Monetization Intellectual Property · 2006. 2. 27. · Monetization strategies • License,...

www.pl-x.com© 2001 The Patent & License Exchange, Inc. All rights reserved.

Dr. Nir Kossovsky, CEOThe Patent & License Exchange, USA

Dr. Nir Kossovsky, CEODr. Nir Kossovsky, CEOThe Patent & License Exchange, USAThe Patent & License Exchange, USA

Intellectual PropertyMonetization

Intellectual PropertyIntellectual PropertyMonetizationMonetization

[email protected], [email protected], 626-584-3303


Key points

• IP is a financial asset• IP is becoming a financial instrument• IP’s global value depends on the

harmonization of both legal andfinancial practices

• WIPO should expand its IPharmonization efforts to includefinancial considerations

• IP is a financial asset• IP is becoming a financial instrument• IP’s global value depends on the

harmonization of both legal andfinancial practices

• WIPO should expand its IPharmonization efforts to includefinancial considerations


Intangible assets are valuable

1 Mar 01: Market Rewards Companies That Harness IP1 Mar 01: Market Rewards Companies That Harness IP

0102030405060708090

100

Intangible Asset Value

Book Value

Ora

cle

Pfiz

er

Coc

a C

ola

Mer

ck

Nok

ia

EM

C

GE

Sun

Cisc

o

Inte

l


IP is a key intangible asset

Market Rewards Companies That Harness IPMarket Rewards Companies That Harness IP

0102030405060708090

100

Oracle EMC Sun Nokia Cisco Pfizer Coca- Merck Intel GE ColaOracle EMC Sun Nokia Cisco Pfizer Coca- Merck Intel GE Cola

Book Value•Earnings momentum

•Management reputation

•Human capital and know-how

•Patents

•Trademarks

•CopyrightsIPR = 66% (est.)IPR = 66% (est.)


Intangible value ≈≈≈≈ market cap

-80%

-60%

-40%

-20%

0%

20%

40%

60%

Oracle

Nokia

Sun Micr

osyste

msEMCCisc

oCoc

aCola

Pfizer

Intel

Merc

k GE

% Change EV 1 March 2000-2001% Change MC 1 March 2000-2001

-80%

-60%

-40%

-20%

0%

20%

40%

60%

Oracle

Nokia

Sun Micr

osyste

msEMCCisc

oCoc

aCola

Pfizer

Intel

Merc

k GE

% Change EV 1 March 2000-2001% Change MC 1 March 2000-2001


IP: a monetizable asset

• Pay to perfect rights• Exercise rights and pay to develop

technology• Receive cash on sale of product

Intellectualproperty (I)

• Pay to acquire stock• Receive cash on sale

Stock

• Pay to acquire bond• Receive interest payments

Bond

Monetization Event (Cash Flow)Asset


IP is an asset:Investment cycle


IP: an investment instrument

• Pay to perfect rights• License or assign, collateralize,

etc.

Intellectualproperty(II)

• Pay to acquire stock• Receive cash on sale

Stock

• Pay to acquire bond• Receive interest payments

Bond

Monetization Event (Cash Flow)Instrument


IP is an instrument:Investment cycle

Monetization strategies

• License, cross-license, in-license• Sell (assign)• Allow to expire or donate• Collateralize• Securitize• 1031 Exchange• Minority equity investment

• License, cross-license, in-license• Sell (assign)• Allow to expire or donate• Collateralize• Securitize• 1031 Exchange• Minority equity investment

Create value from IP, an instrument:Create value from IP, an instrument:

www.pl-x.com

Maximize transaction opportunitiesMinimize transaction risksMaximize transaction opportunitiesMinimize transaction risks


IP≈≈≈≈Financial option

• Provide rights without obligations• Patents are options on technology

– Call option on the future cash flow that may (ormay not) arise from a technology

– Embedded put options to enforce– Annual option to renew– IP is a real option – a financial derivative

• Provide rights without obligations• Patents are options on technology

– Call option on the future cash flow that may (ormay not) arise from a technology

– Embedded put options to enforce– Annual option to renew– IP is a real option – a financial derivative


IP value is market driven**

0

75

150

225

300

12/2

5/00

1/25

/01

2/25

/01

3/25

/01

4/25

/01

5/25

/01

6/25

/01

InformationTechnologyLife Sciences

Automotive andTransportation

0

75

150

225

300

12/2

5/00

1/25

/01

2/25

/01

3/25

/01

4/25

/01

5/25

/01

6/25

/01



Source: pl-x Intangible Asset Market Index**Financial Accounting Standards Board Statements No. 141 and 142


Reward value range over7 months

0

50

100

150

200

InformationTechnology

Life Sciences Automotive andTransportation

0

0.1

0.2

0.3

0.4MeanStdevStdevFx

0

50

100

150

200



0

0.1

0.2

0.3

0.4MeanStdevStdevFx

Source: pl-x Intangible Asset Market Index


Median Values, 8000 IP Assets

02468

10121416

Life Sciences Technology

Software

Telecommunications Technology

Advanced Materials

02468

10121416

Life Sciences Technology

Software

Telecommunications Technology

Advanced Materials

PopulationPopulation-wide-wide

measuresmeasures

MeanMean20.7620.76

MedianMedian5.195.19

ModeMode88


Valuing an investment

• Discounted technology cash flow

• DCF – Monte Carlo

• Discounted technology cash flow

• DCF – Monte Carlo= +

+=L

tnn

n

rCfeeUpfrontPV

)1(.

= ++=

L

tnn

n

rCCf

feeUpfrontPV)1(

),(. σµ

Measuredreward – notcash flows

Measured risk

Measuredreward – notcash flows

Measured risk

)()( τστ −−= − hNKehNSC rtt

{ }

tS

SVar

rKSht

t

tt

t

∆

��

��

��

=

++=

∆+ln

2)ln(

2

2

σ

τστστ

Measuredreward – notcash flow

Measured risk

Market-basedmeasure ofreward

Observed riskfrom variance


ββββ to a discount rate

)(exp favgmf rrrr −+= −β

= ++=

L

tnn

n

rCCf

feeUpfrontPV)1(

),(. σµ


Uncertainty of discount rate

0

0.1

0.2

0.3

0.4

0.5

0.6

12/2

5/00

1/25

/01

2/25

/01

3/25

/01

4/25

/01

5/25

/01

6/25

/01



0

0.1

0.2

0.3

0.4

0.5

0.6

12/2

5/00

1/25

/01

2/25

/01

3/25

/01

4/25

/01

5/25

/01

6/25

/01



Source: pl-x TRRU® metrics: CAPM


Risk (β)β)β)β) value range over7 months

00.20.40.60.8

11.21.41.61.8

2



0

0.1

0.2

0.3

0.4

0.5

0.6

MeanStdevStdevFx

00.20.40.60.8

11.21.41.61.8

2



0

0.1

0.2

0.3

0.4

0.5

0.6

MeanStdevStdevFx

Source: pl-x Beta Watch


Effects of uncertainty

• Needs parallel WIPO legalharmonization efforts

• Uncertainty regarding financialopportunities– Reduces commercial opportunities– Reduces global investment

• Should be addressed by WIPOharmonization efforts

• Needs parallel WIPO legalharmonization efforts

• Uncertainty regarding financialopportunities– Reduces commercial opportunities– Reduces global investment

• Should be addressed by WIPOharmonization efforts


Call to action

• WIPO should promote globalharmonization offinancial aspects of IP

• WIPO should promote globalharmonization offinancial aspects of IP

Interactive IP Catalog– Global language of

science and technology– Standardized units and

ranges of values– Solves prose

limitations

Interactive IP Catalog– Global language of

science and technology– Standardized units and

ranges of values– Solves prose

limitations

TransactionAssurance Services

– International riskmitigation

– Standard escrows– Standardized deal

documents

TransactionAssurance Services


– Standard escrows– Standardized deal

documents

Market-DrivenMeasures of Riskand Reward

– Market-basedindications of value

Market-DrivenMeasures of Riskand Reward

– Market-basedindications of value

Automatic PatentValidity Insurance


– $10 million coverage– Transaction costs– Lost royalties

Automatic PatentValidity Insurance


– $10 million coverage– Transaction costs– Lost royalties

www.pl-x.com

Examples of financialinitiatives

Swiss Re

www.pl-x.comwww.pl-x.com

www.pl-x.com

For further reading

• Options pricing and TRRU® Metrics– les Nouvelles, 2000 (Sept); 139-143– les Nouvelles, 2001 (Sept)– Patent Strategy & Management, Sept 2000.– Patent Strategy & Management, Mar 2001– Harvard Business School (case study)

N1-601-109 (Fall 2000)

• Publishers of TRRU data– Derwent IP Matters, The Daily Deal– Law.com; Thedeal.com,– www.pl-x.com, Technology Access Report

• Options pricing and TRRU® Metrics– les Nouvelles, 2000 (Sept); 139-143– les Nouvelles, 2001 (Sept)– Patent Strategy & Management, Sept 2000.– Patent Strategy & Management, Mar 2001– Harvard Business School (case study)

N1-601-109 (Fall 2000)

• Publishers of TRRU data– Derwent IP Matters, The Daily Deal– Law.com; Thedeal.com,– www.pl-x.com, Technology Access Report

For more information,visit us atwww.pl-x.comor call+1 (888) 465-0690 x1or [email protected]

Monetization Intellectual Property · 2006. 2. 27. · Monetization strategies • License,...

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