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LICENSING AS A BUSINESS

LICENSING AS A BUSINESS. Venture Association of New Jersey. Emmett J. Murtha President & CEO Fairfield Resources International. F. R. March 21, 2000. I. LICENSING AS A BUSINESS. LICENSE THE CROWN JEWELS? ARE YOU CRAZY?. F. R. Emmett J. Murtha President & CEO. I.

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LICENSING AS A BUSINESS

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  1. LICENSING AS A BUSINESS Venture Association of New Jersey Emmett J. Murtha President & CEO Fairfield Resources International F R March 21, 2000 I

  2. LICENSING AS A BUSINESS LICENSE THE CROWN JEWELS? ARE YOU CRAZY? F R Emmett J. Murtha President & CEO I

  3. LICENSE THE CROWN JEWELS? AGENDA • THE VALUE OF INTELLECTUAL PROPERTY • WHAT ARE THE ALTERNATIVES TO LICENSING? • CASE STUDY: LONGHORN TECHNOLOGY • CASE STUDY: IBM CORPORATION • Assets • Objectives • Results • Key Factors • LESSONS LEARNED

  4. Is Intellectual Property Always Valuable? ( Or Just Expensive?) • A PATENT IS A RIGHT • Granted By A National Government • To Stop Someone From Doing Something • A PATENT IS VALUABLE ONLY • If Someone Wants To Use The Patented Invention

  5. INTELLECTUAL PROPERTY • YOU MUST MAKE CHOICES • Protect Your IP - Or Lose It • Enforce Your IP Rights - Or Lose Them • License Your IP Rights - And Prosper

  6. LICENSING THE CROWN JEWELS ENFORCEMENT OR LICENSING? THESE ARE THE ONLY CHOICES

  7. WHAT ARE THE ALTERNATIVES TO LICENSING YOUR PATENTS? • PRACTICE THE MONOPOLY • 3M, Pfizer, Biotechs, Startups, Niche Players • SELECTIVE LICENSING • Intel, Motorola, Kodak, Texaco • LICENSING AS A BUSINESS • Lucent, General Electric, Texas Instruments & IBM

  8. LICENSING THE CROWN JEWELS LONGHORN TECHOLOGY

  9. LONGHORN TECHNOLOGY(A HYPOTHETICAL LICENSOR) • Longhorn Technology Has Thousands of Patents • They Get Over 500 New U.S. Patents A Year • Some Longhorn Patents Are Not Available For License • Particularly New Ones, Which Protect Future Technologies Or Products • However, Longhorn Has Made Licensing A Profitable Business • Licensing An Outstanding Collection of Patents Covering Its Main Business To Its Competitors • For Hundreds Of Millions Of Dollars Annually

  10. LONGHORN TECHNOLOGY • COULD THEY NOT DO BETTER BY REFUSING TO LICENSE THEIR COMPETITORS? • PROBABLY NOT, FOR THE FOLLOWING REASONS: • IT’S IMPORTANT THAT CERTAIN TECHNOLOGIES BE “PROVEN” BY WIDESPEAD USE • CUSTOMERS LIKE TO HAVE MORE THAN A SINGLE SOURCE • PARTICULARLY FOR COMMODITY PRODUCTS LIKE COMPUTER MEMORY CHIPS, MOTOR OIL, EVEN PERSONAL COMPUTERS! • LITIGATING TO ENFORCE A PATENT MONOPOLY IS VERY EXPENSIVE • IT IS OFTEN REFERRED TO AS “THE SPORT OF KINGS”

  11. LICENSING THE CROWN JEWELS IBM CORPORATION

  12. IBM’S IP ASSETS • APPROXIMATELY 33,000 PATENTS WORLDWIDE • Leader in US Patents Issued Since 1994 • VAST PORTFOLIO OF TECHNOLOGY AND SOFTWARE • ALL INTELLECTUAL PROPERTY CONTROLLED BY HQ • CENTRALIZED LICENSING MANAGEMENT • Licensing Activity Run As A Business • Multinational Staff • OVER 1300 ACTIVE PATENT LICENSE AGREEMENTS • Half Non-US

  13. IBM’SLICENSING OBJECTIVES • MAXIMIZE RETURN ON INTELLECTUAL PROPERY • IP IS LIKE ANY OTHER ASSET, EXCEPT: • Highly Profitable Return • Short Shelf Life • SECURE FREEDOM OF ACTION THROUGH CROSS-LICENSING • Assure Developers Not Blocked • PROMOTE OPEN SYSTEMS AND GREATER USE OF IBM TECHNOLOGY • Facilitate Industry Standards • Assure Widespread Software Availability For Customers • GAIN ACCESS TO OTHER TECHNOLOGIES • SUPPORT VENDOR & MANUFACTURING RELATIONSHIPS

  14. IBM LICENSING • 1988 REVIEW CONCLUDED: • Others Were Capitalizing On IBM’s R&D • Royalty Rate Of 1% Sales Was Too Low • INCREASED RATES • LAUNCHED MAJOR LICENSING CAMPAIGN • Modest Staff Increase • Major Involvement of Business Units • ANALYSIS, INFRINGEMENT PROOF, PATENT REVIEW, INCREASED FILING • RESULT: • Revenue Grew Over From Tens Of Millions to $1.3 Billion in 10 Years • All Income Credited To Divisions • Minimal Litigation

  15. IBM’s Licensing Income

  16. KEY FACTORS TO LICENSING SUCESSS • RESOURCE REQUIRED • GOOD PATENT PORTFOLIO • EXCELLENT PATENT STRATEGY & MANAGEMENT • ANALYTICAL • LEGAL • NEGOTIATION • ADMINSTRATION • A COHERENT LICENSING PROGRAM • TERMS & CONDITIONS PERCEIVED AS REASONABLE • CONSISTENT & FAIR APPROACH • A SUCCESSFUL TRACK RECORD

  17. KEY FACTORS • INTERNAL CONSENSUS • CONVINCING INTERNAL “ OWNERS” • LICENSING COMPETITORS • SELLING SENIOR MANAGEMENT • CALMING THE LAWYERS • RISK OF LITIGATION • DECLARATORY JUDGEMENT ACTIONS • NEED TO ENFORCE • EXPOSURE TO RETALIATION

  18. LESSONS LEARNED • THE CROWN JEWELS ARE OFTEN UNDER VALUED While Growing In Value, IP Can Produce a Steady Stream of Profits • LICENSING AS A BUSINESS CAN YIELD SURPRISING RESULTS Your Revenues = Competitors Expenses

  19. LICENSING THE CROWN JEWELS WHO’S CRAZY NOW?

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