IP, licensing, & technology valuation
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Intellectual Property, Licensing, and Technology Valuation
Marty KaszubowskiPresident, General Ideas
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Intellectual Property
TYPES OF INTELLECTUAL PROPERTY
• Patents: give monopoly on inventions, ornamental designs, or plants
• Copyrights: protect rights in works of authorship
• Trademarks: function as indicator of source and quality
• Trade Secrets: confidential information that gives its owners a business advantage
• Different IP Notices: Pat. Pending, ©, ™, ®
TYPES OF U.S. PATENTS
• Utility patents: cover useful items, structures, methods, or processes
• Utility patents protect the functional embodiment of an idea
• Utility patent gives owner the right to exclude others from practicing invention
• Design patents: cover ornamental designs
• Plant patents: cover only asexually reproducing plants discovered in the wild (not wild plants that reproduce sexually or any genetically engineered plants)
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Intellectual Property
REQUIREMENTS FOR UTILITY PATENTS
• Inventorship: in U.S. only inventors may file patent applications
• Novelty: invention must be new (not covered by “prior art”)
• Non-obvious: invention cannot be an obvious variation on prior art
• Enabled: inventor must be able to describe invention so that it could be built (but working model not required)
• Utility: invention must be useful
• No statutory bars: for
example, the “one year on-sale bar”
U.S. PATENT PROCESS
• Provisional Application: for utility patents; optional but establishes priority date with U.S. Patent and Trademark Office (“PTO”)
• Regular Application: must be filed within one year after public disclosure of invention or filing of provisional application
• Issued Utility Patent: provides 20 years of protection from application filing date
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Licensing your technology
• Licensing mean selling the rights to your technology to someone else …
• In exchange you get:• Initial Payment ($)
• Royalties ($$)
• Opportunities to work on future projects & products
• The right to “Take it back” if the other party fails
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Why License?
• You don’t have the resources needed to develop a product
• You don’t have any relationship to the market(s)
• You just don’t want to be a product company!
• Your technology is more valuable when combined with someone else’s technology
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What does it mean to put a “value” on your technology?
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Why put a value on a technology?It’s the core asset of the company!
You can’t license it until you know how valuable it is!
It needs to be matured, and that costs money
“Valuing” the technology helps establish the price you charge for products and services that use the technology
When you sell the company, everyone will want to know how much value remains in the underlying technology
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What IS the technology being “valued”?A “Technology" is usually described in terms of : A bundle of patents; Related technical trade secrets and
proprietary technical know-how; Proprietary hardware/software
required to make full use of the technology; and
The business made possible by the practice of that comprehensive bundle of technology.
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What factors affect the value?There are a number of factors
affecting value: Nature, form, and stage of development of
the technologyPerceived technical riskPerceived commercial riskEconomic impact and useful economic lifeExpected future advances in the fieldTransaction-specific details
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Technology Readiness Levels
1. Basic principles observed and reported.2. Technology concept and/or application formulated.3. Analytical and experimental critical function and/or characteristic
proof of concept.4. Component and/or breadboard validation in laboratory
environment.5. Component and/or breadboard validation in relevant environment.6. System/subsystem model or prototype demonstration in a relevant
environment.7. System prototype demonstration in an operational environment.8. Actual system completed and qualified through test and
demonstration.9. Actual system proven through successful long-term operations.
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The value of technology increases as it matures!TRL 1-3 is basic research and is generally “marketed” to government
agencies, major companies, and philanthropic organizations that seek to advance the state of the art.
Ex: Sponsored research, “Science for hire”
TRL 4-7 is technology demonstration and is “marketed” to early-adopters and strategic partners seeking early market advantages.
Ex: Licensing agreements, sales of patent portfolio, joint venturing, pilot projects
TRL 8-9 is technology application and product development and is marketed directly to end users.
Ex: Product sales and marketing, full-scale manufacturing & support
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Start gathering information …To do a proper technology
valuation you’ll need: Correct interpretations of patent claims
and definition of what is unique and valuable.
The time remaining to practice the unique patent claims.
A “Concept Statement” for the product(s) you expect to develop.
Assessments of the markets for the product(s) you envision.
Financial models related to price, elasticity, demand, cost of manufacturing, costs-to-scale, etc.
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Two Questions
To what extent does your technology make other technologies obsolete?
Example: The automobile made the horse and buggy obsolete
To what extent will your technology make current marketing & sales channels obsolete?
Example: The people who sell automobiles are not the same people who sold horses and buggies
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Other Examples
Niche Innovations: Solid state Flash Drives did not make Hard Drives obsoleteThe people who sell Flash Drives do not sell Hard Drives
Evolutionary Innovations: 1 TB hard drives did make 100GB hard drives obsoleteThe people who sold 1GB drives also sell 1TB drives
Revolutionary Innovations:High Definition (digital) TV made analog TVs obsoleteThe people who sold analog TVs also sell digital TVs
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The Transilience Map
Niche Architectural
RevolutionaryEvolutionary
Makes sales & marketing channels obsolete
Makes older
technologies
obsolete
Automobiles
MP3 Music
Digital Cameras
Flash Drives
High Def.TVHigh Capacity Hard Drives
Leaves older
technologies viable
Retains existing sales & marketing channels
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Value is a function of maturity and market potential
Mark
et
Pote
nti
al
Technology Maturity
€$
Weakening
Stable
Slow Growt
h
Strong Growt
h
Explosive
Growth
Idea Stage Growing Mature
Increasing Value
Increasing Value
Incre
asin
g V
alu
e
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Three Approaches to Valuing Technology
Cost
Market
Income
“Values” the technology on the basis of what it cost to create it
Considers recent transactions involving transfer of ownership of
similar technologies
“Values” the technology as the “Present Worth” of projected
economic benefits
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Valuing based on Cost
Advantages:Simple to doEasy for everyone to
understand
Disadvantages:Has little relationship to
potential benefitsRarely considers
opportunity costs
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Valuing based on recent market activityAdvantages: Simple to do, if you can
find the data … Easily understandable
Disadvantages: Hard to find comparable
transactions Every technology is
unique, difficult to agree on comparisons
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Valuing based on future earningAdvantages: Best captures the long-
term value and full range of risks and benefits
Disadvantages: Difficult to create and
agree on the financial model and associated assumptions
Highly subjective, based on anticipated future revenues …
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Don’t overanalyze!
The size and growth potential of you market is a critical part of assessing the value of your technology
But it’s an inexact science and carriers much uncertainty.
The most certain markets are the ones that are already in decline …
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Questions?