Global Research & Commercialization of Intellectual Property
Intellectual Property Related Market Moves
The
Hannaian Research Institute is primarily an entrepreneurial, research, and
investment center designed to assist industry and academic institutions in their
intellectual property acquisitions and commercialization. One of the important
services offered to industry, industry executives and associated professionals
is a limited offering of specialized academic symposia and courses in the
business and investment transactions of Intellectual Property commercialization.
9/20/2011 @ 4:04PM
New Patent Law Means Trouble For Tech Entrepreneurs
Last
Friday, President Obama signed into law the
Leahy-Smith America
Invents Act, which passed the Senate last week by a large bipartisan
majority, 89-9. Normally, when both political parties agree on anything,
it’s time to celebrate. I wish that were the case here. To the contrary, this
law will undermine one of the things that has made America unique and our
economy strong: technology entrepreneurship.
There are two main problems in this new law for statups:
Proponents of this bill argued that all other industrialized countries are on
the first-to-file system, so we should be too. If we look at the evidence from
other countries, we should be grateful that we dodged the bullet of
past
attempts to change to FTF since it has not gone well for them by several
measures. Canada changed to FTF in 1989, and
two
studies
concluded that it was bad for small companies and individual inventors. A
2010
Canadian study also said “long-term returns in the Canadian venture capital
industry are such that capital has fled the market.” We invest 10x more venture
and angel capital per capita than Europe does. Clearly technology
entrepreneurship
blossoms here to a much greater extent than every other country other than
Israel — and Israeli companies rely on our patent system way more than their
own.
To understand
how FTF would affect entrepreneurs, think about
the process that they go through from ideation onwards. After getting an
idea and doing some Web research, an entrepreneur vets her idea by talking with
others (potential customers, experts, potential co-founders, etc.). If it seems
worth pursuing, she will usually look for financing from angel investors or
venture capitalists. Successful entrepreneurship is a highly social activity
that puts one’s ideas out there — and good ideas spread like wildfire. Under the
existing system (which will remain in effect until 18 months from signing), if
someone applies for a patent and you have evidence that you invented it first,
you can institute an
interference
proceeding. This is a rare event (less than 100/year, and less than 0.05% of
patents issued/year), but this system gives proper recourse and therefore
discourages theft more
than FTF. Under FTF,
theft is much easier,
rewarding hacking and other bad behavior, and, most important to me: will
suppress the openness
on which our
innovation ecosystem thrives.
Embedded in FTF is an elimination of the “grace
period,” which is the one-year limit from “enabling disclosure” until one
must file a patent. Under the new law, any public use or offer to sell an
invention (even if the functioning of it is not disclosed) becomes an immediate
bar on patenting. So if an inventor shows her invention working at a trade show,
demonstrates it for an angel investor group or offers a single unit for sale, it
will not receive a patent even if she applies the next day. How could Congress
have allowed that? They were duped. Evidence of this is that both chambers
published a
colloquy — a staged dialog meant to clarify — that said the bill did the
opposite of what the bill actually does. Courts have ruled that
when such conflicts exist, the bill prevails. This was only one of the many ways
that proponents misled decision-makers on this bill.
You must be wondering what motivated the proponents to lobby so long and hard
for this change in the law. Different parties perceive varying benefits from the
bill. FTF’s
main benefit is to pharmaceutical companies who can achieve faster
“reduction to practice,” which is the time between conception and development of
inventions claimed in patent applications. Smaller companies take longer, but
use resources more efficiently. Under FTI, they get the priority date based on
conception; but under FTF, the only thing that matters is when a patent
application is filed. To the extent that such companies perceive themselves to
be in a race against small companies, they are advantaged. To the extent big
companies rely on buying small ones as part of their outsourced R&D, they won’t
be. Another motivation is moving slightly closer to a globally uniform patent
system. We are still not close enough for these changes to cause a cost
reduction, but “harmonization” is another motivation.
We should not confuse real motivations with believing the fabrications.
Congress and the Administration have received about 90% misrepresentation, and
about 10% truth. This partially explains why a
survey of patent professionals reveals that most don’t believe the claimed
benefits of this bill. The government may be victims of dissembling lobbyists,
but the duty of truth-seeking was always theirs, and they failed. They bought
the patent “yellowcake” story and went to war on the world’s best patent system.
Eric Severeid famously said that “most problems begin as solutions.” This
bill resembles that remark. The problems that got patent reform started have
largely been
addressed by many court cases. Once the
twomain patent reform lobbying
organizations were formed, they gained a life of their own and had to continue
pushing for changes to justify their existence. If one interviews their
membership, there is much less enthusiasm for the changes in the bill. The same
is true of the universities that are members of the AAU that supported the bill.
One congressman told me that the tech transfer office of a university in his
district opposed it, but the university president supported it. Guess who won
that argument? There was a
courageous splinter group of universities that
opposed the legislation, but they were not invited to testify at hearings on
the bill.
The bill also requires that the Small Business Administration deliver a study
to Congress in one year to determine the potential impact of FTF on small
companies. One year is six months prior to FTF going into effect. Isn’t it odd
that the study would be occurring after the decision committing us to
that path? It’s unclear what Congress will do with that information since there
is already
enough evidence from other countries to determine NOT to implement FTF —
although I’m sure that they are still unaware of it since nobody has paid
lobbyists to show it to them.
If we are to preserve what’s most unique about our economy, my recommendation
to Congress and the Obama Administration is to pass a new bill that does 3
things and nothing more: postpones the implementation of both first-to-file and
changes in post-grant review until
studies of
overseas implementations have proven that they will not harm start-ups here,
and properly fund the patent office by letting it keep filing fees. Congress
should do its best to adhere to the Hippocratic Oath to “first do no harm,” and
remember the laws of
unintended consequences. Otherwise, “Leahy-Smith” will become the new “Sarbanes-Oxley.”
Gary Lauder is
Managing Director of Lauder Partners,
a Silicon Valley-based venture capitalist and co-inventor of a dozen patents.
More info on this issue can be found on
his Web site.
Market Watch
Aug. 16, 2011, 6:00 a.m. EDT
Push for big patent holdings brews in tech sector
Google deal for Motorola includes 17,500 patents and
NEW YORK (MarketWatch) –– The intellectual-property arms race is rapidly turning into a game of big numbers, pushing companies such as Google into patent-buying sprees, tech-industry observers say.
Google Inc.’s (NASDAQ:GOOG) agreement to purchase Motorola Mobility Inc. (NYSE:MMI) for $12.5 billion Monday will give it a slate of 17,500 patents and 7,500 patent applications. That’s the latest in a slew of attempts to bulk up on its patent war chest.
Markets Hub: Why Google bought Motorola Mobility
Google's purchase of Motorola Mobility was cheered by the street, as Google looks to control more of its handset maker of its Android phones. The deal also gives Google access to a library of patents.
Google recently purchased 1,000 IBM (NYSE:IBM) patents, and made a failed bid for Nortel Networks Corp.’s (OTN:NRTLQ) 4,500-strong portfolio that was eventually sold to a consortium that included Apple Inc. (NASDAQ:AAPL) , Microsoft Corp. (NASDAQ:MSFT) and Research In Motion (NASDAQ:RIMM) .
Before Monday, Google was also believed to be considering buying InterDigital Inc. (NASDAQ:IDCC) , a wireless technology company that holds 8,800 patents.
While Google’s willingness to fork out a 63% premium over Motorola Mobility Inc.’s most recent closing price raises eyebrows, the Internet company is reacting to -- and feeding -- a new reality in the tech marketplace, patent brokers and attorneys say.
“The Motorola deal is reflective of the value associated with a large collection of IT patents, which are becoming valued at premiums,” said James Malackowski, chief executive of Ocean Tomo, the intellectual property services firm, that helped to value a portion of the Nortel portfolio. “It’s a case of 1 + 1 = 5.”
Recently, courts have started to focus on royalty stacking and aggregation to determine awards in patent lawsuits, Malackowski said. This means that smaller portfolios aren’t commanding the money they used to bring in these suits.
As the profit value of licensing out large tech patent holdings climbs, bigger portfolios are becoming highly sought by companies -- whether they make the technology that these patents cover or not.
Because of this, tech companies will be making a big push for large purchases instead of small ones, industry players say, driving up the premiums big portfolios are valued at.
This patent stockpiling will be especially pronounced in the mobile and telecommunications space, where devices have to comply with a myriad of industry standards and need to be protected by a combination of patents, said James Nurton, managing editor of trade publication, Managing IP.
For instance, a smartphone can command 250,000 patent claims. This is in contrast to the pharmaceutical industry, where individual patents are able to sufficiently protect a drug’s market share, he said.
“It is a numbers game because some of the patents being bought may be of questionable validity or for technology that doesn’t last very long,” said Nurton.
Patent value
The value of a technology patent is derived from speculation on how much it could allow a company to gain price elasticity and market share, said Ron Epstein, chief executive of Epicenter IP Group.
As handset makers are being pushed to make smartphones more feature-rich, the integration of different technologies will drive up patent infringements, contributing to a building bubble in patent purchasing, he said.
One opposing school of thought says that the Google acquisition “is actually likely to put an end to the ‘patent bubble,’ or at least seriously deflate it” now that the Android platform has the a line-up of patents to defend itself from being sued, Bernstein research analyst Pierre Ferragu said in a note Monday, referencing a 14% slump in Interdigital’s stock price Monday.
But other companies got a lift in anticipation of a new cash cow. U.S.-listed shares of Nokia Corp. (NYSE:NOK) rallied 17% on Monday, on hopes that its own patents would be valued at the premium that Motorola’s portfolio has been imbued with.
Since Nokia inked a patent licensing deal with Apple in June, it’s been seen as trying to compensate for its falling mobile market share through patent royalties. Nokia has been granted 371 patents and has 427 pending applications, as of the end of July, according to IFI Claims Patents Services.
Research in Motion (NASDAQ:RIMM) shares rose 10%. The BlackBerry-maker has been granted 408 patents and has 604 pending patent applications this year, according to IFI Claims Patents Services.
Epstein said that Google’s willingness to pay a 63% premium seemed “a little high historically, specially for a company still coming out of a major transformation in a recession bound economy.”
“Who’s to say what the real value of these patents actually are?” said Marc Hubbard, a partner at the intellectual property law practice at Gardere. “Until Google’s actually tests the cross-licensing market, no one will know whether the patent portfolio will cover what it needs.”
That’s not the first time patent portfolios have been valued especially high. After Google put the first $900 million bid on Nortel’s patent portfolio, the holdings were eventually bid up 5 times to a pricetag of $4.5 billion.
Yesterday (Aug. 15th), Google (NasdaqGS: GOOG) announced that it was acquiring Droid smartphone manufacturer Motorola Motility (NYSE: MMI) for $12.5 billion in cash, or $40 per share. The price was a huge 63% premium to Motorola’s closing price the day before the announcement. Why would Google pay so much? According to Google co-founder and CEO Larry Page, the acquisition of Motorola has to do with intellectual property and the avoidance of costly and distracting patent infringement lawsuits:
Our acquisition of Motorola will increase competition by strengthening Google’s patent portfolio, which will enable us to better protect Android from anti-competitive threats from Microsoft, Apple and other companies.
We own one of the strongest and most respected patent portfolios in the industry. We have over 17,000 patents granted and over 7,000 patents pending with particular strength in 2G and 3G essential, non-essential patents important to the delivery of competitive products in the marketplace, video particularly compression, decompression and security technologies and finally, a leading position in 4G LTE essential.
With new entrants to the mobile space resulting from the convergence of mobility, media, computing and the internet, our patent portfolio is increasingly important.
Even accounting for some CEO bluster, I’m impressed! Google investors, however, appeared to be nonplussed by the planned Motorola acquisition, sending Google shares down on the day. Perhaps investors thought Google was overpaying for Motorola at $700,000 per patent or perhaps they were still reeling from last week’s news that Google is getting anti-trust heat from the U.S. Federal Trade Commission over tying arrangements between its dominant Internet search franchise and Android-powered smartphones. Near-monopolists have a tough life!
Other Companies with Communications Patents React Differently to the Motorola Acquisition
Last month in an article entitled 3 Stock Sizzlers, I discussed the meteoric 65%-plus price rise of InterDigital (NasdaqGS: IDCC) -- another patent-rich communications company – and speculated that the most likely acquirer would be Google. Well, you can kiss that speculation goodbye and InterDigital’s stock fell hard on the Motorola news, dropping more than 22% intraday. Fewer suitors may mean that InterDigital will get a lower price for its patents.
In contrast, other patent-rich communications companies like Nokia (NYSE: NOK) and Research in Motion (NasdaqGS: RIMM) received a boost from yesterday’s Motorola news because their stocks had not – unlike InterDigital --already jumped on patent-acquisition speculation. Revaluing Nokia and RIM’s patent portfolios at $700,000 per patent makes these companies appear much more valuable than they did a few days ago.
Does Google Want to Compete Against Its Smartphone Partners?
A question remains whether Google is acquiring Motorola simply for its patent portfolio or because it wants to become an integrated hardware/software smartphone company like Apple. Initially at least, Google insists that it just wants to avoid patent litigation over Android and help its hardware smartphone partners do the same. But some industry analysts are skeptical. For example, one ComputerWorld columnist wrote:
No one sane will spend $12.5 billion (the equivalent of the entire UK economic aid package to developing countries in 2008) on something if they don't intend making full use of it.
Surely this means it is logical to expect Android development in future will move to offer better support for Motorola-made devices, even if only on a component level. Being part of Google's family is bound to give Motorola certain advantages.
Google can’t admit in public that what they intend to do is eventually make Android proprietary. If this deal was just about patents, Google would have bought IDCC.
Intriguing speculation to be sure, but I think Google would be nuts to make Android proprietary. Just look at how a closed-system mentality hurt Apple in personal computers. By keeping Android open to all hardware manufacturers, Google will ensure that Android remains the world leader in smartphones just like Microsoft is the world-leader in PCs.
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Jim Fink is the senior online editor for Investing Daily and is also chief investment strategist for Jim Fink’s Options for Income. He has traded options for more than 20 years and generated personal profits of more than $5 million. When not trading options, he writes the “Stocks to Watch” daily column that provides readers with timely insight into current events and their potential impact on publicly listed companies.
Hopelessly overeducated, Jim holds a bachelor’s degree from Yale University, a master’s degree from Harvard’s Kennedy School of Government, a law degree from Columbia University, and an MBA from the University of Virginia’s Darden School of Business. For good measure, he has been a member of the Illinois and D.C. bars and is a CFA charterholder.
Prior to joining Investing Daily, and when not incurring student loans hiding out in academe, Jim practiced telecommunications regulatory law for nine years until he realized that he made more money trading stock options than writing briefs. After attending business school, Jim switched gears to the investment realm full-time, working for a university endowment, a private wealth management firm, an insurance and financial planning company, and as a Senior Analyst for an online investment newsletter service that encourages the wearing of funny hats.
A possible but unlikely descendant of legendary brawler and boatman Mike Fink, Jim defies his heritage, believing that investing success requires patience and analysis, not swashbuckling bravado. Besides his passion for analyzing and writing about stocks, Jim likes to hike in the desert Southwest, vacation in Las Vegas, play tennis, and feed his toddler son cheerios.
The
Hannaian Research Institute is primarily an entrepreneurial, research, and
investment center designed to assist industry and academic institutions in their
intellectual property acquisitions and commercialization. One of the important
services offered to industry, industry executives and associated professionals
is a limited offering of specialized academic symposia and courses in the
business and investment transactions of Intellectual Property commercialization.
Currently Scheduled Symposium
December 27 - 31, 2011
Nassau, Bahamas
Investments &
Research In
The Business of Intellectual Property & Capital
Development
Today the
most valuable aspects of significant business enterprise are
the Intellectual Property holdings of the business. Understanding
the subject matter in this course is essential
for any business entrepreneur or student of high
finance and law, who desires to be successful in
investments and in negotiating business
transactions in the new global economy.
This is a practical course taught from an
experiential perspective by professionals with
direct working knowledge in the subject matter.
Attendees will have the opportunity to
participate in workshops simulating real time
investments and negotiations, and the
opportunity to participate in an IP Commercialization Research
Project.
A special module covers "Innovation in Education and Education Productivity"
emphasizing the United Nations mandate on the importance of Education as an
element of Community and International Technology Transfer.
In the practical world of business and investments developers
of products want to know what industry needs and wants. Both developers and
industry need investors to fund their operations. Investors need to know what's
coming down the pipeline, how to value it, and how to acquire some ownership or
control of it as early in the process as possible. Companies want to acquire
valuable intellectual properties to enhance their prestige, profit potential and
shareholder value. The markets and strategies involved are increasingly global
in scope and environment. Knowledge of the law, investment modalities, and business
practices involved in these processes are essential to all participants. This
course is unique in that it has been specifically designed to provide the
knowledge and pragmatics required to be successful in this arena.
The Course is taught in symposium format and is
a dynamic course constantly updated to provide a
current perspective on Investments in the Business of Intellectual Property & Capital
Development. It is designed for
undergraduate, graduate, and professional
business and finance students, artists,
songwriters, authors, publishers, software
engineers, inventors, attorneys, accountants,
researchers, stock traders, investors, business
entrepreneurs, and emerging growth company
executives. Any Intellectual Property stakeholder
interested in understanding intellectual
property and its important role in the modern
global economy and investment markets will
benefit from the information in this course. The
Course is taught from an international business,
investment,
& legal perspective in order to reflect the
predominance and ever growing importance of
global business transactions, investments, and
valuations.
The
full course is an intense sixty (60) hour course, the equivalent of five (5) semester
credit hours encompassing five (5) consecutive
days (forty (40) hours) of actual classroom
didactics, and an additional twenty (20) hours of a supervised online didactic
and research project module. Registrants may register for the course in
sections or in full as their needs require.
The basic forty (40) hour Symposium and take home
exam will qualify students to receive three (3) hours of college credit.
Completion of the twenty (20) hour Online
Market Research Module & Research Project will qualify the student for an
additional two hours of college credit.
Special Note
Although the Symposium is primarily designed for working professionals in the
involved fields, the course is open for enrollment to current undergraduate,
graduate and professional college students. Students should check with the director or dean
of their academic program at their institution to ensure that they will receive
appropriate credit as an extension, externship, or research course applicable to their course of study.
Portions of the course have been approved for
continuing legal education, and for other
credentialing purposes.
After completion of the course attendees will be able to function
better
as researchers, negotiators, traders, and investors in intellectual property rich
companies and securities in the private and public markets, and understand
concepts including:
• Components of intellectual property and
capital, & the importance to business &
investment success
• Basic aspects of the laws of intellectual
property
• Aspects of intellectual property peculiar to
special industries, Food & Agriculture, Health,
Education, Energy, Performing Arts, Music &
Entertainment, Digital Engineering, Internet
Technology and others
• Strategies for protecting intellectual
property domestically & internationally
• Domestic & international valuation of
intellectual property in business transactions
• Company structure, behavior, & special
entities for holding, protecting, marketing, &
licensing IP
• Special contractual provisions in structuring
intellectual property acquisitions & transfers
• Essential Elements of Marketable Research and
Intellectual Property
• Processes and current practices in
Commercialization of Research, IP, & Technology
Transfer
• Processes, practices, and politics in
Community, & International Technology Transfer &
Economic Development
• Principles of funding the intellectual
property research & development stage
• Commercial Loans & Funding; Source of Funding,
Knowing Where the Money Comes From
• Domestic & International grants, government
and agency funding, hedge funds, and venture
capital
• Funding the IP Commercialization & Technology
Transfer stage
• Structuring IP interests in licensing, joint
ventures, mergers & acquisitions, start ups,
PO's, IPO's, & SO's
• Special contractual provisions for funding
intellectual property acquisitions & transfers
• Understanding the different types of
securities and securities laws globally
• A comparative study of securities markets,
stock exchanges, and the SEC's of the U.S.,
Canada, Europe, Asia, Africa, South & Central
America, the Caribbean Basin, and
their rules & required filings
• Basic strategies & principles of investing in
private and public securities markets
• Principles of investing in international
securities markets
• Necessary tools for effective investing
activities in current markets
• Strategies for researching private and
publicly traded investments
• Basic strategies for protecting investments
and dispute resolution in public markets
• The current state of the intellectual property
investment markets
• Taxation, auditing & accounting elements of
I.P. investing
•
Developing
Minds, Education & Effective Economic
Development,
the
Investment in People & Community
•
Standard Accepted Research Methodology
•
Effective writing & communication
strategies for business success
• Memory,
Reading & Comprehension Strategies for Business
Leaders
•
Power Words,
Understanding the Language &
Vocabulary
of Business & Negotiations
•
The Psychology of Business
& Investing
•
Evidence Based Tools & Strategies for
Increasing Education Productivity
There will be daily practicum & sector analysis sessions for industry
professionals where researchers, inventors, and emerging growth company
executives and venture capital participants will make presentations of their
projects and companies and interact on the potential for joint ventures and
alliances.
All materials necessary for the course will be
available online or supplied by email to course
registrants. While not required or necessary,
registrants are encouraged to bring a notebook
computer to class.
Course Coordinator
Dr.
Harlington L. Hanna Jr.
Symposium Modules
1. Understanding Intellectual Property & Capital
2.
Negotiations, Deal Making, Business Structure &
Transactions
3.
Principals of Trading & Investing
Intellectual Properties
4. Innovation in Education, The Essential Element of Community
& International Technology Transfer
5. Online Review & Research Project
Symposium Daily
Format
5 hours of classroom lecture
1.5 hours of Industry Sector Analysis Practicum
1.5 hours of lecturers as panelists providing
follow-up info and questions & answers
Online Study Materials
College Credit
Requirement
Take home essay and short answer exam due within
one month of Symposium and/or complete a Research
Project.
At this time registration for the full course is
estimated to be $600 (3 credits) or $800
(5 credits), with options for special
segment registration and special registration
for sector analysis industry presenters.
Requests for further information and on sector analysis presentations should be
forwarded by email to:
Dr.
Harlington L. Hanna Jr.
The Hannaian Research Institue
Course Coordinator hlaw@hannaian.com
772-985-9121
Symposium
Registration Form
Scholarships
There are a limited amount of full and partial
tuition scholarships available. Any registrant who would like to register for
any portion of the Symposium and be considered for a scholarship or reduced
registration fee should contact HRI as soon as possible.
Please click here to
apply for a scholarship or reduced registration fee.
You
may register online by using
the Online
Registration
Form
this is the quickest and most efficient method of
registration.
You may also use postal mail, or E-MAIL
the following information: Your Name, Address, Telephone, Fax,
E-Mail Address with Check, Money Order, to the
address below. Or call our offices with this
information for registration.
FOR
FURTHER INFORMATION
CONTACT
The Hannaian Research
Institute
220 Tywnam Heights
P.O. Box EE-16021
Nassau, N.P. Bahamas
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