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PATENTS: SLEEPING BEAUTIES
Patents. Yawn. Have insomnia? Read Hewlett Packardís U.S. Patent Number 4,669,051 some night. (Itís over a thousand thrilling pages, including drawings.) Need a laugh? Check out British Railís GB 1,310,990 ("Space Vehicle.") How many of you have passionately debated the value of patents at your last cocktail party? Please question your sanity in quieter moments. But donít stop reading, because these seemingly dull, dry, documents of doom are being seen, in the words of none other than Bill Gates, as "the new gold rush."

   

Consider:

  • National Semiconductor "found" $250 million when Gilbert Amelio pushed the companyís licensing arm to be more aggressive. Steve Jobs then wrangled $150 million more from Microsoft for cross-licensing fees.
  • IBM has annual revenues of more than $1 billion - nearly a fifth of its total profits - from patent licensing.
  • Two-thirds of the estimated $7 trillion market value of all publicly-traded U.S. companies lies with their patents and other intellectual property assets. (This data is from Coopers & Lybrand now part of PricewaterhouseCoopers, who have recently, like other major consulting firms, initiated a patent-utilization practice for its corporate clients.)

Patents: What Good are They?

As but one example of so-called "intellectual property", patents are a convenient way to "package technology." For those of us who have worked with patent documents, we know how to search them and what kind of information resources they can be. But what can you do with them? Donít they merely prevent others from doing something? In fact, most patents are not particularly interesting or valuable by any standard. However, with the right combination of technical, business, and legal talent to evaluate them, certain properties can be well worth the cost of obtaining, maintaining, protecting, and leveraging them. This is what technology transfer and licensing are all about.

Trends in technology transfer

Three clear trends have emerged in the technology transfer business:

  • Technology that is not vital to the core business is being licensed or sold.
  • Patent portfolios are increasingly used to assess intellectual capital.
  • Companies are realizing value from their technology through patenting, partnering, or licensing out, in addition to using it in their own home markets and sectors.

Why? Activities that transfer use of technology can be translated directly to the bottom line. Plus, patents are expensive to prosecute and maintain.

A conservative estimate, based merely on filing, maintenance, and other fees, pegs the price at $10,000 per patent. The extent of this cost is further appreciated when one considers that there are more than 1000 organizations that have received at least 100 U.S. utility patents since 1985. When the classic "make vs. buy" decision says "buy", a "carrot" or market-based approach can be very attractive to organizations looking to bolster an existing product or position, or enter an entirely new market. Although it carries a much higher cost, exclusive licensing literally can buy almost instant viability in a given product line or market segment.

Does it work?

You bet it does. Here are a few examples from our experience at First Principals, Inc.

  • A major manufacturer of automotive, electrical, and temperature controls had a "messy" patent portfolio. The same law firm that was writing an abundance of patents with Jepson-style claims language was managing the maintenance program for the portfolio. After an extensive analysis and organization, the portfolio was lean, mean, and truly well managed. Result: Hundreds of thousands of dollars in cost savings.
  • A global powerhouse in the computer industry enlisted our help with analyzing and evaluating market opportunities for a selected set of robotic-related patents. This led to an introduction to a customer that licensed the patents on an exclusive basis. Result: Several million dollars in new, "found" money for our client.

I can do thatÖ

Yes, you probably can. Given enough time -- not just to climb, but attack the learning curve -- you may be able to do several parts of the technology transfer and licensing process yourself. But look at the swiftness (or not!) of the results. Keep in mind that licensing deals can take years to conclude. Then think about what else you could be doing. Remember that itís not a binary "either/or" science; there are lots of variables and gray areas which we at First Principals have learned to navigate.

So before getting lost in the details and complexities of technology transfer, take the time to learn more about it and find your way around -- or ask someone who already knows.

 

First Principals, Inc.   1768 East 25th Street  Cleveland, Ohio 44114   216.881.8520 phone   216.881.8522 fax   Email: info@firstprincipals.com

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