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Transcript of Optimizing Values of Patents in Oil and Gas Industry Paper No. : A065 Date- 11 th March, 2010 Venue-...
Optimizing Values of Patents in Oil and Gas Industry Paper No. : A065
Date- 11th March, 2010
Venue- SILVEROAK-II, Habitat Centre, New DelhiSession Name : Leveraging
IPSession No: TS-12
Presented ByITAG Business Solutions Ltd,
Sughrue Mion PLLC , USA
© ITAG Business Solutions Ltd., 2010 © 2010 Sughrue Mion PLLC, All Rights Reserved.
Presenting Author – Mark BolandPAPER Number – A065 Session No. - TS-12Date – 3/11/2010 Time – 14.15-15.45 hrs
PRESENT AFFILIATION
Partner at Sughrue Mion, PLLC since 1991, began as associate 1985.
AREAS OF INTEREST Lead trial counsel in numerous patent infringement litigations, infringement and validity opinion practice and counseling, licensing and contract matters including joint ventures and co-development situations, patent application and prosecution, and counseling clients in devising global intellectual property strategies.
ACHEIVEMENTS / AWARDS
1. Catholic University of America, Columbus School of Law (JD 1985)
2. College of Holy Cross (B.A. Biology 1982; minor concentration Chemistry)
3. Co-Editor (1994 Ed.) (treatise) “Comprehensive Patent Interference Practice”
4. Lectured worldwide on various IP topics
5. Member of Sughrue’s Management Committee – 1993 to present.
Presenting Author- Dr. Dhanpat Ram AgarwalPaper Number- A065 Session Number- TS-12 Date- 3/11/2010 Time - 14.15-15.45 hrs
PRESENT AFFILIATION-
Director of ITAG Business Solutions Ltd, (KPO IN IP LAWS) Kolkata and in practice as Chartered Accountant since 1982 .
AREAS OF INTEREST-
Consultancy in IP Management , IP Laws , Taxation, Finance and other WTO related issues.
2. Author
•A Monograph on WTO 2005
•A Monograph on Intellectual Property Rights (IPR), 2010 (under print)
3. Co-Author of books on FEMA, Partnership Taxation and other direct tax matters
4. Presented papers on WTO , IPR and other economic and taxation issues at various National and International Conferences.
5. Participated in 5th, 6th and 7th WTO Ministerial Conference in Cancun (Mexico), Hong Kong and Geneva.
ACHIEVEMENTS / AWARDS
1. A Commerce and Law Graduate from Calcutta University, a chartered accountant and PhD in Economics.
© ITAG Business Solutions Ltd., 2010 © 2010 Sughrue Mion PLLC, All Rights Reserved.
Patent PortfolioView of Patents
Shift view from one of a patent as a legal instrument to that of a financial asset and weapon.
In a Knowledge EconomyIntellectual assets rather than physical assets have become important to corporate wealth and competitive advantage. Patent portfolio is a strategic and financial asset of a company
Patent PortfolioIn the last 20-30 years the source of value has shifted from tangible to intangible assets.
Source – Juergen Daum, New Economy Analyst Report, July 2001.
Patent vs. Trade Secret
OR
• Trade secret protection may be preferable for those inventions which the competitor cannot reverse engineer.
• While the patent system forces one to disclose the details of the invention, a trade secret enables one to keep the details of an invention a secret. – However, as the name suggests, a trade secret does not confer the right to
exclude.
Patent PortfolioPatents Enable:
Category-Leading Products
Enhanced Market Share
Higher Profit Margins
Patent Portfolio: A Sword & A Shield
A Sword• generate licensing revenue• block/exclude a competitor
from a particular market space• force an acquisition
A Shield• ensures freedom to operate• provides “trading chips” to
be cross-licensed or leveraged in response to any aggressive action
Patent Strategy: 4 Steps
I. Business & Patent Portfolio Goals II. Evaluation of Company Assets III. Procurement Phase IV. Procurement
Patent Strategy: I. Business and Patent Portfolio Goals
–Patent strategy identifies key business goals of company - needs management support–Identify business, technology, and product goals for company–Identify competitors and key players–Anticipate technology shifts, and direction–Determine focus of patent portfolio - offensive, defensive, marketing
» Resources and budgeting
Patent Strategy: I. Business and Patent Portfolio Goals -
Interplay Between IP, R&D, and Business Goals
• Alignment between big 3 strategies is bi-directional - proactive and reactive• Led by Business goals and plan• R&D strategy and IP strategy follow from the business
plan • R&D efforts, however, provide information for developing
(input into) the business plan• IP strategy provides input into the business plan and also
can influence the R&D efforts
Patent Strategy: I. Business and Patent Portfolio Goals -
Competitor’s Portfolio
Company Patents (2000-2005)
Patents (2006-present)
Patent Apps (2000-2004)
Patent Apps (2004-present)
Halliburton 841 706 1568 1153
Schlumberger 626 495 1590 1587
Baker Hughes 589 438 1178 1589
Exxon Mobil 51 21 1472 492
Shell Oil Co. 252 233 994 263
Chevron 15 20 681 762
Above table shows a trend where service providers are generally filing more patent applications and obtaining more patents than the oil companies
This shift provides the service providers with a greater bargaining position against the oil companies.
Patent Strategy: II. Evaluate Company’s Intellectual Assets
–Assets = products, services, processes, technologies–Determine anticipated life span of assets–Identify markets for assets–Identify products incorporating each asset–Identify those assets best suited for patent protection–Determine budget for patent strategy and procurement
Patent Strategy: III. Procurement: Types of Patents
•Cornerstone patents - blocking patents - keep competitors from entering a market covered by the patent•Fence Patents - Improvements of a competitor’s core patents - provides an incentive to cross-license•Design-around patents - Avoids infringement
Patent Strategy: III. Procurement: Filing Strategies
Clustering –File as many applications as possible for all possible features of a product
Blocking –designed to cover products/processes that the company does not intend to practice but would be viable alternative to competitors
» file application for both process A and process B, but company only intends to practice process A, in order to leave competitors with fewer alternatives to compete
Bracketing–File applications in view of competitors issued patents to fence in competitors future mobility
»Competitor Develops Technology - e.g. light filament. You develop glass bulb, socket, and everything else.
Patent Strategy: IV. Deployment
–Licensing–Asserting rights (litigation)–Continual evaluation of assets–Constant evaluation of competitor’s portfolio
Public
Corporate
Investors
IP Speciali
st
Education
Institutes
Research lab
Tradeshows
IP Auction
Newspapers, journals and magazines
Dedicated Database
IP Seminars/ conference / workshops
Newsletters
Advertisements
Press Release
Marketing Research
Approaching the Target population (Segment Oriented)
IP Commercialization
© ITAG Business Solutions Ltd., 2010 © 2010 Sughrue Mion PLLC, All Rights Reserved.
Identify Segments
Research
Invention Disclosure
New Idea / Invention
Patents
Commercialization
Self UseLicense
Lump sum Sale
ExclusiveNon Exclusive
Proof Of Concept
Commercial Viability
Technology Transfer- Different Stages
Technology Transfer
© ITAG Business Solutions Ltd., 2010 © 2010 Sughrue Mion PLLC, All Rights Reserved.
Technology Transfer-Technology Transfer is the process of sharing of knowledge, technologies, and facilities among different organizations to ensure scientific development as well as facilitate the process of channelizing research into the commercial environment.
Licensing
Sale
Foreign direct investment
Turnkey contracts
Acquisition of equipment
Different modes of technology transfer
Tech
nolo
gy T
rans
fer
Skilled Manpower
Technical Know-how
Organizational Innovations
Equipment & Materials
Components of
Technology Transfer
© ITAG Business Solutions Ltd., 2010 © 2010 Sughrue Mion PLLC, All Rights Reserved.
Basic license alternatives
Exclusive license
Sole license
Non-exclusive license
Know-how license
IP Licensing
Diff
ere
nt
Typ
es
of
Lice
nse
sSoftware license
Franchise
Other Variations of the Basic License Alternatives
Cross license
When a patent is granted to a patentee, he not only gets the right to prevent others from exploiting the invention covered by the patent but also gets the power to grant others a right to exploit the invention.
An agreement in which such a right is granted is called a patent license agreement.
The patentee is called the licensor, and the party to whom the license is granted is called the licensee.
© ITAG Business Solutions Ltd., 2010 © 2010 Sughrue Mion PLLC, All Rights Reserved.
IP valuation is the key element of new comprehensive business management systems including the identification, in a previous step, and IPR exploitation
IP valuation
Valuation Approaches Definition Common Uses Challenges
CostCost of replacement or reproduction
Insurance claims & disputes
Cost is a poor estimate of value
MarketValue of comparable deals
Property value & stock market
Finding close comparables and adjustment methods
Income
Present value of future cash flows (can include option methods)
Business valuation & academic circles
Certainty surrounding cash flow levels, timing, and risk-time discounting
© ITAG Business Solutions Ltd., 2010 © 2010 Sughrue Mion PLLC, All Rights Reserved.
Variables which influence the Valuation
Sale of product & Product’s Maturity
Profitability Margin
Competition & competitor sale and profitability
Types of goods
Loyalty of customer
Customer profile
Importance of product in the consumer’s life criteria’s: emotional, health impact, social standing, value addition
© ITAG Business Solutions Ltd., 2010 © 2010 Sughrue Mion PLLC, All Rights Reserved.
Geographical domain
Marketing network
Brand reminders through advertisement
Assignment
Value addition to licenser/ Assigner
Sale growth prospective
Product awareness in the geographic domain of assigner
Time period of license and its terms & Conditions
Discount Rate
Purposes and uses of IP/intangible asset valuations
Accounting for your assets
Calculating share values
Fund raising.
Fair Joint Ventures
Preparation of annual account
Commercial due diligence
Prospectus preparation
Forensic accounting.
Tax Generally
IP Investment Holding Company
Strategic Planning
Financial Reporting
Sale Transaction Support
Licensing
Strategic Alliances
Equity Raising
Collateral-based Financing
Infringement Damages
Transfer Pricing
Other tax issues
© ITAG Business Solutions Ltd., 2010 © 2010 Sughrue Mion PLLC, All Rights Reserved.
An IP Audit is defined as a systematic review of the IP assets owned, used or acquired by a business.
The intellectual property audit is an assessment of the legal status and value of an organization’s intellectual property
Types Of IP Audit
Gives an overview of the IP Asset
The valuation of the IP Asset
A specific purpose to address, such as due diligence or to enforce or defend legal action.
A qualified IP practitioner is required to assist you (eg. a recognized accountant, lawyer or patent attorney).
IP Audit
Provisional Audit / Preliminary
Audit
Comprehensive Audit
© ITAG Business Solutions Ltd., 2010 © 2010 Sughrue Mion PLLC, All Rights Reserved.
1.Chalk Out Audit PlanScope of the audit and the documents to be reviewed
Schedule for the audit
Audit team responsibilities
Enlist personnel to be interviewed
Employment agreements and policies
Information Gathering:
Nature of assets (product brochures, release notes, etc.)
Issues peculiar to the law of a particular state
Background about the technology at issue
Detailed checklist
IP Audit Procedure
2. Gather documents
Access to company information
Access to computer media
Questionnaires and interviews
Search of databases (USPTO, UCC filings, etc)
Search inventive employees to be sure all patents assigned
© ITAG Business Solutions Ltd., 2010 © 2010 Sughrue Mion PLLC, All Rights Reserved.
3. Analyze the Information
IP processes and systems audited can be compared against best disclosed in the literature and from other available resources
Quality of all IP assets analyzed
Possibly infringement issues analyzed
review the agreements to assess the risks and benefits in them.
4. Write the Audit Report
The results of IP audit should be mentioned in a report.
The report should include the objective of the audit, the audit plan and how it was executed and the results obtained from the analysis.
It should describe and evaluate IP defects uncovered in the audit, propose and describe specific remedial action that needs to be taken or that has been taken.
IP Audit Procedure contd….
Thank
You© ITAG Business Solutions Ltd., 2010 © 2010 Sughrue Mion PLLC, All Rights Reserved.