“Primer on Patent Pools” (and Other IP Strategy Alternatives)
Licensing Executive Society
Chemical, Energy, Environmental, Materials (CEEM)
CEEM Community Conversation
Peter Kim, Principal, Irvine Pointe Advisory, LLC
peter@irvinepointe.com
(www.irvinepointe.com)
“People say you have to have a lot of passion for
what you’re doing. And it’s totally true. And the
reason is because it’s so hard that if you don’t, any
rational person would give up. It’s really hard. And
you have to do it over a sustained period of time.”
Steve Jobs, All Thing Digital 2007
Source: allthingsd.com
4/23/2013
“A man can do nothing better than to eat and drink
and find satisfaction in his work …”
Ecclesiastes 2:24
Copyright © 2013. Irvine Pointe Advisory, LLC. All Rights Reserved.
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Boutique Intellectual Property Advisory
Publicly-Traded Semiconductor IP Licensing
Publicly-Traded Patent Aggregation/Licensing
Venture-Backed Patent Licensing Services
(clients served: Xerox, British Telecom)
Private Invention Laboratory
(invented Priceline.com patent portfolio)
Worldwide #2 PCT Filer
(Co-Marketing Relationship, ask for details)
4/23/2013
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2
• Patent owners have many different strategies to drive adoption of
a new technology, including forming a patent pool.
• What is the objective of a patent pool, and its key benefits?
• How does it differ from a traditional patent licensing program?
• What is involved in creating a patent pool?
• How do regulators look at the key issues?
• Other IP Strategy Alternatives, including:
– creating a new patent licensing program,
– selling patents outright, and
– working with a patent monetization partner.
4/23/2013
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3
WHAT IS A PATENT POOL?
4/23/2013
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Creators of
Technology
(Patents)
Licensor 1
Licensor 2
Licensor 3
Licensor 4
Licensor 5
Licensee 4
Licensee 5
Patent Pool
Users of
Technology
(Products)
4/23/2013
Licensee 1
Licensee 2
Licensee 3
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Patent Pool
Licensor 1
Licensor 2
Traditional License
Licensor 3
Licensor 1
Licensor 2
Licensor 3
Licensee 3
Licensee 1
Licensee 2
Licensee 3
Patent Pool
Licensee 1
4/23/2013
Licensee 2
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Patent Pool
Traditional License
A
B
A+B
A
B
AxB
Licensor
Licensee
Licenses
Licensor
Licensee
Licenses
1
1
2
1
1
1
2
2
4
2
2
2
3
3
6
3
3
9
4
4
8
4
4
16
5
5
10
5
5
25
10
10
20
10
10
100
20
20
40
20
20
400
4/23/2013
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The more fragmented the
external technology
markets, the more
aggressively firms will
patent (beyond what is
otherwise predicted).*
The effects of fragmented
external rights on the
patenting behavior of
firms will be especially
pronounced among
capital-intensive firms (all
else equal).*
* Source: Rosemarie Ham Ziedonis, October 2003. Don’t Fence Me In: Fragmented Markets
for Technology and the Patent Acquisition Strategies of Firms. Michigan Business
School, Working Paper Series.
(http://deepblue.lib.umich.edu/handle/2027.42/36305).
4/23/2013
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Fragmented
• Con: easy to design-around
Concentrated • Very few patents?
Capital-Lite
4/23/2013
• Pro: less regulatory scrutiny
• Pro: greatest admin. benefit
• Pro: hard to design-around
• Con: regulatory risk
• Con: little admin. benefit
Capital-Intensive
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9
Case Study
Patent Pool
MPEG-2
(June 26, 1997)
Technology
Video and Systems coding
Administrator
9 Founders
(27 Essential Patents)*;
later expanded to 27
licensors (patent
holders)**
Columbia University
Fujitsu Limited
General Instrument Corp.
Lucent Technologies Inc.
Matsushita Electric Industrial Co., Ltd.
Mitsubishi Electric Corp.
Philips Electronics N.V.
Scientific Atlanta, Inc.
Sony Corp.
* DoJ Business Review Letter - http://www.justice.gov/atr/public/busreview/215742.htm
** MPEG-2 Patent list - http://www.mpegla.com/main/programs/m2/Documents/m2-att1.pdf
4/23/2013
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10
New Research: Patent Pool Effect
Formation of a patent pool may influence
the patenting behavior of firms (focus on
outsiders or non-pool-participants), to shift
their innovation strategy from technology
exploration to pool implementation
Source: Keyvan Vakili, Ph.D. Candidate (draft November 30, 2012, yet
unpublished, cited with permission). Competitive Effects of Collaborative
Arrangements: Impact of the MPEG-2 Pool on Outsiders’ Innovative
Performance. Rotman School of Management, University of Toronto.
4/23/2013
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11
MPEG-2: Many Licensors & Licensees
Year:
1997
Licensors:
9
Patents:
27
Licensees:
0*
1998
2011
27
226
1,000+
1,518
* Excluding original patent owners, who receive a license to all patents in pool
Source: Keyvan Vakili (draft November 30, 2012, yet unpublished, cited with permission).
Competitive Effects of Collaborative Arrangements: Impact of the MPEG-2 Pool on
Outsiders’ Innovative Performance. Rotman School of Management, University of
Toronto.
4/23/2013
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12
What is in a Patent Pool?
• Essential
• Complementary
• FRAND Obligation
4/23/2013
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13
Founding Members
(Patent Owners / Licensors)
Licensing Program: Distribute
Royalties, Enforce Infringement
Business Review Letter
from U.S. Dept. of Justice
Independent Evaluator to
Determine Essentiality
4/23/2013
Patent
Pool
Playbook
Patent Pool
Administrator
Issue Call for Patents
Related to Technology
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FRAND: Recent Regulator Scrutiny
Company
Issue
Injunction:
SEP/FRAND
Patents
Injunction:
SEP/FRAND
Patents
Joint Patent
Buying
Consortium
Injunction:
SEP/FRAND
Patents
Regulator
FTC
E.U.
DoJ
FTC
4/23/2013
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15
WHAT IS BEST WAY TO DRIVE
ADOPTION OF NEW TECHNOLOGY?
4/23/2013
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16
Model: ARM Holdings
Revenue growth since IPO spans 13 years
Consistently-High YoY Growth
Source: ARMH Annual Reports (1998-2010)
4/23/2013
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17
ARM “Playbook”
1.
2.
3.
4.
Two-Way Partnerships
Careful Balance in Roadmaps
M&A: Buy Complementary Vendor
VC: Invest in Pioneering Customer
4/23/2013
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Two-Way Partnerships
Partners
1990
1993
Present
OEM
(customer’s customer)
Fab-less
“Pull”
(customer)
“Push”
Chip-less
The concepts of “Two-Way Partnership”, “Customer’s Customer”, “Push-Pull”, and “Chip-less/Fab-less” are described in
a 2009 case study “ARM Holdings PLC: Ecosystem Advantage” from University of Cambridge, Judge Business School
4/23/2013
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Careful Balance in Roadmaps
Customer’sCustomer’s
Roadmaps
A
B
C
Customer’s
Roadmaps
D
E
F
Graphic by Irvine Pointe Advisory, LLC.
The concept of “Careful Balance in Roadmaps” is described in a 2009 case study “ARM Holdings PLC:
Ecosystem Advantage” from University of Cambridge, Judge Business School
4/23/2013
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20
Nurture New Ecosystem
Invest in a startupcustomer as outside
prototype, pioneer
new end markets, and
feedback loop on
improving product
Buy a “complementer”
(sells product or
service to same
customer base) to add
value to customers
Source: ARMH Annual Report (2010)
4/23/2013
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21
TRADITIONAL LICENSING PROGRAM
4/23/2013
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22
SELLING PATENTS
4/23/2013
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23
WORKING WITH A PARTNER
4/23/2013
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Q&A
For further information:
Peter Kim
Principal,
Irvine Pointe Advisory, LLC
peter@irvinepointe.com
www.irvinepointe.com
4/23/2013
Copyright © 2013. Irvine Pointe Advisory, LLC. All Rights Reserved.
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