so you've gotten a patent - now what?

SO YOU HAVE GOTTEN A PATENT - NOW WHAT?

BY:KIRBY DRAKE

Perspiration + Time = Patent

• “Genius is one percent inspiration and ninety-nine percent perspiration” - Thomas Alva Edison

• Many patent applications filed each year• 760,924 patent applications awaiting action by

Examiner in 2007

• 1,112,517 pending patent applications in 2007

• 1 out of 3 patent applications issue into a patent

• Patent applications generally take 2+ years to issue into a patent

Is This Where Your Patent Is?

Making Use of Patent After Issuance

• Most patents retired to file cabinet and not source of revenue generating activities

• 15-20% of all patents do not have their first maintenance fee paid – go abandonedTypically have 20 years of patent term –

find ways to make perspiration and time worthwhile

Patent Issues – What Next?

• Options for Using Patent• Litigation• Licensing• Spinout or start-up business• Partnerships, joint ventures

Patent = Litigation Against Infringers

• Around one percent (1%) of patents find their way into the United States District Courts through patent infringement suits


• Depending into which technical area a patent falls, the chance of a patent being named in a litigation varies widely

• Chance of litigation as high as 0.41% for medical patents to as low as 0.16% for chemical patents

• Even for “most ‘valuable’ drugs and health patents” low rate of litigation

Out of the 166,000 patents that issued in 2001, under 1,700 will ever be litigated over their lifetime.


• Litigation offers less certainty than other uses of patents• However, only 1 of 7 cases end with a court’s

judgment

• Most of the rest of cases end before trial begins – i.e., via settlement

• Concerns about patent validity challenges, whether infringement is present, and whether significant damages can be demonstrated

Want reasonable confidence about these issues before going litigation route


• Benefits of Successful Litigation• Monetary damages

• Potential injunction

• Establish credibility of patent - formation of basis for ongoing licensing program

• However, may not want to risk patent through litigation – other options?

Unlitigated Patents = Still Valuable

• Litigated patents not the only valuable patents

• Unlitigated patents may be valuable• Defensive measures• Deterrent to block others• Create a patent thicket• Signaling purposes• Generate revenue through licensing and other

business relationships

Unlitigated Patents = Less Controversial?

• Generally, when a company receives a demand letter for alleged patent infringement for something they think they invented and invested to build the market for, they aren’t happy and less willing to deal

• It is more akin to trying to get the proverbial pig to fly - it doesn’t work, and it annoys the pig

Patent = Licensing Program

• Can be effective way to generate revenue and to establish credibility of patent and business

• Examples of companies with well-known licensing programs• IBM• Qualcomm• Texas Instruments

Licensing and/or Using Your Patent - IBM

• For each of the past 15 years (1993-2007), IBM has been granted more U.S. patents than any other company

• IBM received more than 38,000 US patents in 1993-2007

• In 2007 alone, IBM received 3,125 U.S. patents

Licensing and/or Using Your Patent - IBM

• IBM licenses technology primarily to enhance the return on its investment in the technology

• License fees are at market rates

• Licenses generally involve combinations of up front payment and royalties based on revenues generated from use technology

• IBM benefits from long-term commitment to a broad range of fundamental research – had good sense to patent much of fundamental research before patents became fashionable

Licensing and/or Using Your Patent - Qualcomm

• Qualcomm has powerful CDMA licensing model

• But service providers and handset makers didn’t initially beat a path to Qualcomm’s door even though CDMA initially was technically superior to TDMA

• Qualcomm had to build the components, the handsets, and even pay for the initial network build-outs (in Los Angeles and New York) before they started to generate licensing revenue

• Licensing program generated more than $200 billion in revenue in 2005 alone

Licensing and/or Using Your Patent – Texas Instruments (TI)

• TI has built an impressive patent portfolio

• Derives considerable strategic advantage

• Licensing revenues in excess of $800M per year

• TI may have benefited from Patent Office delay of several years in issuing some of their early semiconductor patents • Able to amend patents while they were still

pending to make them more applicable, and by the time the patents issued the technology was being used by many others

Licensing and/or Using Your Patent

• Texas Instruments, Qualcomm and IBM make patent licensing look deceptively easy

• However, more akin to a 10+ years of effort with huge upfront investment rather than anything resembling an overnight success

• IBM, TI, and Qualcomm all generated patent licensing revenues by first creating - or at least finding - the business model and market for the IP rather than sending out a mass mailing of demand letters


• Many companies already license some products or sell products that are covered by patents, but may not take advantage of all the opportunities offered by an effective patent licensing strategy

• Not every company has a patent portfolio the size of IBM’s, but even a small company is not precluded from adopting patent licensing as a business strategy


• No one-size-fits-all license agreement or approach to patents

• Many issues to consider not only for each patent, but for each deal • Should a patent be licensed on a per product

royalty or on a per use basis• What is the “product” upon which the royalties

are based on• What is a fair royalty? • What is the scope of use? • Can you maximize revenues by licensing

geographically? By narrow fields of use? By time?

Patent = Other Ways to Monetize

• Just like a good football team has a variety of formations and plays, should always look for more than one way to monetize patents

Patent = Other Ways to Monetize

• Various alternative to litigation and straight licensing

• Technology transfer• Start-ups

• Spinoffs/spinouts

Patents = Startups

• June 2007 - North Carolina Biotechnology Center established business-support programs to encourage the state’s public and private universities and research institutions to start commercial ventures based on patents derived from their faculty research • North Carolina A&T University - Provagen

• North Carolina State University - Sirga Advanced Biopharma

Patents = Startups

• North Carolina A&T University - Provagen• Formed to commercialize unique protein technology

developed by a molecular biologist and research coordinator at the University’s Department of Animal Sciences

• Technology based on patented “Synthetic Protein V” can be used to purify and isolate antibodies that can be used in several disease treatment and diagnostic applications

• North Carolina State University - Sirga Advanced Biopharma• Capitalized on research by professor of biochemistry • Using patented technology to identify novel therapies for

drug-resistant diseases and other difficult-to-treat human health conditions, including HIV and autoimmune diseases

Patents = Startups

• Too early to fully evaluate success of these startups

• Expect short-term and long-term benefits• Address significant unmet technological needs

• Establish stronger industry-academia relationships

• Provide new job opportunities

• Obtain royalties from licensing technology and/or selling product

Start-Ups Acquiring Patents – From University to Start-Up

• Nano Terra – startup based in Cambridge, MA• One of largest nanotechnology patent deals to date –

licensed rights to more than 50 patents from Harvard University

• Patents cover techniques for designing materials that assemble themselves into microscopic lenses and data storage devices, to tools for patterning complex nanoscale circuits over large, irregularly shaped surfaces

• Using patent portfolio as basis for business strategy to create products that its clients cannot make at all or cannot make cheaply

• Already has development agreements with the Department of Defense, Merck and 3M• Not all patents may be breakthroughs• Many improve on earlier work• However, interest is present and brings benefit to Harvard

as well as Nano Terra

Start-Ups Acquiring Patents – From Industry to University

• NutriJoy, Inc.• Company was created and supported by the

efforts of NISTAC and Kansas State University through two technology donations from the Procter and Gamble and Company (P&G)

• P&G donations included:• Protein particle stabilization (PPS) technology the

basis for Cal·C®, that provides a method to make shelf-stable beverages containing juice and milk; and rights to use a proprietary P&G calcium fortification technology (calcium citrate malate); and

• A nutritious snack food technology, the basis for GoodBites™- technology protected under at least 3 U.S. patents

• Parlayed technology into Coca-Cola acquiring majority interest in company because of profitable growth in area of interest for Coca-Cola

Patents = Corporate Spinouts

• Technology companies identify good technology to use for spinouts

• Corporate patent spinouts typically have certain characteristics:• Completed product or prototype in an advanced phase

of development• Significant prior corporate investment and several

years of prior R&D• Early customer interest and engagement• Initial revenues, or less than 12 months from first

revenue• Highly capital efficient due to reduced equity

investment needs going forward• Technology team and other key employees available

as part of the spinout• Availability of critical IP via assignment or exclusive

licensing

Patents = Corporate Spinouts

• Avoids stranding novel technology and patents within a corporation

• Corporate parent – at no additional expense – may recoup initial R&D dollars and potentially reap substantial rewards if spinout blossoms

• Spinout benefits from acquiring technology and having relative autonomy to develop technology

Establishing a Patent Strategy

• Whatever path is chosen for using patents, need a well-considered patent strategy• Supported by management

• Result of patent audit

• Supported by patent expertise

• Managed by a centralized patent assessment group

Steps to a Viable Patent Strategy

• Obtain corporate support • Strength and success only as successful as the

willingness of entire company to pursue and support strategy

• Consider company’s core business and willingness to (i) capitalize on patents both in a defensive (such as cross-licensing) and offensive mode (such as conducting litigation to stop infringement), and (ii) license patents to potential competitors

• Understand how patent licensing and/or litigation fit into company’s overall vision


• Conduct a patent audit • Patent audits can be conducted in many different

ways and for different goals

• Identify the patents and potential patentable technologies of your company, the markets and companies to which those patents would apply, the strategic value of the patents to the core competency of company, and the industry environment for accepting licenses

• To build a strong patent portfolio, the audit should also include an analysis of how company identifies and protects patents

• May need audit to provide the data necessary to obtain corporate support


• Create a centralized patent assessment group • Identify which inventions should be patented

• Identify which patents should be licensed/litigated

• Formalize company’s approach to dealing with third parties

• Valuate patents and assist in selecting potential licensees/partners

Concentrates patent efforts within a set of individuals working across business units, adds

continuity and consistency to process, and presents a unified front

Patents = Value

Patent strategy +

Methodical execution of patent strategy=

Great rewards

so you've gotten a patent - now what?

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