David Aylen

Gowlings Moscow

PATENT MONETIZATION

Monetization

• PART I What…

• Monetization: what is it?

• PART II When…

• Monetization: When do you do it?

• PART III How…

• Monetization: How do you do it?

Monetization

• PART I What…

• Monetization: what is it?

• PART II When…

• Monetization: When do you do it?

• PART III How…

• Monetization: How do you do it?

PART I Monetization: What is it?

• = a way to make money

• = a way of generating cash from a patent portfolio

• = any technique to make IP a liquid asset from which to

profit

• = “business model” for obtaining unrealized

value in a portfolio of IP assets

Monetization

• PART I What…

• Monetization: what is it?

• PART II When…

• Monetization: When do you do it?

• PART III How…

• Monetization: How do you do it?

Part II Monetization: When do you do it?

• When you know what you have to monetize

• When you know what you want to monetize

• When you decide the timing is right

• When you decide how to monetize

Monetization

Multi-step process

Monetization

FIRST: Portfolio Management of IP

THEN: Monetization of IP

Monetization

PORTFOLIO MANAGEMENT

• Identify all IP rights

• Categorize them

• Look at Business Plan

• Manage IP rights to support business plan

• Keep what you need

• Monetize the other IP rights

Portfolio Management: Identify all IP Rights

WHAT HOW ** DURATION

• software

• lists/data

• designs

copyright 70 yrs

•brands:

• words

• designs

• sounds

trademark

indefinite

•machines

•pharma

•nanoscience

•chemistry

•electronics

patent

20 yrs

•shapes

industrial

design

15-25 yrs

•special info trade secret indefinite

Portfolio Management: Audit and Categorization

KNOW HOW Information of any type that has been maintained confidential and is not

independently known and disclosed elsewhere and has commercial value

New & useful apparatus,

processes, chemical

compositions, designs

Manual,

Procedures,

Charts, Plans

Undefined KH

Scientific trial data

Research Material

Raw Data

Software

Databases

Int. Circuits

Not Protectable

Not Assignable

Maintaining Secret Helps

Copyright &

Confidential

Info.

no reg. required

can be registered

(some countries)

Protectable from

“copying”

Confidential KH

Unpatentable

Unregistrable

Transactional

Protectable if kept

confidential

Defensive

Strategy

Up to 20 years

exclusivity by country

or region

Copyright &

Confidential Info

- registrable (some

countries)

- partially confidential

Patents

Utility models

Industrial

designs

General knowledge,

skill, expertise of

employee workforce

Applications are

published

Offensive

Strategy

Marketing

Brands

Advertising

Trademarks

Copyright

Portfolio Management

Patents

Useful ??

Portfolio Management: Look at Business Plan

• What priorities?

• What markets and where?

• Who are competitors?

• Where will money be spent?

• IP rights:

• IP needed…to stop others [offensive] ?…to protect company

[defensive] ?

• IP not needed [transactional]

Portfolio: Offensive Strategy

targeted at competition

blocks manufacturing processes and product

features

preserves market leader position BP

CASE STUDY - Apple v. Samsung

→ exclude Samsung’s GALAXY brand from the market:

“losing is NOT an option”

→ 100% aggressive offensive strategy

[patents-trademarks-designs …]

→ exclusion of GALAXY from USA and EU market =

obliteration

Portfolio: Defensive Strategy

guarantees FTO for processes and products BP

patents block others from patenting

discourages others from entering the field

CASE STUDY - P&G v. K-C

Disposable diaper “technology”

Feature oriented: EWB

P&G FTO check

Althouse patent purchased = defensive strategy

K-C Patent infringement attack = offensive strategy

Portfolio: Transactional Strategy

Revenue generation BP :

sale of IP assets

licensing in / out

spin-offs etc

Joint ventures

Optimization of Transfer Payments BP

CASE STUDY - DuPONT Strategy

transactional strategy

→ litigate for $$$

→ force licenses

→ sell unused patents

= monetization of idle assets

IP Portfolio Management

IP Management

(Economic Benefit Creation)

IP Administration

(Patent Asset Creation)

Innovation Patent Prosecution Monetization

-Filing

-Prosecution

-Maintenance

-Research

-Product Development

Activities:

-Portfolio Management

-Integration of IP into Business Strategy

-Value Maximization of IP

Offensive, Defensive and Transactional re-investment

Portfolio of IP

Monetization

"There are countless patents that are promising but

sitting idle, stowed in the corporate file room. In fact,

about 90 percent to 95 percent of all patents are

unused…”

Monetization

• PART I What…

• Monetization: what is it?

• PART II When…

• Monetization: When do you do it?

• PART III How…

• Monetization: How do you do it?

PART III Monetization: How?

Basic Techniques

• Sale • Outright [not core to business]

• Sale and license back [core to assignee]

• Sale and structured payments [cash flow]

• License • Non-exclusive [flexible]

• Exclusive [right to sue]

• Cross-license [defensive pooling]

David Aylen Gowlings RUSSIA / CIS

PART III Monetization: How?

Basic Techniques

• Litigation • Infringement action

• Judgment or settlement

• Monetary damages or royalties

• Securitization • Pledge to bank or lender

• In return for cash

• Donation • Tax deduction

David Aylen Gowlings RUSSIA / CIS

PART III Monetization: How?

Advanced Techniques

• Patent Licensing and Enforcement co.’s [non operating; strategic cease and desist and infringement actions; license driven;

inventor assist or trolls]

• Patent Pools [defensive; anti-troll; amongst operating co’s; their patents and third party in the pool]

• Patent Aggregators [defensive; anti-troll; not operating co. / NPE non practicing entity]

PART III Monetization: How?

Advanced Techniques

• IP Tech Development co.’s [R&D based; patent and know how licensing; specialty areas biotech, internet;

wireless…]

• University Tech Transfer [Collegiate IP development co ; university or independent]

• IP Auction Houses [urgency; closure; liquidity; price; transparency v. secrecy; networking]

• On-line IP Exchanges / Clearing Houses [E-bay / Craigslist for IP ;members only or public access]

PART III Monetization: How?

Advanced Techniques

• IP Backed financiers and Securitization Firms [debt financing by specialists; or mortgage approach with license back]

• Risk-management i.e. insurance [assignment of patent to insurer; value = prepaid premiums; tax deductible; license

back]

• Technology Spin-outs [spin-out from tech company; non-core; stranded in tech co.; sell off or becomes lic.

Co]

• Patent Brokers [sale or license;”real estate agents”; finding buyers/sellers;commission; quality]

PART III Monetization: How?

Valuation $$$

• How do you value a patent?

• GAAP forbid companies from booking patents generated

internally on the balance sheets as assets

• Patent valuation = expert area

[patent attorney + economist + finance]

PART III Monetization: How?

Valuation $$$

• Some techniques

• Discounted cash flow methods for inventions with clear revenue streams

ie licenses

• Litigated patents (what awards)

• Citation frequency (how often cited in patent office)

• Maintenance fee history (how old)

PART III Monetization: How?

WHO ARE ALL THE PLAYERS?

Manufacturers

Customers Customers

Brand Owners

Suppliers

TROLLS (pat. acquisitions &

licenses)

Universities

&

Research Institutes (patent licenses & sales)

Brand 1 Brand 2

cross licenses; pooling; patent sales

enforcement

cross licenses; pooling; patent sales

enforcement

Lic

en

ses

Supplier Type 1

cross licenses; pooling; patent sales

enforcement

Patents in a Disaggregated Modern Economy

Type 2 Type 3

Financiers (patent due diligence & valuation)

Bankruptcy Trustees

(patent due diligence; valuation;

license; sale; enforcement

patent collateral

M&A’s (patent due diligence

& valuation)

Thank You

montréal ottawa toronto hamilton waterloo region calgary vancouver beijing moscow london

David Aylen Moscow Managing Partner david.aylen@gowlings.com