kasznik ucberkeley 20apr2015 final
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Kasznik UCBerkeley 20APR2015 FINALTRANSCRIPT
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THE ROLE OF INTELLECTUAL PROPERTY AS A STRATEGIC
BUSINESS ASSET
Efrat Kasznik, Founder & President Foresight Valuation Group, LLC
Presentation at UC Berkeley April 20th, 2015
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2 Foresight Valuation Group © 2014
About Me: Efrat Kasznik
¨ Founder and President, Foresight Valuation Group, a Silicon-Valley based intellectual property (IP) valuation, strategy and start-up advisory firm.
¨ IP valuation and strategy expert, with 20 years of experience
¨ Lecturer on IP Strategy, Stanford Graduate School of Business (GSB)
¨ Chair, Internet of Things (IoT) Committee, Licensing Executives Society.
¨ Listed on IAM 300 list of top IP strategists: 2013, 2014, 2015.
¨ Co-founder and adviser to startups, incubators and funds in the US and Europe
¨ Conference speaker and regular contributor to GigaOm, VenureBeat, Biz Journal, IAM Magazine, and other IP/business publications.
¨ MBA,
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3 Foresight Valuation Group © 2014
Foresight Client List: IP Services *
*Cases based on work done by our partners & affiliates over past 20 years
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4 Foresight Valuation Group © 2014
Outline
¨ IP Marketplace Overview
¨ IP Strategy for Growth
¨ IP Case Studies
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5 Foresight Valuation Group © 2014
Intangible Assets = 80% of S&P 500 Market Value
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6 Foresight Valuation Group © 2014
IP in Consumer Products
Copyrights
Trade Secrets
Patents
Trademarks
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7 Foresight Valuation Group © 2014
IP in Digital Products
Patents
Copyrights
Trade Secrets
Trademarks
Angry Birds
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8 Foresight Valuation Group © 2014
Type Definition Criteria Life Example
Copyrights
Original works of authorship: literary, dramatic, musical, artistic, etc
Automatic protection Author’s life + 70 years
Trademarks
Word, name, symbol, device used in trade to distinguish goods
Unregistered (first to use – common law), or registered with USPTO
No expiration as long as used commercially
Trade Secrets
Business items/info: 1. Economic value 2. Kept confidential
No need to show novelty, or disclose publicly; need to take measures to keep confidential (stamp, lock up)
Indefinite
Patents
Right to exclude others from making, using or selling products covered by invention in a defined territory (constitutional property right)
Novel, Non-obvious, Reduced to Practice; Granted by the USPTO; Territorial protection (by country of registration)
20 years from filing
Comparison of IP Rights
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9 Foresight Valuation Group © 2014
The Berkeley Patent Study (2010): Competitive Advantage of IP by Industry
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10 Foresight Valuation Group © 2014
Let’s Talk About Patents …
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11 Foresight Valuation Group © 2014
Source: The Guardian and New York Times
The Mobile Patent Wars
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12 Foresight Valuation Group © 2014
250k Patents Going into Smartphones
Design Patents Ex. ‘slide to unlock’ feature Rounded square icons
Utility Patents Ex. Enlarging documents by tapping screen Single touch and multi touch gestures ‘pinch to zoom’
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13 Foresight Valuation Group © 2014
Apple, Microsoft, Research in Motion, EMC, Ericsson, and Sony joined together in a consortium to win an auction for the 6,000 patents of the bankrupt Nortel at a price of $4.5 billion.
Google, the losing bidder in the Nortel auction, announced the $12.5 billion acquisition of Motorola Mobility, whose IP portfolio includes 17,000 issued patents and 7,500 patent applications.
June 2011 Aug 2011
Multi-Billion Dollar Deals Involving IP
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14 Foresight Valuation Group © 2014
Forces Impacting the Patent Marketplace
IP Marketplace
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15 Foresight Valuation Group © 2014
The US Patent Prosecution Process First to File (AIA)
R&D
Invention Disclosure
(First to File)*
Provisional Application
Non-Provisional Application
Patent issued
(valid 20 years from filing + 12 months of
provisional)
3+ years
Renewal & Maintenance fees
12 months
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16 Foresight Valuation Group © 2014
USPTO Pendency and Backlog Increase
Pendency time is close to three years… … while application backlog is around 700,000
Source: USPTO.gov
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17 Foresight Valuation Group © 2014
USPTO Performance Statistics As of November, 2014
Source: http://www.uspto.gov/dashboards/patents/main.dashxml
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18 Foresight Valuation Group © 2014
The Majority of Top US Patent Recipients In 2012 are Foreign Companies
Source: The Intellectual Property Owners Association (IPO)
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19 Foresight Valuation Group © 2014
America Invents Act (AIA) Highlights
Represents the most significant overhaul to the US patent system since 1952 >> putting small businesses at a disadvantage:
¨ Main Changes include: ¤ US moves from First to Invent to a First (Inventor) to File system
(Section 102) – aligns the US with the rest of the world – Effective March 16, 2013
¤ Post-Grant Review process for Business Method/other Patents at the USPTO: Establishment of the Patent Trial and Appeal Board (PTAB)
¤ Joinder of parties >> Bars plaintiffs from suing multiple defendants (Section 299)
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20 Foresight Valuation Group © 2014
Post-Grant Review Process
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21 Foresight Valuation Group © 2014 Source: Lex Machina
Over 6,000 Patent Lawsuits Filed in 2013
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22 Foresight Valuation Group © 2014
Patent Litigation Declining in 2014
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23 Foresight Valuation Group © 2014
NPEs (“Troll”) Litigation: Sharp Rise Since 2010
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24 Foresight Valuation Group © 2014
Startups Most Litigated by Patent Trolls
Companies with less than $100MM annual revenue represent at least 66% of Patent Trolls defendants
At least 55% of unique defendants in Patent Troll
lawsuits make under $10MM per year
Source: Startups and Patent Trolls, Colleen Chien, Santa Clara University School of Law, Legal Studies Research Paper Series, September 2012
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25 Foresight Valuation Group © 2014
The Old Patent Marketplace
IP Creators/Holders - Operating Companies - Independent Inventors - Universities - Research Institutions - Gov’t labs
Direct Licensing
Enforcement (Legal)
Cross Licensing
IP Users - Operating Companies - Others
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26 Foresight Valuation Group © 2014
The New Patent Marketplace in 21st Century – Rise of the Intermediaries
Intermediaries: • Non-practicing entities (NPEs) • Patent Funds/Aggregators (Intellectual Ventures) • Market Makers (Auctions, patent exchange) • Financial services (securitization, litigation finance)
IP Creators - Operating Companies - Independent Inventors - Universities - Research Institutions - Gov’t labs
IP Users - Operating Companies - Others
Patent Sales/licensing
Enforcement (Litigation)
Cross Licensing
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27 Foresight Valuation Group © 2014
Patent Monetization: Industry Trends to Watch
¨ Enforcement Business Model is Under Attack v Patent litigation declines for first time in 5 years v IV and other enforcement entities scaling down
¨ Patent Transactions Slowing Down v Patent transactions slow-down (especially software patents) v Buying moved to China (mobile, IoT are hot right now)
¨ Focus Shifting to Validity v Post-AIA PTAB proceedings: “Patent Death Squads” v Supreme Court patent decisions: Alice (SW), Myriad (genes)
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28 Foresight Valuation Group © 2014
Outline
¨ IP Marketplace Dynamics
¨ IP Strategy for Growth
¨ IP Case Studies
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29 Foresight Valuation Group © 2014
Sources of IP
Internal R&D Manufacturing Marketing
Tech Transfer
Sources of outside innovation: • In-licensing (companies, universities) • Buying start-ups, competitors • Universities, research institutions • Collaborative R&D outfits (Xerox PARC)
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30 Foresight Valuation Group © 2014
Types of Intellectual Property Transactions
• Patents, technology • Software (copyright licensing) • Trademarks
Use Internally
License
• Active market for patents in the US • Companies selling to gain liquidity, alternative to
funding Sale
• Contribute patents/technology into JV (collaborate with strategic partner)
• Spin off a new company (common to universities)
Joint Venture/
Spin Off
• Licensing Campaign • Litigation Campaign Enforcement
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31 Foresight Valuation Group © 2014
The Berkeley Patent Survey (2010): Top Reasons Why Startups Don’t File for Patents
"For your last innovation you did not patent, which if any of the following influenced your company's decision?"
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32 Foresight Valuation Group © 2014
Developing IP position
Portfolio commercialization & monetization
Portfolio liquidation
IP Strategy Throughout the Lifecycle: Growing IP as a Strategic Business Asset
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33 Foresight Valuation Group © 2014
Developing IP position
IP Strategy – New Venture: Building an IP Portfolio to Increase Valuation
Goals: • Freedom to operate • Block competitors • Support future products • Hedge against litigation • Attract buyers & investors • Monetization • Liquidation Value
Sources of IP: • Internal R&D à filing patents • Buying patents • In-licensing (university, government
labs, etc.)
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34 Foresight Valuation Group © 2014
Portfolio commercialization & monetization
Portfolio liquidation
Strong IP Portfolio Supports Later Phases
Use Internally
License
Sale
Joint Venture/Spin Off
Enforcement
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35 Foresight Valuation Group © 2014 2
0
50
100
150
200
250
1995 1996 1997 1998 1999 2000 2001 2002 2003 2004 2005 2006 2007 2008 2009 2010 2011 2012 2013 2014
Patents
Year
Patents per Source per Filing Year
US Applica4ons
US Grants
Cyclical Market Filing Trends
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36 Foresight Valuation Group © 2014
Emerging Market Filing Trends
0
10
20
30
40
50
60
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1995 1996 1997 1998 1999 2000 2001 2002 2003 2004 2005 2006 2007 2008 2009 2010 2011 2012 2013 2014
Patents
Year
Patents per Source per Filing Year
US Applica4ons
US Grants
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37 Foresight Valuation Group © 2014
Mature Market Filing Trends
0
100
200
300
400
500
600
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1995 1996 1997 1998 1999 2000 2001 2002 2003 2004 2005 2006 2007 2008 2009 2010 2011 2012 2013 2014
Patents
Year
Patents per Source per Filing Year
US Applica4ons
US Grants
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38 Foresight Valuation Group © 2014 2
“Bubble” Market Filing Trends
0
500
1000
1500
2000
2500
1995 1996 1997 1998 1999 2000 2001 2002 2003 2004 2005 2006 2007 2008 2009 2010 2011 2012 2013 2014
Patents
Year
Patents per Source per Filing Year
US Applica4ons
US Grants
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39 Foresight Valuation Group © 2014 2
Emerging Market Market Map
0
20
40
60
80
100
120
0 20 40 60 80 100 120
Resources (% Reven
ue + % Loca9
ons +
% Li9ga9o
n)
Vision (% Patents + % Classifica9ons + % Cita9ons)
Top 50 3D Systems Corpora4on
Stratasys Ltd.
Huntsman Corpora4on
DWS Srl
Global Filtra4on Systems
Koninklijke DSM NV
EOS GmbH Electro Op4cal Systems
Micron Technology, Inc.
Envisiontec GmbH
Nabtesco Corpora4on
Jeffery, Timothy M
HewleY-‐Packard Company
Zydex Pty Ltd
Eta SpA
Delphi Automo4ve PLC
Seagate Technology PLC
Bombardier, Inc.
JSR Corpora4on
United Technologies Corpora4on
Rutgers, The State University of New Jersey
Imagecube LLC Pennsylvania
Notar, Walter, 89264 Weisenhorn, De
Creo Srl
Imagecube, LLC, Pennsylvania
Milwaukee School of Engineering
Jones, Ronald D
Na4onal University of Singapore
Potential Buyers
Incumbents
Followers & Entrants
Potential Sellers
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40 Foresight Valuation Group © 2014
Mature Market Market Map
0
20
40
60
80
100
120
0 20 40 60 80 100 120
Resources (% Reven
ue + % Loca9
ons +
% Li9ga9o
n)
Vision (% Patents + % Classifica9ons + % Cita9ons)
Patents, Revenue, and Li9ga9on per Company
Microsoa Corpora4on
Interna4onal Business Machines Corp.
Apple Inc.
Google Inc.
SAP SE
Samsung Group
Oracle Corpora4on
HewleY-‐Packard Company
Potential Buyers
Incumbents
Followers & Entrants
Potential Sellers
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41 Foresight Valuation Group © 2014 2
Mature Market Market Map
0
20
40
60
80
100
120
0 20 40 60 80 100 120
Resources (% Reven
ue + % Loca9
ons +
% Li9ga9o
n)
Vision (% Patents + % Classifica9ons + % Cita9ons)
Patents, Revenue, and Li9ga9on per Company Interna4onal Business Machines Corp.
Microsoa Corpora4on
AT&T Inc.
HewleY-‐Packard Company
Intellectual Ventures Management, LLC
General Electric Company
Google Inc.
Siemens AG
Oracle Corpora4on
Intel Corpora4on
Potential Buyers
Incumbents
Followers & Entrants
Potential Sellers
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42 Foresight Valuation Group © 2014
Emerging Market: “White Space” Analysis
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43 Foresight Valuation Group © 2014
Mature Market: “White Space” Analysis
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44 Foresight Valuation Group © 2014
Outline
¨ IP Marketplace Dynamics
¨ IP Strategy for Growth
¨ IP Case Studies ¤ Famous IP Mistakes!! ¤ Crowdfunding ¤ VC Funding ¤ Startup Litigation (Nest Labs) ¤ Complex Transaction (Facebook)
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45 Foresight Valuation Group © 2014
Product IP Strategy Scenarios
¨ IP strategy can determine a product’s success, market share, and profitability ¤ Freedom to operate ¤ Block competitors ¤ Support future products ¤ Hedge against litigation ¤ Attract buyers, investors
¨ Case studies demonstrate that a failure to properly address IP issues can result in loss of market share, margin erosion, and reduced market competitiveness
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46 Foresight Valuation Group © 2014
Support Future Products: Xerox PARC
Product: Graphical User Interface (GUI)
Overview: In 1979, Xerox’s PARC (Palo Alto Research Center) decided not to patent its invention of the GUI because Xerox management didn’t see value or business in then small PC market. Outcome: A loss in potential royalty revenues from ‘84-’98 from Mac and windows sales estimated at half a billion dollars. Insight: Failure to patent results of innovative research can lead to huge financial and strategic losses.
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47 Foresight Valuation Group © 2014
Freedom to Operate: Polaroid and Kodak
Product: Instant Camera
Overview: Kodak launched “Project 130” to develop instant cameras and films – going after Polaroid’s patented innovation. Kodak was aware of potential infringement dangers, but went ahead with its R&D strategy.
Outcome: Kodak found to have infringed on seven of twelve Polaroid instant photography patents and ordered to pay $925M in damages to Polaroid. Total cost - $3B (700 employees layoff, $1.5B manufacturing plant, $500M buyback cost of 16M instant cameras, and$100M legal fees).
Insight: Kodak’s should have designing around the patents and developed more advanced inventions of their own.
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48 Foresight Valuation Group © 2014
Crowdfunding: IP Scam
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49 Foresight Valuation Group © 2014
Campaign Copied to Competing Platform
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50 Foresight Valuation Group © 2014
Dealing with Investors: Sage Advice or Recipe for Disaster?
Why You Should Risk Sharing Your Idea BY SCOTT WEISS One of the rookie mistakes first-time entrepreneurs often make is to be too guarded about their idea – in fact, many will actually spend their first $25,000 on patent lawyers without ever fully vetting their product. In order to gain credibility and attract investor attention, it’s critical to aggressively seek out the most relevant people in the world and get their feedback. I believe most young entrepreneurs massively overestimate the chances of someone stealing their idea versus the benefits associated with sharing it.
Andreesen-Horowitz blog, Oct. 2014
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51 Foresight Valuation Group © 2014
Questions for Discussion
¨ Can you be too guarded about your idea? ¨ Does patent protection really cost $25k? ¨ When is a “product first” strategy appropriate? ¨ Are product development and IP protection mutually
exclusive? ¨ Do the benefits of freely sharing your idea
outweigh the risk of your idea being stolen?
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52 Foresight Valuation Group © 2014
Honeywell Int. vs. Nest Labs, Inc. Startup Sued by Incumbent
Product: Smart Thermostat Overview: Honeywell filed a multi-patent infringement lawsuit against Nest Labs for allegedly infringing on seven Honeywell patents – sought cease and desist order and collection of damages – not licensing fees.
NEST Actions: 1. Nest filed for reexamination of Honeywell’s patents. 2. Next created a large patent portfolio (hired Apple’s GC) 3. Nest buying patents from Intellectual Ventures to further defend itself.
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53 Foresight Valuation Group © 2014
Facebook-Yahoo-AOL Case: Complex Deal Situation
End of 2011
• Facebook owns 56 patents
2/27/2012
• Yahoo accuses Facebook of infringing on 10-20 patents
3/22/2012
• Facebook buys 750 IBM patents to defend against Yahoo for undisclosed price
4/3/2012
• Facebook countersues Yahoo for patent infringement
4/9/2012
• Microsoft pays $1.06B for 800 AOL patents and 125 apps.
4/23/2012
• Facebook acquires 650 AOL patents and license the leftover AOL patents from Microsoft for $550M
vs. vs. $$ $$ $$
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Patent Resources for Startups
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THANK YOU!
Efrat Kasznik President, Foresight Valuation Group
[email protected] www.linkedin.com/in/ekasznik
650-561-3374
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