo Technology Corporation29 Business Model & Contract Management At the Beginning Confidentiality Intentions of the parties Business model Exit/divorce/disputes Applicable law (multinational R&D!) Contractual main bullet points

30. 2008-08-28 FröhlingVolvo Technology Corporation30 Business Model & Contract Management General Collaboration Contract Structure Split of the collaboration into various consecutive phases with corresponding agreements & exit/divorce plans Before the start of substantive discussions & negotiations regarding a potential collaboration: Non-Disclosure Agreement (”NDA”) Optional: Frame Agreement (umbrella contract) covering the general aspects, objectives, goals and intentions of the collaboration Specific agreements for the various collaboration phases, as for instance: –Phase 1: Non-Disclosure Agreement –Phase 2: Feasibility Study Agreement –Phase 3: Prototype Development Agreement –Phase 4: Product Development Agreement –Phase 5: Product Industrialisation Agreement –Phase 6: Serial Production & Exploitation Agreement –...

31. 2008-08-28 FröhlingVolvo Technology Corporation31 Business Model & Contract Management Major Contract Modules Parties Preamble (intentions of the parties) Objectives & scope (project description) R&D collaboration plan –Organisation, structure, milestones,... Contributions –Financial contributions –Personnel –Other contributions Confidentiality Foreground & Background –Ownership –Access rights (licenses) –Excluded assets & other limitations Exploitation plan –Allocation of profits & other benefits Exit/divorce plan (premature termination) Warranties & liabilities Applicable law & dispute regulation

32. 2008-08-28 FröhlingVolvo Technology Corporation32 Business Model & Contract Management Contract Modules regarding Foreground & Background Define & agree on suitable models for each of the contract modules, e.g.: Ownership –Foreground –Background I & Background II (Sideground) –Improvements –Special provisions for demonstrators, prototypes, … –Special provisions for software programs, data bases, … –Limitations & other encumbrances regarding Ownership Remuneration for patentable inventions of employees Access Rights (licenses) –Foreground –Background I & Background II (Sideground) –Improvements –Special provisions for demonstrators, prototypes, … –Special provisions for software programs, data bases, … –Limitations in Access Rights Necessary 3rd party consents Legitimate own interest Right to grant sublicenses, have made rights, access rights for affiliates and associated companies … Exclusions from Background & further limitations....

33. 2008-08-28 FröhlingVolvo Technology Corporation33 And now something completely different … (Monty Python) Let’s talk about …

34. 2008-08-28 FröhlingVolvo Technology Corporation34 The End

35. 2008-08-28 FröhlingVolvo Technology Corporation35 Thank you for your attention Contact: Dr. Werner Fröhling Volvo Technology Corporation Corporate Patents 06820, M1.7 S – 405 08 Gothenburg Sweden Phone: +46-31-3223810 Fax: +46-31-828040 E-mail: werner.frohling@volvo.com

36. 2008-08-28 FröhlingVolvo Technology Corporation36 Appendices... good to know

37. 2008-08-28 FröhlingVolvo Technology Corporation37 Patent First Filing Strategies SE + US Prov + PCT SE PCT US BR CN JP US BR CN JP 12 M 18 M 30 M SE PCT International Phase SE, if needed, at any time SE DE FR EP SE DE FR GB EP IT 030 M US PCT

38. 2008-08-28 FröhlingVolvo Technology Corporation38 PCT First Filing PCT SE US … JP CN … GB BR EPDE IT FR … International Phase 2.5 Years Patent Office: Patentability Assessment Novelty Search Written Opinion (WO) on Patentability Preliminary Examination (optional) (for instance if WO negative) Geographical Protection Decision deferred by 2.5 Years & based on Patentability Assessment Technology Assessment Business Impact Assessment

39. 2008-08-28 FröhlingVolvo Technology Corporation39 PCT First Filing (PCT FF) Strategy One PCT application includes automatically option for patent protection in 139 PCT countries Decision regarding geographical coverage of patent protection –Is deferred by 30 months to the end of the international phase –Is, regarding patentability of the claimed invention, based on the results of an international search & a written opinion, and (optional) an additional International preliminary examination of the patent office –Is based on a more reliable assessment of patentability, technology & business aspects of claimed invention –Includes Option to retroactively include patent protection for emerging strategic markets PCT first filing replaces the traditional domestic (national) Swedish first filing –However, in case it is needed, a domestic Swedish application can be branched off from the PCT application at any point in time during the international phase Priority system according to Paris Convention is no longer a “standard” process by default for establishing protection in foreign countries, but rather an “option” for special cases only –Extending the maximum life time of patent protection by one year (important for pharmaceutical industry) –Amending the subject matter of claimed invention during priority year claiming priority of first application –Extending patent protection to a state belonging to the Paris Convention but not to the PCT system PCT application drafted in English (official language of EPO, USPTO & even PRV) –No translation of the application during the international phase and the national/ regional phase before USPTO/EPO (further relief due to London Agreement when validating European patent for SE) –No need anymore to file a US provisional application in parallel with PCT application since the PCT filing date (= priority date) is automatically the earliest possible effective early fling date (“102e Date”) for any US application derived from the PCT application in the national phase Considerable cost & handling time savings during the international phase

40. 2008-08-28 FröhlingVolvo Technology Corporation40 PCT First Filing vs SE First Filing

41. 2008-08-28 FröhlingVolvo Technology Corporation41 PCT First Filing PCT SE US … JP CN … GB BR EPDE IT FR … Priority Year International Phase (2.5 Years)National Phase (17.5 Years max) Preliminary Examination (optional) Novelty Search & Patentability Ass. Patent Grant PCT: one international application for more than 130 countries EP: central patent granting process for more than 30 European countries Patent Lifetime: 20 Years (max) as of Filing Date

42. 2008-08-28 FröhlingVolvo Technology Corporation42 PCT First & PCT Subsequent Filing (Optional) PCT 1 PCT 2 SE US … JP CN … GB BR EPDE IT FR … Priority Year International Phase (2.5 Years)National Phase (1 + 17.5 Years max) Preliminary Examination (optional) Novelty Search & Patentability Ass. Novelty Search & Patentability Ass. Addition of Improvements of the invention Patent Grant PCT 1 Abandoned Patent Lifetime: (max) 20 Years As of Filing Date

43. 2008-08-28 FröhlingVolvo Technology Corporation43 PCT First & PCT Subsequent Filing (Optional) PCT 1 PCT 2 SE US … JP CN … GB BR EPDE IT FR … Priority Year International Phase (2.5 Years)National Phase (17.5 Years max) Preliminary Examination (optional) Novelty Search & Patentability Ass. Preliminary Examination (optional) Improvements of the Invention added to PCT 2 PCT 2 Derived Patent Lifetime: Max 20 Y as of PCT 2 Filing Date Patent Lifetime: 20 years (max) as of Filing Date