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What’s Driving the Current Patent Market -- Where Are We and Where A re We Going?

What’s Driving the Current Patent Market -- Where Are We and Where A re We Going?. Ron Laurie Inflexion Point Strategy. IEOR 190G - Patent Engineering U.C. Berkeley College of Engineering April 9. 2012. What’s Driving Patent Markets? Supra-Normal Returns on Enforcement.

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What’s Driving the Current Patent Market -- Where Are We and Where A re We Going?

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  1. What’s Driving the Current Patent Market--Where Are We and Where Are We Going? Ron Laurie Inflexion Point Strategy IEOR 190G - Patent Engineering U.C. Berkeley College of Engineering April 9. 2012

  2. What’s Driving Patent Markets? Supra-Normal Returns on Enforcement Royalty Base (Tax Base) – License/Litigation Tangible Products $$c Market (Price) Marketing, Sales, Admin, etc. Digital Products (Proprietary Design Info) Product (Cost) $$b Design Core Technology $$a Core Technology: Patented Inventions & Unpatented Know-How Patent on Invention X X Invention X Integration Technology Productization Technology (Patented and/or Unpatented) Royalty Payments (Tax) - $$ Innovation 1

  3. What’s Driving Patent Markets? Transition from Direct Financial Return to Strategic Value Level 1 - Offensive Value Level 2 - Defensive Value ------------------------- Level 3 - Strategic Value Level 4 - Enterprise Value 2

  4. Level One - Offensive IP Value Top-Line Revenue Enhancement via Out-Licensing or Sale -- • Non-exclusive patent licensing (stick model) • Non-exclusive patent licensing plus tech transfer (carrot model) • Exclusive field-of-use licensing in non-core markets - with or without technology transfer • Cross-licensing with receipt of balancing payment • Sale - with or without grant-back license or reservation of rights 3

  5. Level Two - Defensive IP Value Bottom-Line Improvement via Cost Reduction In terms of IP Cash Outflows via -- • License Fees, • Litigation Expense • Infringement Damages • Design-Around Efforts > Freedom to Operate - deterrence or settlement of competitor IP Infringement claims > Cross-licensing with zero or lower net balancing payment > Exclusive field-of-use licensing in non-core markets - with or without technology transfer > Participation in defensive aggregation consortia 4

  6. Level Three - Strategic (Market-Related) IP Value • Price Premium for Products/Services with Patented Features -- depends on demand for patented feature, i.e., price cross-elasticity Licensing (Level One  Revenue Enhancement) vs. Exclusion (Level Three  “Feature Wars”) • Market Share Protection/Expansion -- measurement issues 5

  7. Level Four - Enterprise IP Value Using patents -- > to increase acquisition value in an M&A transaction e.g., HP  Palm, Google  Moto > to increase issue price in IPO e.g., Priceline > in lieu of cash as contribution to JV or strategic alliance > to increase/support public company share price 6

  8. Recent High-Visibility Patent Sales & IP-Driven M&A Transactions (cont.) 7

  9. Recent High-Visibility Patent Sales & IP-Driven M&A Transactions 8

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