Third WIPO-INSME International Training Program- Financing .ppt

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1、1,Third WIPO-INSME International Training Program: Financing your business with Intellectual Property Major trends in IP monetization Geneva, December 1st, 2010 Sylvain Roy, High Spin Licensing,2,Contents: 5 themes highlighting world trends in IP licensing and IP monetization,3,Theme #1: Growing vol

2、ume of activity (and lots of place for further growth),IP is considered as property as it should be rather than monopoly IP is becoming routinely traded, and IP trade is increasing in volume, worldwide Transnational companies spread knowledge and are responsible for the bulk of licensing activity Co

3、mpanies are no longer using IP solely as a defensive tool, and see IP monetization as an attractive value added activity that can increase the ROI for R&D and market development which have already been spent for existing products,4,Sources: EPO,Why business loves patents 1/2,#1,Provisional protectio

4、n of an innovation (pending appl) Building monopoly position; blocking other from entering a market Assembling portfolio of rights to create financial strength (and improving balance sheet) Getting a seat at the table for standards setting Creating marketing messages and becoming more visible in the

5、 market,5,Sources: EPO,Why business loves patents 2/2,#1,Generating license income Building a base for infringement claims (“troll” model) Preventing lawsuits Measuring the performance of the company or individuals Communicating innovativeness to investors Avoiding the feared, but unknown, consequen

6、ce of not patenting,6,Sources: Ernst The Economist,Licensing should further grow from US$110 billion (2000) to US$500 billion (2015) (including copyright and trademark),The IP licensing market has exploded in the last 20 years worldwide,#1,7,The technology licensing market is a fraction of the large

7、r IP licensing market,#1,8,Growing volume of patents, but relatively few patents are being monetized,10,000 new patents are issued every week (world) Only a fraction of patents and disclosures end up having any economic value; it is generally agreed that only 5-10% of issued patents have a significa

8、nt commercial value Patent rights generally have value if :Revenues + Volume + Infringement,#1,Sources: OECD; Milken Institute,(competition proving the vitality of the market),9,Growing volume of patents, but relatively few patents are being monetized,#1,Less than 3% of patents generate royalty inco

9、me Less than 50% of licensed patents generate income average revenue per license of 45,000 (Switzerland, 2000),10,Sources: Harvard Business Review; McKinsey & Co., Nov. 2002 survey,Substantial growth can result from better IP management and licensing practice,Intellectual Property is still a signifi

10、cantly untapped resource Innovating companies can increase their operating income by 5-10% from the sale or license of patents and proprietary technologies Few companies earn more than 0,5% of their revenue from licensing,#1,11,Theme #2: Growing complexity and specialization,Still, bottleneck issues

11、 limit monetization efficiency Increased competitive research, development costs and compliance costs encourage IP trade A growing secondary market for IP increases overall market efficiency More players are becoming able to identify and grab under-valued IP IP issues and strategies are becoming lea

12、ding indicators of company performance,12,Globalization and consolidation of R&D,R their share of R&D spending is increasing dramatically Some industrial companies will transform partially or completely into R&D companies, taking advantage of relative growing value of IP,#2,13,Bottleneck issues affe

13、cting IP monetization,IP protection costs (not all inventions worth protecting) Un-harmonization of patent rules (US first to invent vs. EU first to file patent systems) (biotech patents remain un-harmonized across EU on gene sequences, stem cells) (claims of issued patents can vary from one country

14、 to another) but there is a drive toward Global consistency Patent complexity and patent claims incertitude (broad upstream pioneer patents) (large number of claims are granted twice) (claims of issued patents can vary from one country to another) Under-reported royalties (affecting up to 88% of dea

15、ls; nearly 50% of licenses have under-reported royalties in excess of 25%) Lack of valuation guidelines,#2,Sources: Invotek,14,#2,New players and innovative business models,Secondary, speculative markets : IP banks buying patents and reselling at profit IP securitization (sale of IP for a pricing ba

16、sed on future royalty income; e.g. David Bowies portfolio) Dedicated commercialization platforms: IP showcases, on-line listings IP auctions (Ocean Tomo, eBay) Enforcement speculative market: “IP trolls” (buys patents and seek royalties) Private-equity funding research dedicated to generate and expl

17、oit IP (Intellectual Ventures),15,IP value now provides a benchmark to evaluate companies performance,#2,Equity indexes used to cover portfolios of large industrial and technology companies: Jones Industrial Average (1896) Standard & Poors 500 (1957) NASDAQ Composite Index (1971),Ocean Tomo 300 10 y

18、ear performance tracking data,New index: Ocean Tomo 300 Patent Index (2006) covers a portfolio of 300 companies that own the most valuable patents relative to their book value,16,Theme #3: Interdependence,Trends today is away from independence and toward a vital need for the talent of others Conside

19、ring increasing costs (for research and for non-inventive activities), companies dont rely on their own capability to fill the product pipeline Competitors engage in overlapping research and product development, and license each others technology Revolutionary IP-driven deals are now done across ind

20、ustries,17,#3,Privileged relationship and legal vehicles,Licensing (grants of rights) Options (access to future technology) Technology transfer (assignment of ownership) Donation and divestiture (with or without tax incentive) Hybrid agreements (often complex and sophisticated): option/license, join

21、t-venturing, cross-licensing, corporate partnering, co-promotion or co-marketing arrangements, strategic alliances and consortium licensing,18,#3,Strategic alliances among competitors,Companies are learning and accelerating innovation pace through acquisition and partnering Partnering topics include

22、s: Joint R emphasis now on shared manufacturing rights, shared promotion rights, shared profits from commercialization),19,Theme #4: Increasing strategic value,IP has generally become a corporate priority and IP strategies are more aligned to core businesses IP licensing justifies distinct, and ofte

23、n performing, business units Rapid evolution of best practices, regarding notably contractual clauses and “win/win” negotiations Increased selectivity, notably in the willingness to trade non-core patents Increased willingness to enforce patents; litigation determines ultimate disposition conditions

24、,20,Now emphasis on individual patent value instead of “batch” or portfolio valuation Main factors influencing individual patent value: Legal factors: scope of the technical disclosure (description, drawings); interpretation of claims (width, reach and clarity) Market factors: correlation between th

25、e patent and products and market needs, existence of transaction on comparable patents and technologies Financial factors: contributing value of the patents to profit margin, market share or reduction of manufacturing costs Again, no value without Revenues + Volume + Infringement,Higher value of IP

26、contributes to selectivity,#4,21,There are 100+ factors influencing pricing of licensing deals and royalty payments, among which: Stage of development of the technology Access to ongoing R&D via grantbacks and grantforwards Structure and spread of payments Warranties, indemnification Exclusivity, te

27、rritories, etc There is no such thing as average industry royalty rates! Royalty is the last element to be covered during negotiations,Several non-IP factors can influence the value of a licensing deal,#4,22,#4,Examples of IP licensing successes (Chemistry industry),Eastman Chemical Co.: in 1999-200

28、2, closed 20 license deals worth $50m plus $100m in NPV Bayer: 350 business units contributes to IP; offers technology packages (each contains 3-5 patents plus supporting information); each success is worth $1-10m, at a profit margin averaging 78% DuPont IP monetization results (2001): $377m in roya

29、lty income (2% of total revenues, but contributed to 23.3% of total DuPont profits!),23,#4,Examples of Corporate IP strategies (Chemistry industry),Proctor Dow has fewer technologies to offer on licensing (Dow downsized its estate from 20,000 to 10,000 patents (1992), saving $40m over 5 years in pat

30、ent-maintenance fees alone),24,MIT: has been spinning-off companies for 50 years; strong in engineering and physical sciences, #1 university in number of start-ups UC San Francisco: focus on licensing technologies that have a substantial impact U of Florida: high income relative to research expendit

31、ure, focus on developing clinical or commercial applications from basic science discoveries,#4,Examples of Academic IP strategies (U.S. Universities),25,Theme #5: National specificities, reduced international discrepancies,IP is still mostly traded among large corporations United States still ahead

32、in almost all areas of IP Europe: top-down approach to research financing, uneven access to capital Developing countries are fast growing patent filers, their industrial champions grab assets through MnA; China no1 filing country (2005 onward) Relative harmonization of IP rules, but important discre

33、pancies in enforcement,26,Examples of regional discrepancies (Biotechnology industry, 2003),#5,U.S. leads in invention disclosures, patents filed and granted, licenses executed and licensing income European universities surpass their U.S. counterparts in start-ups established United States and Europ

34、e have an equal total number of companies, but. Number of persons employed: US = 2 x EU R&D spending: US = 3 x EU Venture capital raised: US = 3-4 x EU Access to debt finance: US = 4 x EU,27,National specificities: a snapshot U.S. / Canada,#5,United States dominates research and high tech industries

35、, due in part to direct and indirect role of government in setting environment for innovation R gaps in the risk capital system for financing early-stage ventures first in terms of cost competitiveness for biomedical R&D, second highest number of biotech companies (world),28,National specificities:

36、a snapshot Europe,#5,France innovation policy characterized by layers of complexity, but made great progress in terms of government funding for research; scores 5th in R&D spending (world) highly individualistic and entrepreneurial spirit, but the country is risk averse (partly due to high tax rates

37、) high number of scientists, goal to raise R&D investment to 3 percent of GDP by 2010 pool of large innovative transnational corporations United Kingdom abundant capital: strength in public spending (and charities funded research), and by far the largest private equity and venture capital market in

38、Europe (2nd only to US) relatively fewer patents and fewer start-ups majority of university spin-offs are unsustainable (mostly in pharmaceuticals, biotech and high technology),29,National specificities: a snapshot performing small countries,#5,Switzerland high innovation, highest biotech density wo

39、rldwide, thanks to renowned universities, tax environment and banking system ranks 2nd, worldwide in active patents per residents, strong in health, pharmaceuticals, medical technology, IT, electronics and instruments Finland great emphasis on exploitation of research results Israel good start-ups i

40、ncubation up to prototype phase; innovates but added-value leaves (mostly to United States) specialized military units generated 3,000 start-ups, strong interdisciplinary technologies (mathematics, physics, computer science),30,National specificities: a snapshot CHINA,#5,China should be at the cente

41、r of any IP strategyfirst country in terms of patent application filing (ahead of JP, US, EU and PCT) since 2005 (480000+ filings!) issued Chinese patents, 2007: 245161 (original Chinese patents 153060; foreign patents 92101); 2006: 210490 2005: 173327 Chinese Technology Trade Market (TTM) enormous

42、growth in TTM, from US$ 3,75 b (1996) to 22,73 b (2006) patent based deals was US$ 1,69 b, 11% of IP based deals, 7% of total about 65% of deals involve Know How, related to outsourced technology development and technical service contracts surprisingly, transactions are mainly between domestic organ

43、isations,31,#5,Challenges lack of framework to commercialise technologies for trading (overall level of commercialisation is low, roughly 10%) inadequate IT infrastructure no established professional Chinese technology trade agents inadequate laws on technology transfer and poor enhancement leading

44、to loopholes and irregularities in the market and lack of confidence by IP owners. .,National specificities: a snapshot CHINA,Critical Success Factors for business in China Knowledge about doing business in China. The right technologies that are valuable to China. A tailored business model that is b

45、ased on long term partnership. Flexible approaches to cater for the carried needs by Chinese partners.,32,#5,Other risks and Problems know-how (trade secret) is hard to protect in China. many IP lawsuit cases involve know-how leak from former employees. different interpretation of “contract”. the go

46、vernment policy is “market in exchange for technology” so Chinese regulations tend to protect licensees. post-contract risks: contract renegotiation, “clever” accounting and contract interpretation, foreign exchanges control for payments under licensing agreements.,National specificities: a snapshot

47、 CHINA,33,CHINA : IPR situation,#5,Negative aspects general lack of awareness of and respect of IPR rapid improvements to laws but enforcement is weak poor quality and potential corruption of local judiciary high cost and lengthy legal process for IP cases risk assessment is difficult. Positive aspe

48、cts increasing press and media coverage for IPR protection gradual knowledge base improvement about IPR no longer just a “foreigners problem” business secrets are protected under Chinese regulations establishment of IP special courts and training of judges.,34,#5,Any patentability or novelty search

49、should include a search of Chinese patents SIPO CNPAT http:/ CNIPR http:/ EPPIS http:/ Searching Chinese patent databases no complete update/coverage information available relevant information may be overlooked when searching with English keywords/applicant names machine translation tools still in development stage certain functions are currently only possible via the Chinese interfaces: always combine different (free) sources use both English and Chinese interfaces whenever possible/necessary compare the results (e.g. different machine translation results).,