Category: Uncategorized

IP Dealmakers: The 3 Key Take-aways for IP Licensing Deals

The only constant is change.

Spending 2 days with the IP and Investment leaders in NYC this week at the IP Dealmakers Forum, highlighted for me 3 key take-aways of IP licensing in today’s business environment: Flexibility, Opportunity, Success.

#1) Flexibility
A consistent theme throughout the time was the discussion of licensing flexibility as a top priority.  With the investment firms becoming more sophisticated in reviewing deals, combined with the lowering volume of both quality deal flow and the financial structure, dealmakers are needing to be more flexible in  how the opportunity is structured for financial benefits.  In short, there may be less cash up front for now but for the quality patents it still gives the opportunity for the same revenue at the back-end.

Flexibility is driven in part by the legal climate.  A short, yet pointed discussion, happened on how recent patent law changes have impacted how deals are being executed.  The discussion around law changes highlighted the level of flexibility in the room, with most speakers simply noting the recent law changes and then moving swiftly to how their processes and procedures have changed to adapt to the new rules. It is this swift acceptance of the legal changes from a business view that breaks the top dealmakers apart from the rest.

 

 

 

#2) Opportunities In both data and beautiful graphs (thank you David Morland of 3LP Consulting), we saw that not only is there new opportunities but a growing market cap that they support. New entrants into the ecosystem of publicly traded IP companies show at least a $1.4B increase in market cap recently, a marker of continued volume on the private side. While the move to lower deal cash is happening, the cross-border volume is growing.

Overall there was a consensus that that it is a buyers market, and for those IP Investment firms with access to capital, it is a good time to invest (and to do so without pure reliance on Excel spreadsheets). And the investment is not limited to the traditional geographies or sectors yet a large point of discussion did seem to always circulate back to topics like Automotive, Medical, Agriculture, Industrial, and other non-software related sectors.

 

One challenge brought up on the opportunity side is for investors to have more educated IP based analysis to interpret the information, and translate it into business impacts.

#3) Success Like any business, the stars will emerge to be successful, but is is the A-player teams that will be leading the charge.

 

There is no denying that as deals are forged, the licensing path of the successful is supported by litigation at some point. Certain “fruit name companies in California” seem to be leading the charge of having a standard process of litigate over license, one patent at a time. However for those with the capital and team to support the endeavour, there will be success in the long term.

 

Wrapup: With the constant of industry change, the entities having breakthrough licensing programs are the result of flexibility and opportunity identification: The dealmakers in the IP area are several steps ahead of the reset of the VC, Instustional Investors, and Blue Chip markets. The IP marketplace is growing, and it is up to those that capitalize on the market and legal trends to land in the ‘success’ category.

 

Post-script: If you addend the event, you will see I didn’t cover the keynote by Jay Walker. The only thing I didn’t like about the keynote is that it was so good, I didn’t even have time to take notes on it, and I wasn’t alone!

 

IPBC wrapup – on Talent and Structure

After 3 days of discussing business + IP at the IP Business Congress in Amsterdam, many themes and talking points emerged, which Joff highlighted in his wrap-up summary post on the IAM website.

However there is always the question “How do I translate something into a digestible point that ventures can consider and implement?” For startups and smaller ventures there is always a starting point of IP in their business, and there was at least two were foundational points agreed on by multiple CIPO’s that came out that can be considered as key by all stages of ventures: IP talent & IP organizational structure.

On the IP Talent I would summarize the key point as follows: The IP team as a pure talent base for filing patents will add little overall value to the business. Several of the panelists working for Philips as well as Daimler repeated the point that building a business focused patent portfolio requires the team to get out of their offices to understand the business and be able to apply their IP skills into protecting the marketplace, not just the inventor products. With this type of approach the IP team can have a more realistic 5 year view compared to marketing with landscaping and other IP strategic tools.

But simply having a business savvy IP team is not enough – there has to be an organizational structure that allows for execution of a defined IP strategy. Brian Hinman, CIPO for Philips, lobbied that the CIPO should report to the CEO or the Chief Strategy Officer, as the IP decisions are truly a business decision that needs made. Another leading CIPO noted that even though litigation is part of his role, business licensing and strategy discussions take a large amount of time during the week as well, so a pure reporting structure within legal does not make sense.

 

 

 

Overall to leverage the foundations of IP talent & IP organizational structure, they really must be jointly considered. Many smaller ventures & startups can take a lesson in this – it is much simpler to setup the structure & IP frameworks as part of the business discussions early on than it is to make changes once the venture is large. Philips, one of the benchmarks for having a visionary IP structure, was hinted at when the CEO, Frans van Houten, spoke about their IP team “act as truly trusted, strategic counselors.”  and that this aproach has given them success.

I will simplify it for ventures by saying combine business, IP, and R&D thinking together. The change may not happen overnight, as the world class IP structure that Ruud Peters built took 15+ years of growing and tweaking, but the foundational pieces of at least talent and operational reporting will reap benefits as a venture grows over time.

Inclusion into the IAM Strategy 300 list for 2014

IAM Strategy 300This year I was nominated and then selected to appear in the 2014 edition of the IAM Strategy 300, which was published this week.  The annual guide is published by Intellectual Asset Magazine, a publication of the London based IP Media Group. According to Joff Wild, IAM editor “The IAM Strategy 300 identifies individuals who offer top-flight services related to the development and implementation of strategies which enable IP owners to maximize the value of their rights portfolio.”

I am particularly thankful to my peers for nominating me for inclusion in this years list.  There are some IP superstars and industry recognized names on the list, so I am quite honored to be included.  Recognition like this, after 15+ years of evangelizing and leading the business side of IP, is appreciated after all the work I have accomplished to date.  From discussions with others I have surmised that only a small number of new people were added to the list in 2014, only 5 new individuals added from Canada, being listed along side the “IP A-players” of my industry is actually quite the professional complement.

When I look through the list in 2014, I see a common thread: Individuals who are leaders in their field, taking the holistic approach to management and value creation, focusing on how both must be aligned to the overall business strategy.  They each view IP from the business view, and not just a legal consideration or “patent count to acquire”.

Since founding Northworks IP I receive at least 2 or 3 queries per year about being on a “top 100” list, only to be accompanied by an invoice. The IAM listing is quite different and based solely on the individuals skills and accomplishments, with those on the listing not paying to be included  – All had to be nominated by at least 3 peers and then all those nominated still went through a review process with IAM researchers, with the editor noting that many nominees did not make it through the final selection process.

My congratulations to all those that are on the list in 2014.

About the IAM Strategists 300: Over the course of five months, IAM researchers spoke to a wide range of leading IP professionals in order to identify people considered to be world-class IP strategists: men and women whose business is the creation, development and deployment of strategies that enable IP rights owners to gain maximum value from their portfolios. Only those individuals considered and nominated by their peers to be outstanding IP strategists are listed in the IAM Strategy 300. The IAM Strategy 300 is available in printed format and online at www.iam-magazine.com/strategy300.

An IP Manager’s Influence on Positive Cash Flow

I had an interesting discussion today with a colleague about looking at high growth companies, and we both approached the question with two distinctly different perspectives on what makes a valuable company from an acquisition point of view.  Fundamentally our discussion still focused around a question that is also relevant to the new product view for any venture – when is the real value and ROI generated in regards to cash flow?

With my IP Strategy background I am naturally drawn to the IP and Patent aspect of a venture, so naturally I extended this question to how can an IP Manager or leader in an organization ensure an IP portfolio support a positive cash flow position.

One view was a ‘high velocity cash’ position, where the value of an acquisition is fully linked to the amount of ROI it immediately generates in positive cash flow, which may or may not include the influence of IP. If IP existed cash flow would be via licensing, royalty rates, increased pricing due to brand, etc. The alternate view was ‘high growth IP’ backed position, where the value of the acquisition was based on the value of the tangibles, as well as the future market protection the intangibles covers – including the long tail opportunity seen in future licensing both inside and outside of the specific venture’s industry.  Removing the actual ROI seen, the main differentiator was the time of positive cash flow with the ‘high velocity position’ heavily front loaded in comparison.

I don’t necessarily think either perspective is incorrect, as the value perceived is different depending on which criteria you use for acquisition.  However the discussion does raise a broader point for Startups, SME’s and even multi-nationals:  A venture’s business model of IP has to incorporate multiple views and timelines to be marked as successful, as having a singular model that moves from one binary state to the next will give the appearance to fluctuate in value strictly based on who is looking at it. There needs to be a more balanced perspective when looking at the real value IP brings to a business.

IP programs that align with the business should have many stakeholders, for example, Inventors, CEO’s, Product & Market Managers, Finance, etc., and each with their own measure of success of the actual impact of IP in the venture.  Again, it is not that each view is wrong but rather HOW each views it through the priorities they have that an IP Manager or leader needs to take into account.

In practice, successfully implemented IP programs are able to balance the functional needs by providing a strategy where value of IP in a business can be seen from each perspective.  Without this, there is now way to talk about IP in the boardroom, either at the strategic or execution side of a discussion.

Take, for example, an average patent portfolio of a venture: Generally there will be a long tail distribution of the value, where a few patents are worth the majority of the portfolio as a high value, and the remaining abundance of patents may have been provided to protect a product offering but realistically have low or no value for generating cash flow.  The ‘high velocity cash’ perspectives (perhaps as a Finance or Operations view) tend to view the value of a portfolio of what can be monetized or leveraged in the moment to influence the immediate cash position. Product Mangers or Inventors tend to view the value of “IP success” as what breadth scope is protects products, and not always with the specific concern of immediate cash returns from IP.  CEO’s and those in the boardroom focus on both short and long term views, placing value on the venture or product if the current quarter as well as several into the future.

To make it more complex, as time moves on both portfolio scope and market needs will independently shift and unless the portfolio grows to take this into account the relevancy and ROI of the portfolio will be impacted. Granted, given the length of patent terms the shift may be slow, but for fast moving consumer markets and areas where disruptive innovation is moving the direction of an industry it will happen.

With that in mind, and coming back to the original question: What perspective is the best when looking at an acquisition, high-velocity cash or high growth IP potential? And, taking this to the SME and Startup venture level, what perspective is best when looking at developing a new product, because after all a venture with a new product idea is essentially “acquiring” the product through its own development efforts.  Should an investor or CEO focus on the high-velocity cash opportunity or the long game of an IP based option?

The answer in my view is either, or the combination of both that that strikes the right balance for the stakeholders in the venture. In other words IP Mangers need to be able to create an IP portfolio that has portions which are able to be monetized in the short term – the “high-velocity” cash position – as well as build a portfolio that can be used in longer term protection strategies – the “high growth” IP backed position. It sounds incredibly simple but in practice the actual balance of creating a portfolio mix that takes into account items such as breadth of coverage vs. depth of coverage, timeline to grant vs. market trends for product releases/end-of-life, etc. is incredibly complex and may take several years to build.  To make matters more difficult, unless an IP Manager or Chief IP Officer can successfully talk to this at all levels of the organization to generate support which will help create such a balanced portfolio- from Inventors to the CEO in a boardroom setting – there will always be other strategic or operational items that dominate in the discussion of “What makes this venture / product valuable?”.

A Patent Invention Disclosure Process for Patent Managers

I came across a patent this week covering Invention Disclosures, entitled “Methods and systems for managing invention disclosures“.  From a Patent Manager point of view, it is a good reminder that the patent office itself is a valuable resource for getting background on almost any topic, even the patent process itself.

For smaller companies, who are in their infancy in building their own processes, it can give unique insight into the structure and procedures the large entities and multinationals have to move ideas from engineers into patents. Generally speaking  my experience in both SME’s and Multinationals, and academic research, the following seems to hold true: Firm size and culture are factors the average type and quality of patent application filed, as seen in patent breadth and depth of coverage.  Small firms tend to file wider and more all encompassing application whereas large firms that have a robust process tend to file more narrow and technology specific applications.

Such a robust process always produces one key question:
Does the process encourage Patent Quantity, or Patent Quality?

Looking at the cited patent above and the process described it is fairly easy to see why – potential inventors are queried on a large range of topics related to the idea, from economic to competitive market value, which one can presume gives some weight to the final decision. In large firms by the time this market data is evident the project is typically far enough along that technical work has been done to scope the technology to a specific market segment and technology value. Simply mirroring the project gives patents that are product specific, which will only enable a strict area of technical protection which is not the same as full market protection. The tipping point between market and product protection is usually made by a defined Patent Strategy.

I give a brief outline here as to some of the building blocks that will generate a strong Patent Strategy. In the next few posts I’ll dig into the 3 high level points that can drive a successful business strategy that encompasses IP.

  • Patent Quality = Alignment with Business + Legally Enforceable +Economic Value
  • Patent Culture: Creation of a culture-driven IP strategy.
  • IP Vision: First mover advantage of IP where the future market and technology intersect.