European Patent Academy Seminar IS02-2006 "Patent-related IP management for innovation advisors" Swider Conference Centre, 11 October 2006 Patent Strategies and Patent Portfolio Management Dr. Mark Schulze 11 October 2006, 1
Patent Strategies - a jungle? Everybody knows so many parameters... Where is the path through the jungle??? 11 October 2006, 2
PPM - A Process Superposed Strategies: Business / R&D IP Strategy Strategic IP Goals Patent Analysis Patent Strategy Strategy Implementation Update IP Operations Own IPRs 3rd Party IPRs Invention Disclosure Risk Identification First Filing Foreign Filing Risk Assessment Portfolio Mngmt Risk Reduction Licencing Controlling 11 October 2006, 3
Strategic IP Goals EXCLUSIVITY Options for Strategic IP Goals REPUTATION DESIGN ACCESS ADDITIONAL INCOME Chosen Strategic IP Goal is often a mixture DESIGN FREEDOM 11 October 2006, 4
Strategic IP Goals: Exclusivity Options for Strategic IP Goals EXCLUSIVITY REPUTATION DESIGN ACCESS ADDITIONAL INCOME DESIGN FREEDOM Prohibition is the 'natural' purpose of a patent if coming from patent law. Use of prohibition includes the readyness to go to court over several instances and invest thus money neccessary. Thus, exclusivity is mostly used where the success of a product depends on a certain invention or a group of inventions. In practice, exclusivity is a rare option, mostly restricted to the biotech / pharmaceutical field and special, relatively simple solutions in other technical fields. With complex products, this is no option. 11 October 2006, 5
(Counter-)Example: Cellular Phone M Schulze Speech / Data Transmission Microchips Antenna Display 7.000 6.000 5.000 4.000 The 90s Boom Applications / Software HMI Camera Batteries... 3.000 2.000 1.000 0 First filings - worldwide from 01/02 w/o Infineon 1989 1993 1997 2001 2005 SonyEricsson mobile Exclusivity is not practical, but a stronger patent position is! Patent Portfolio Mngmt! 11 October 2006, 6
Strategic IP Goals: Reputation Options for Strategic IP Goals EXCLUSIVITY REPUTATION DESIGN ACCESS ADDITIONAL INCOME DESIGN FREEDOM Reputation is one of the main reasons to file: to have a patent or being an inventor is a good thing Reputation is showing the innovation potential of a company to customers and investors. In practice, the use of reputation remains unspecific but the costs add up. Another form of reputation is being aggressive in court, e. g., if sued. This will make the company a less easy target for patent litigation 11 October 2006, 7
Strategic IP Goals: Design Access M Schulze Options for Strategic IP Goals EXCLUSIVITY REPUTATION DESIGN ACCESS ADDITIONAL INCOME DESIGN FREEDOM Design Access mostly means Deterrence or Cross License Agreements (XLA). With Design Access companies share their IP potential: they give acces to their own inventions and use the access to the invention of other companies Design Access 'neutralizes' patents and emphazises the selling of product without the danger of patent infringement problems. XLAs are based on the equal strengths of patent portfolios; imbalances can be accounted for by payments to the stronger side. The larger companies are the more likely they close a XLA. 11 October 2006, 8
Strategic IP Goals: Additional Income Options for Strategic IP Goals EXCLUSIVITY REPUTATION DESIGN ACCESS ADDITIONAL INCOME DESIGN FREEDOM Additonal Income is not easy to gernerate. When Carrot Licensing, one offers his patents to a licensee. This hardly works. To successfully carrot license, one must have a superior patented technology and additionally offer Know-How. When Stick Licensing, one threatens to sue a target company because of a concrete patent infringement if no license is taken out. The would-be-licensee is normally not willing to pay and is likely to go to court over serveral instances and tries to counter-strike. One must determined to give out one's best technology to the largest companies. 11 October 2006, 9
Strategic IP Goals: Design Freedom M Schulze Options for Strategic IP Goals EXCLUSIVITY REPUTATION DESIGN ACCESS ADDITIONAL INCOME DESIGN FREEDOM Design Freedom is the try to design products without violating patents. The most prominent realisations are Design Around and Opposition / Invalidation against third party rights, often after a product clearing. One does not need own patents to use a Design Freedom strategy. 11 October 2006, 10
Strategic IP Goals (Summary) Affected Business Strategy Options for Strategic IP Goals Exemplary IP Strategies Market Differentiation EXCLUSIVITY REPUTATION Prohibition no. 1 patent holder fighting legal battles to the end Cost Leadership DESIGN ACCESS ADDITIONAL INCOME DESIGN FREEDOM Deterrence Cross License Agreements (XLAs) Licensing (Stick / Carrot) XLAs with Compensation Design Around / Invalidation 11 October 2006, 11
PPM - the Look Around Superposed Strategies: Business / R&D IP Strategy Strategic IP Goals Patent Analysis Patent Strategy Strategy Implementation Update IP Operations Own IPRs 3rd Party IPRs Invention Disclosure First Filing Risk Identification Foreign Filing Risk Assessment Portfolio Mngmt Risk Reduction Licencing Controlling 11 October 2006, 12
What influences a Strategy? Options for Strategic IP Goals MARKET TECHNOLOGY PATENTS ENVIRONMENT Patent Portfolio Management: optimize patent activities under cost aspects 11 October 2006, 13
Patent Search: Statistics Overall See Talk of J. Schaaf Trends First Filings (accumulated) First Filings 1998-2003 Own Company 200 Competitors 150 100 A U 50 B C D E 0 50 40 A 30 20 U 10 0 B 1997 1998 1999 2000 2001 2002 Skylining 80 70 60 50 40 30 20 10 0 F04L G02L G06F G06H H03L H04L H04N M03K M03P Search Capacity Search Know-How Patent Know-How Market Know-How Regions First Filings 2004 2007 Analyse goal-oriented: Return-of-Investment! DE EP US CN 11 October 2006, 14
Patent Search: The Assignee Problem M Schulze Aventis owns 29,000+ patents; about 1% show Aventis as assignee Richardson Merrell Richardson Vicks P & G See Talk of J. Schaaf Marion Labs Rhone Poulenc American Hoechst Celanese Corp Marion Merrell Dow Roussel UCLAF Rhone Poulenc Rorer Hoechst AG Hoechst Celanese Hoechst Marion Roussel Celanese AG Aventis Rorer Rhodia Figure modified from Edlyn Simmons Figure:PIUG 2000 Meeting From: F. Narin: WIPO Conference on Patents; Genf, 17. September 2003 11 October 2006, 15
Market Analysis Market Size / Market Share / Turnover / Regions / Trends Market Overview Market: Gas Turbines Competitors 1. Competitor A 2. Own Company 3. Competitor B.. Exclusivity US EP Market Share 18 % 16 % 12 %.. Design Access / Income US Market Size: 5,7 bn Characterisation financial troubles good service small R&D.. EP US EP Rest Comp B Rest Own Comp Comp B Comp A Comp A Own Comp Regions in 5 years 11 October 2006, 16
Technology Analysis Which technolgy is important? How good am I at the technology? Importance of the Technology lower higher T2 T1 T3 Different Segments (Technologies / Products) IP Investments lower higher following leading Technology Position 11 October 2006, 17
Comparison of Patent Position with... M Schulze... the Technology Position... the Market Position Patent Position following leading directed externally defensive offensive Own Position directed internally Patent Position following leading Own Position defensive offensive following leading Technology Position The correlation of the patent position with the technological strength gives a hint for the strategic direction. leading following Market Position The number of IPRs is typically being related with the relevant sales; only then one can speak of a stronger or weaker position. 11 October 2006, 18
... a closer look...... shows the well-known license analogy used in a risk-chance-diagram. No of IP Rights 500 Risks Own Position x Chances one product market for large numbers License demand ~ (Sales) Comp * Patents Own * Licence Rate * Hit Rate License balance ~ 0 0 5 10 15 20 25 Market Share Own Demands Demands from the Comp. The risks and chances must be usually verified by taking a closer look into the IPRs, incorporating quality. 11 October 2006, 19
Developing a Patent Strategy Superposed Strategies: Business / R&D IP Strategy Strategic IP Goals Patent Analysis Patent Strategy Strategy Implementation Update IP Operations Own IPRs 3rd Party IPRs Invention Disclosure Risk Identification First Filing Foreign Filing Risk Assessment Portfolio Mngmt Risk Reduction Licencing Controlling 11 October 2006, 20
Sketch: Strategy Development Typical IP Behaviour offensive defensive directed internally directed externally Strategic Significance Patent Position weak strong following leading Technology Position + SWOT Definition of an IP Strategy Patent Position strong Technology Position weak large small Market Share Licences Success Factors decisive factors / features 11 October 2006, 21
Generic Patent Strategy an example Patent Position Typical IP Behaviour offensive defensive directed internally directed externally strong Strategic Significance following leading Technology Position + SWOT In case of a (yet) strong Patent Position but weak Ressources and large exposure, secure Design- Access via XLAs and licence patents selectively. Technology Position Patent Position strong weak weak Licences Success Factors large small Market Share 11 October 2006, 22
A Target Portfolio should be defined M Schulze The Target Portfolio should give operative goals regarding the development of the patent portfolio w.r.t quantity and quality. Technology Now Trend in 3 years T1 20 10 T2 13 15 T3 5 13 Patent portfolio management must also incorporate measures and metrices to ensure efficient controlling. 11 October 2006, 23
Implementation Superposed Strategies: Business / R&D IP Strategy Strategic IP Goals Patent Analysis Patent Strategy Strategy Implementation Patent Activity as a Pull! Update IP Operations Own IPRs 3rd Party IPRs Invention Disclosure Risk Identification First Filing Foreign Filing Risk Assessment Portfolio Mngmt Risk Reduction Licencing Controlling 11 October 2006, 24
Where to file? Foreign filing is costly. The selection of countries is thus budget-restrained. Foreign filing is governed mainly by (a) own turnover and margin, resp. or (b) market size, mostly not the main manufacturer s countries. Patentability, Prosecutability and Culture as further important Factors In the simplest case, use a country list; better: dependent on the value of the IPR 11 October 2006, 25
Application Paths Only national: Adv: faster grant, Disadv: high costs immediately Fast Implementation; Short Cycles; sure Patentability Regional / PCT: Disadv: usually slower grant (PCT up to 30 / 31 Monate); Early development; long cycles; unsure Patentability Adv: delayed costs, cheaper for more countries. The decision how to file is also dependent on the own pre-application search. In detail, one has to calculate the costs and reason higher spending. 11 October 2006, 26
Distribution of Costs DE PCT (EP, US, JP) (AT, CH, DE, FR, GB, IT) 18000 16000 Prio DE PCT EP US JP 14000 12000 10000 8000 6000 4000 2000 0 1 2 3 4 5 6 7 8 9 10 11 12 13 14 15 16 17 18 19 20 21 Year Grant: EP: in Year 6 US: in Year 5 JP: in Year 6 Accumulated Costs: EP: 65.000 US: 19.000 JP: 29.000 from: Martin Baader Der Leiter Patente 2004 ;Infineon Technologies 11 October 2006, 27
The Value of Patents Patent Experts: Evaluation (qualitative value) Relative value of patents using a value spectrum, e. g. {1... 5} or {A... F} Application: patent selection; portfolio management; patent comparison Business Experts: Valuation (quantitative value) Financial value of patents and patent portfolios (in ) using known (?) valuation methods Application: etc. transaction pricing or licensing fees; financing (e.g. start-ups) 11 October 2006, 28
Some Evaluation Parameters Customer Attractivity Large Performance / Cost Advantage Medium Performance / Cost Advantage Small Performance / Cost Advantage 2 1 0 Scope of Invention Basic Larger Improvement Detail 2 1 0 2 1 Value Proof of Use easy costly Not possible 2 1 0 0 Circumvention Not possible Possible but costly Alternatives exist 2 1 0 Not only the average 11 October 2006, 29
Generating Inventions Overproportionally many inventions should be generated in attractive technologies This generation can - at least partly - be controlled, e. g. by - Invention-on-Demand-Workshops - Incentives (Money, Management Appreciation) Generally, from a portfolio management point of view it is desirable - but also more costly - to have more inventions than applications can be filed so that one can choose from a pool of inventions and file or discard. 11 October 2006, 30
Prozesses - Get it Going For the different steps of the operative patent activities there should be defined processes with (competence orientated) responsibilities and tasks! Example: of Patent Value I.D.: Inventor who: Patent Professional, Head of R&D group respons.: Patent Professional when: 1 x month / quarter report: Patent Professional This includes reporting to the business functions ressponsible (e.g. quarterly review), but also to inventor s side (inventor, head of R&D) Reporting also regarding Costs 11 October 2006, 31
Implementation Superposed Strategies: Business / R&D IP Strategy Strategic IP Goals Patent Analysis Patent Strategy Strategy Implementation Update IP Operations Own IPRs 3rd Party IPRs Invention Disclosure Risk Identification First Filing Foreign Filing Risk Assessment Portfolio Mngmt Risk Reduction Licencing Controlling 11 October 2006, 32
Key Factors for successful PPM The strategic orientation of patent work too is subject to the RoI-rule, i.e. to be performed in adequate detail Verifiable benefit justifying the additional effort Clear assignment of roles with defined contributions by the parties involved in the process Controlling must lead to consequences Comfortable IT-support Strategy process properly timed with processes for setting up business strategies and budgets Support by line management Patent work is a speculative business with significant chances and risks. Therefore, much ground would be lost without a strategically oriented approach. 11 October 2006, 33
Patent Strategies and Patent portfolio management Dr. Mark Schulze M Schulze Patentanwaltskanzlei IPR Consulting Pilotystr. 4 D-80538 München info@schulze-patent.de Thank You! 11 October 2006, 34