The Role of IP and Patents in Enhancing the
Competitiveness of Business
9th June 2010
Julian Nolan – jnolan@patrious.com
Julian Nolan
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– What is IP?
• And who cares about it
• IP and business – Scipher case study
– The Business of patents
• And their value
• Using patents to build a business – BTG case study
– Creating value through patent licensing
• Strategies and tactics
• Licensing to 80% of the PC market – Sensaura case study
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Julian Nolan – jnolan@patrious.com
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• Intellectual property is not just about patents.
• It's about brand names, products, services, music, software, paintings and many other creations of the mind.
Patents
Other IP
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Julian Nolan – jnolan@patrious.com
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Trade Marks
Patents
Designs
Copyright source identifier logo’s, names, smells, shapes, packaging etc.
technology protector inventions, products, processes etc.
protection to product shape appearance: toys, clothes, household items etc.
protection of creativity artistic, aesthetic works, photography, books, sculptures, computer code etc.
Julian Nolan – jnolan@patrious.com
© 2001 Lall & Sethi Advocates
5 9th June 2010

‘My focus is IP, I’m convinced that the management of IP is how value added is going to be created at Xerox. And not only here. Increasingly companies that are good at IP will win. The ones that aren’t will lose.’
….. Richard Thoman - CEO Xerox
‘We are reducing our dependence on the businesses based on heavy assets and fixed capital and growing fast in new and flexible businesses based on intellectual capital. …. Only by cultivating outstanding ideas …… and protecting them as a source of value creation can we assure that ABB will continue to be successful.’
….. Markus Bayegen - Senior Corporate Officer, Group R&D and Technology ABB
‘Intellectual Property is the oil of the 21st Century. Look at the richest men a hundred years ago, they all made their money extracting natural resources or moving them around. All today’s richest men make their money out of Intellectual
Property.’
…. Mark Getty - Founder of Getty Images
9th June 2010
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USPTO patent applications
9th June 2010
Source OECD: Compendium of patent statistics 2007
About USD500B of transactions per year !
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Increase competiveness...
New revenue...
New products & services...
Limited monopoly...
Brand creation/protection...
differentiation
Mutual advantage...
Attack / defence...
Mergers & acquisitions...
Lower costs...
9th June 2010 market/competitor intelligence licensing/sale of your technology acquiring technology patents trade marks copyright designs collective marks cross-licensing litigation evaluation, due diligence core / non-core IP
Source: Stephen Potter
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9th June 2010
AOC
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Source material in this section contributed by Dr. Stephen
Potter.
Julian Nolan – jnolan@patrious.com

 1920 - 1979
 “the world’s first multimedia company”
 Innovations: electronic television, CT scanning
 Production of CT scanners drives company to the wall
 1979 - 1990’s
 Thorn - EMI conglomerate - >100 companies
 licensing of scanner technology delivers >$150m
 Conglomerates become unfashionable
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 Major innovations




Nobel Prize - Computerised Tomography stereo recording the “long tailed pair” first public television system
 first airborne radar systems
 “corporate laboratory” ------- “business levy”

 formed in1924 - break the Westinghouse patents true corporate laboratory: “money over the wall”
+ levy on businesses
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 1993
 Focus the business: sell >120 companies
 EMI - pure music company
 Corporate laboratory: ~ 300 engineers, ~ 800 patents
= staff + IP
£10m - ~£4.8/4.8m corporate/levy, ~£0.4 3rd party
 Strategy: put the engineers on the street !
 Unless corporate laboratory could be self funded.
 Shut down the lab or spin it off.
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Julian Nolan – jnolan@patrious.com
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 1994


 agreed budget: £1m loss
T/O fell to £6,5m
30% loss of people

 1995 form 10 potential groups using indigenous people
 agreed budget: £650K loss


5 groups left externally funded work rose to 95% of T/O
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Julian Nolan – jnolan@patrious.com
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 1996
• Scipher plc formed from CRL + other unwanted EMI businesses
• November 1996 Management Buy Out for ~$5M
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Strategic
Objectives
Acquire IP assets
Business
Process
IP generation
CRL
Corporate partners
Business opportunities
Commercialise
IP assets
Competencies
Licensing
-
-
Patent licensing
Technology transfer
Technology
-
Electronics, optics, magnetics
Business creation
-
spin-out business
JV
Value creation
Asset creation
Technology development & licensing
Release
IP asset value
Value extraction
Licensing revenue
R&D revenue
Product sales
Equity holding
Capital value
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 2000
• Initial Public Offering on the London Stock Exchange for
~ $1B (peak) !
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- novelty: product, method or process
- inventive step: not obvious to those skilled in the art
- industrial application: reduction to practice
----------------------------
- must not have been disclosed to the public (except under US patent law)
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Use of ‘business method’ patents by Internet companies
–
–
–
–
Amazon vs Barnes&Noble - one click process
-
Obtained court injunction against Barnes & Noble
Priceline vs Expedia - reverse auctioning
-
-
Seeking patent infringement judgement
Marketel issued lawsuit against WalkerDigital for breaching trade secrets lBM & Dell - integrated order, build & ship process
-
-
$16bn cross licensing deal
IBM gains free access Dell’s 42 business process patents - Dell gains free licence to IBM’s PC technologies on which competitors pay royalties
Wal-Mart vs Amazon - business process s/w (no patents)
-
Out of court settlement with no financial compensation - Amazon agreed not to use poached staff to work in similar area
“you can get much further with a kind word and a gun than with a kind word alone”
……… Al Capone
9th June 2010
Julian Nolan – jnolan@patrious.com
Source: Stephen Potter
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High Value Patents
Defensive Patents Overhead or Non-strategic
Patents
0% 5%
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50%
Portfolio
Julian Nolan – jnolan@patrious.com
Source: Stephen Potter
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Consulting or Technology development spin-outs
Know-how based
Technology - transfer
High-tech product based spin-out opportunities
IPR based
Technology - transfer
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Non-technology based spin-outs
None
IPR Licensing
Alternative solution
Improvement
Patents
Technology/
Product concepts
Formal Intellectual Assets
Julian Nolan – jnolan@patrious.com
Master
Patents
But mostly ...
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• GIRARD PERREGAUX
– Invented
• But
– Did not exploit
• Swiss watchmaking
– Employed
• 90,000 in 1970
• 30,000 in 1984
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Julian Nolan – jnolan@patrious.com
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• BTG
– Manufacturer of ceramic coated blades for cutting paper/board
• Reduces down time
• Big impact on profitability
– High selling price of blade substantiated
• Patented
– Used to initially protect margins ...
But what happens when the patents expire?
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• Before the patent expired, BTG
– Developed relationships with customers
– Put in place class leading logistics
– Onward developed the technology and filed new patents
• Result
– Small decline in revenues but largely business as usual
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Julian Nolan – jnolan@patrious.com

Licensing is a direct way of creating value from IP
“A License is a written authority granted by the owner of a patent or other intellectual property
(licensor) to another party (licensee) empowering the latter to make or use the article for a particular application.”
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Julian Nolan – jnolan@patrious.com

…..and can limit the licensee’s use of the licensed material by:
•
Market
•
Geography
•
Time
•
Specific Application
•
Grant of Rights Usage
•
Make, have made, sell, market, sublicense, etc.
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Julian Nolan – jnolan@patrious.com
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• Non-core or mature technology or patents
• Core technology or patents
• Struggling businesses or products (new or mature)
• Non-strategic businesses or products (new or mature)
• Services
• Technology that can be applied to other markets
• Trademarks
• Patent Enforcement
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• Sensaura Ltd. – London, UK
– 3D audio technology
• Virtualises 3D audio from only two loudspeakers
• Patents, software, documentation
• Licensed to >80% of PC market + CE manufacturers
– Embedded in audio chipset
• Patents used to sustain competitive position
But, why license instead of selling hardware ?
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Julian Nolan – jnolan@patrious.com
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– Resources
• Technology development / licensing
Vs.
• Much broader investment
– Marketing
• Value chain positioning
• Ability to reach customers / sales cycle time
• Industry dynamics
– Result
• Licensing strategy resulted in successful business faster and at lower risk than if company had moved up the value chain.
• Acquisition by Creative Labs .
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• 80:20 flip between tangible and intangible assets
• Intellectual Property key for success in many industry sectors
• Patents are an asset (like any other)
– Use them to make money
– License-in to help grow business
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Julian Nolan – jnolan@patrious.com
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Julian Nolan
Patrious
Avenue des Alpes, 4
Pully
Switzerland
E-mail : jnolan@patrious.com
BBC Column : http://news.bbc.co.uk/2/hi/business/8551808.stm
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