2008-08-28 FröhlingVolvo Technology Corporation1 The Interconnection between Patents, Trademarks,...

2008-08-28 Fröhling Volvo Technology Corporation 1

The Interconnection between Patents, Trademarks, Designs and Domain names

-Business Models & IP in Collaboration

Scenarios

Werner Fröhling

CONOPA Annual Conference

Copenhagen, 28-29 August 2008


Some Basics

• IP or Intellectual Property: IP filed with & registered by

patent offices and unregistered IP of similar nature– Patents & utility models– Designs– Integrated circuit topography protection– Plant protection– Trademarks, company names, domain names– Database protection– Copyright (software)– Confidential know-how– ...

• Focus here: patents


Some Basics

Business is based on (fair) competition & profit

Copying is one important element in competition; it is not only allowed but also wanted in order to serve the needs of the market and of society in an optimal way unless it is forbidden by law

Innovation is another important element in competition; it creates new products & new services and is an important prerequisite for sustainable economical growth and societal wealth

Knowledge is a prerequisite for innovation- Reduction of knowledge to practice (”know-how”) creates said new & innovative products & services which in turn might be based on concrete inventions- Technical inventions which are new, based on an inventive step & susceptible of industrial application can be protected by patents*

Patents are negative monopolies which stimulate & foster innovation- They encourage innovators & investors to invest in R&D - They force 3rd parties to develop alternative (better) solutions (”work arounds”)

* US patentability requirements: novelty, non-obviousness & usefulness; no patentability restrictions regarding technical character of inventions


Some Basics

• The original “classical” role of a patent - as defined by law: A Patent is a negative monopoly right

• which the society grants to the patent holder in return for the disclosure of the invention forming the base for said monopoly right to the public

• which is limited in time and geographical coverage and• which gives the patent holder the right to forbid any third party to commercially use the subject matter

protected by that monopoly right

• Further roles of patents - as developed in practice: Patents are effective & multi-facetted business tools for setting up an appropriate business model for the commercial exploitation of an innovation in a specific business environment; they are

• a strong currency to get access to complementary technologies controlled and/or patent protected by third parties (cross licenses)

• a strong tool to increase the attractiveness of a technology or product concept for third parties• a strategic asset for co-operations, M&A, JV, and strategic alliances• an efficient tool for securing exclusivity on the market of brand-identifying features or other competitive

advantages of products & services• an official certificate of the innovator’s technological competence & leadership• an efficient tool for blocking competitors and controlling suppliers in their activities• a strategic asset increasing the innovator’s value for shareholders, investors, banks & rating companies• a strategic tool in connection with international standards• a prerequisite for an active licensing policy• ...


Some Basics

KnowledgeTechnical Knowledge

Public

Non-PublicProprietary

FreeNon-Proprietary

Protected Proprietary

Non-Accessible

Accessible

Unregist’d IP

Regist’d IP

Market Knowledge

Business Knowledge

Public Know-How-Publications-Presentations ...

Non-Retrievable- Foreign Languages- Oral only

...

SW CopyrightDatabase Prot....

PatentsUtility Models

IC mask worksDesigns...

Confidential Know-How


Some Basics

UnpublishedInvention

UnpublishedPatent Application

(18 months)

PublishedPatent Application

or Patent

Unpublished

Unpublished Published

Patents

Confidential Know-How

ConfidentialKnow-How

Non-PublicProprietary

Non-Protected

PublicNon-ProprietaryNon-Protected

PublicProprietaryProtected

Type

Published & Expired Patent Application

or Patent

Time


Profitability & Growth

Profitability

Growth

Mainstream R&D

Caught in the Box

Does mainstream R&D within the core business as any other actor in that business

Files patent applications focused on details/components of existing products

Creates (i) profitability within the core business at the expense of growth or (ii) growth at the expense of profitability, but creates usually only little profitable growth (if any)

Core Business


Profitability & Growth

Profitability

Growth

Breaking down the Walls

Creates innovations related to core business

Files patent applications focused on concepts of next generation products, systems, technologies & new materials

Expands the core business and creates profitable growth in the expansion areaMainstream

R&D

Innovations

Core Business

Extended Core Business


Profitable Growth

Profitability

Growth

Thinking outside the Box

Creates break-through innovations focusing on customer needs (total customer solutions) and connecting core business with other businesses

Files patent applications focused on strategic new product and service concepts and emerging technologies

Creates considerable profitable growth in new businesses Mainstream

R&D

Core Business

Extended Core Business

New Business

Break-Through Innovations


Make, Collaborate or Buy Strategy

Collaboration with 3rd party

(e.g. technology provider)

Company’s own internal core competence

Buy as standard component

(”off-the-shelf”)

Collaboration with 3rd party (e.g. supplier)

Uniqueness of Technology

Uniqueness of Product Feature

High

High

Low

Low


Technology Access

Accessing Technology from the Outside*

1900

1960

2000

20%

10%

0%Time

* Taken from: EIRMA: Technology Access for Open Innovation – Summary of Working Group 63 Report; page


Players*

• Basic R&D – academic research – Universities

• Operative R&D – reduce to practice– Universities– Research institutes– Research companies– Companies

• Process development & up-scaling - industrialisation– Research companies– Companies

• Business – market penetration– Companies

* Taken from: EIRMA: Technology Access for Open Innovation – Summary of Working Group 63 Report; page 2


Basic Innovation Concepts

• Closed Innovation* – Successful innovation requires the control of the innovation by the innovator in

order to create value for him (Henry Chesbrough’s solid funnel)

• Open Innovation*– Successful innovation makes use of external & internal ideas, and internal &

external paths to market defined by an appropriate business model in order to create value for the actors involved (Henry Chesbrough’s porous funnel)

• Public Innovation– Given to the public without any restrictions– Non-proprietary & free accessible to everybody– Spirit of Humboldt (universities)

• Hybrid Innovation Concepts – Given to the public, but with restrictions– Proprietary, but free accessible to everybody– Example: Open Source community (software)

* based on Henry Chesbrough: Open Innovation (Havard Business School Press, Boston, 2004, pages xx, xxiv)


Business Model

An attempt to approach the meaning of the term* • Business Model definitions in literature:

– The definition of a business model is murky at best. Most often, it seems to refer to a loose conception of how a company does business and generates revenue. Yet simply having a business model is an exceedingly low bar to set for building a company. Generating revenue is a far cry from creating economic value, and no business model can be evaluated independently of industry structure. The business model approach to management becomes an invitation for faulty thinking and self-delusion (Porter, 2001)

– The terms “business model” and “strategy” are among the most sloppily used in business. People use them interchangeably to refer to everything – so they mean nothing. But no organization can afford fuzzy thinking about these fundamental concepts. A business model and a strategy are two different animals. One explains who your customers are and how you plan to make money by providing them with value; the other, how you’ll beat competitors by being different (Magretta, 2002)

* Taken from: Günter Gromeier: Business Models for Software Components in the Automotive Industry (ERTS 2004 Congress, Toulouse)


Business Model

Another approach to the meaning of the term

• Business models are the outline of all transactions needed to make a profitable business*

• Business models in collaborations between independent parties are the outline of all transactions needed to make a profitable business or to create benefits of similar nature for all parties involved

* Taken from: Günter Gromeier: Business Models for Software Components in the Automotive Industry (ERTS 2004 Congress, Toulouse)


Patent & Know-How Exploitation

• A patent or technology/know-how can be subject of many kind of transactions as for instance sale, license, or donation, however, the base for such transactions and their value are completely different

• The value of a patent is primarily based on its - negative –monopoly– A pure patent license for instance is principally nothing else but an

undertaking of the patentee/licensor not to assert his patent monopoly against the rightfully acting licensee

• The value of technology/know-how is primarily based on the - positive - fact that knowledge has been successfully reduced to practice– A pure technology/know-how license for instance is principally nothing

else but an undertaking of the proprietor/licensor • to provide the rightfully acting licensee with this (confidential and

proprietary) technology/know-how and • to help him that he can reduce it successfully to practice, too


Evolution of Public Prior Art

Public Prior Art

Inventiveness

Time

PatentScope of Protection

Patent Filing Date Patent Grant Date Patent Expiry Date

Patent Exploitation Window


Technology Value vs Patent Value

X-Party’s Use: N licensed Systems

1997 2007 2012 2017

A-Party System

(before 1997)

A-Party System (1997)

X-Party System

(before 2007)

X-Party System (2007)

X-Party System (2012)

Public

Prior Art

Protected Area

A-Party Patent

Patent Expiration 2017

A-Party I X-Party Technology/System Valuation

Patent Valuation

Free Development

5 Years

A-Party: Patentee & LicensorX-Party: Licensee


Key Factors for Successful Collaborations

• Key factors for successful collaborations, in particular in Open Innovation scenarios are– Suitable business model – Professional contract managment– Covering the generation (R&D) phase & exploitation phase


The Core of CollaborationForeground & Background

• Foreground (”FG”): Knowledge generated within the frame of a collaboration between parties

• Background (”BG”): Knowledge generated outside the frame of the collaboration, but necessary for the generation, use & exploitation of Foreground

– Background I: generated before the collaboration start– Background II (”Sideground” or ”SG”): generated during the development phase, but

independent of the collaboration• Improvement: further development/enhancement of FG & BG after the end of the

development phase of the collaboration• Other Assets: Knowledge not necessary for the generation and exploitation of

Foreground • Knowledge: confidential know-how, copyrights (software), demonstrators, prototypes,

test results, data bases, inventions, patents, patent applications, designs, design applications, etc.

– Demonstrators, prototypes and other tactile/visible realisations and results comprising Foreground & Background of one, some or all collaboration parties – often in a severable form

– Software programs comprising Foreground & Background of one, some or all collaboration parties – often in an amalgamated & non-severable form

– Patents, patent applications and other IP owned or controlled by one, some or all collaboration parties – often dependent on each other

– Data bases, test results and other collections of information of one, some or all collaboration parties – often in an amalgamated & non-severable form


Puzzle & LegoThe Construction Principles Behind

• Puzzle - “Closed Construction“– a selection of a limited number of different building elements

enables the construction of one single 2-dimensional object

• Lego - “Open Construction“– a selection of a limited number of different but standardised

building elements enables the construction of numerous different 3-dimensional objects

• Standardised high quality building elements• Standardised connection of building elements• Different types of building elements


Management by LegoThe Virtuoso


Management by Lego The Equilibrist


Management by Lego The Cubist


Contract Management by LegoCollaboration between Parties

Party ABackground I

Party BBackground I

Innovation(Foreground)Generation

(Party A Other Assets)

(Party B Other Assets)

Time

Party A Background II(Sideground)

Party B Background II(Sideground)

R&D Start Exploitation Start

Innovation(Foreground)Exploitation

Party B BG Improvements

Party A BG Improvements

FG Improvements

FG Improvements

Collaboration


Phase 1: Preparing the PlaygroundThe Collaboration & Exploitation Contract

Party B BackgroundParty A Background

Party B Other AssetsParty A Other Assets

Party A Sideground Party B Sideground

Collaboration & ExploitationContract


Phase 2: Building the Lego-HouseThe R&D Phase

Party B BackgroundParty A BackgroundGeneration of

Innovation(Foreground)




Phase 3: Selling the Lego-HouseThe Exploitation Phase

Party B BackgroundParty A Background

Exploitation ofInnovation

(Foreground)&

Further Developments



Party B BG/SG Impr’tsParty A BG/SG Impr’ts Party B FG Improvements

Party A FG Improvements


Business Model & Contract ManagementAt the Beginning

• Confidentiality

• Intentions of the parties

• Business model

• Exit/divorce/disputes

• Applicable law (multinational R&D!)

• Contractual main bullet points


Business Model & Contract Management General Collaboration Contract Structure

• Split of the collaboration into various consecutive phases with corresponding agreements & exit/divorce plans

• Before the start of substantive discussions & negotiations regarding a potential collaboration: Non-Disclosure Agreement (”NDA”)

• Optional: Frame Agreement (umbrella contract) covering the general aspects, objectives, goals and intentions of the collaboration

• Specific agreements for the various collaboration phases, as for instance:– Phase 1: Non-Disclosure Agreement– Phase 2: Feasibility Study Agreement– Phase 3: Prototype Development Agreement – Phase 4: Product Development Agreement– Phase 5: Product Industrialisation Agreement– Phase 6: Serial Production & Exploitation Agreement– ...


Business Model & Contract Management Major Contract Modules

• Parties • Preamble (intentions of the parties)• Objectives & scope (project description)• R&D collaboration plan

– Organisation, structure, milestones, ...• Contributions

– Financial contributions– Personnel– Other contributions

• Confidentiality • Foreground & Background

– Ownership – Access rights (licenses)– Excluded assets & other limitations

• Exploitation plan– Allocation of profits & other benefits

• Exit/divorce plan (premature termination)• Warranties & liabilities• Applicable law & dispute regulation


Business Model & Contract Management Contract Modules regarding Foreground & Background

Define & agree on suitable models for each of the contract modules, e.g.:

• Ownership – Foreground – Background I & Background II (Sideground)– Improvements– Special provisions for demonstrators, prototypes, …– Special provisions for software programs, data bases, …– Limitations & other encumbrances regarding Ownership

• Remuneration for patentable inventions of employees

• Access Rights (licenses) – Foreground– Background I & Background II (Sideground)– Improvements– Special provisions for demonstrators, prototypes, …– Special provisions for software programs, data bases, …– Limitations in Access Rights

• Necessary 3rd party consents• Legitimate own interest• Right to grant sublicenses, have made rights, access rights for affiliates and associated companies …

• Exclusions from Background & further limitations• ....


And now something completely different … (Monty Python)

• Let’s talk about …


The End


Thank you for your attention

Contact:

Dr. Werner Fröhling Volvo Technology Corporation Corporate Patents 06820, M1.7 S – 405 08 Gothenburg Sweden Phone: +46-31-3223810 Fax: +46-31-828040 E-mail: [email protected]


Appendices

... good to know


Patent First Filing Strategies

SE + US

Prov+

PCT

SE

PCT

PCT

US

BRCNJP

USBRCNJP

12 M

18 M

30 M

SE

PCT International Phase

PCT International Phase

SE, if needed, at any timeSE

SE

DEFR

EP

SE

DEFRGB

GB

EP

IT

IT

0 30 M

US

PCT


PCT First Filing

PCT

SE

US

…

JP

CN

…

GB

BR

EP DE

IT

FR

…

International Phase 2.5 Years

Patent Office: Patentability Assessment• Novelty Search• Written Opinion (WO) on Patentability• Preliminary Examination (optional) (for instance if WO negative)

Geographical ProtectionDecision deferred by 2.5 Years & based on• Patentability Assessment• Technology Assessment• Business Impact Assessment


PCT First Filing (PCT FF) Strategy

• One PCT application includes automatically option for patent protection in 139 PCT countries

• Decision regarding geographical coverage of patent protection – Is deferred by 30 months to the end of the international phase – Is, regarding patentability of the claimed invention, based on the results of an international search & a written

opinion, and (optional) an additional International preliminary examination of the patent office– Is based on a more reliable assessment of patentability, technology & business aspects of claimed invention – Includes Option to retroactively include patent protection for emerging strategic markets

• PCT first filing replaces the traditional domestic (national) Swedish first filing – However, in case it is needed, a domestic Swedish application can be branched off from the PCT application

at any point in time during the international phase

• Priority system according to Paris Convention is no longer a “standard” process by default for establishing protection in foreign countries, but rather an “option” for special cases only

– Extending the maximum life time of patent protection by one year (important for pharmaceutical industry)– Amending the subject matter of claimed invention during priority year claiming priority of first application – Extending patent protection to a state belonging to the Paris Convention but not to the PCT system

• PCT application drafted in English (official language of EPO, USPTO & even PRV)– No translation of the application during the international phase and the national/ regional phase before

USPTO/EPO (further relief due to London Agreement when validating European patent for SE)– No need anymore to file a US provisional application in parallel with PCT application since the PCT filing date

(= priority date) is automatically the earliest possible effective early fling date (“102e Date”) for any US application derived from the PCT application in the national phase

• Considerable cost & handling time savings during the international phase


PCT First Filing vs SE First Filing

0

50

100

150

200

250

Cost [ kSEK ]

SE FF PCT FF

First Filing Strategy

Estimated Acc Cost (at Entry Nat Phase)

Sum

Pat Off

Pat Att

Serv P

Inv/Mgr


PCT First Filing

PCT

SE

US

…

JP

CN

…

GB

BR

EP DE

IT

FR

…

Priority Year

International Phase (2.5 Years) National Phase (17.5 Years max)

Preliminary Examination (optional)

Novelty Search & Patentability Ass.

Patent Grant

PCT: one international application for more than 130 countries

EP: central patent granting process for more than 30 European countries

PatentLifetime:20 Years

(max)as of Filing Date


PCT First & PCT Subsequent Filing (Optional)

PCT 1

PCT 2SE

US

…

JP

CN

…

GB

BR

EP DE

IT

FR

…

Priority Year

International Phase (2.5 Years) National Phase (1 + 17.5 Years max)



Novelty Search &Patentability Ass.

Addition of Improvements of the invention

Patent Grant

PCT 1 Abandoned

Patent Lifetime:

(max)20 Years

As ofFiling Date


PCT First & PCT Subsequent Filing (Optional)

PCT 1

PCT 2 SE

US

…

JP

CN

…

GB

BR

EP DE

IT

FR

…

Priority Year

International Phase (2.5 Years) National Phase (17.5 Years max)



Preliminary Examination(optional)

Improvements of the Invention added to PCT 2

PCT 2 Derived Patent Lifetime:Max 20 Y as of PCT 2 Filing Date

PatentLifetime:20 years

(max)as of FilingDate

2008-08-28 FröhlingVolvo Technology Corporation1 The Interconnection between Patents, Trademarks,...

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