The Operating System for the Knowledge Economy © 2004 IPR in Business Use Harnessing IP for Strategic Competitive Advantage IIMA July 2-4, 2004 MCAM.

© 2004 The Operating System for the Knowledge EconomyThe Operating System for the Knowledge Economy

IPR in Business UseIPR in Business UseHarnessing IP for StrategicHarnessing IP for Strategic

Competitive AdvantageCompetitive Advantage

IPR in Business UseIPR in Business UseHarnessing IP for StrategicHarnessing IP for Strategic

Competitive AdvantageCompetitive Advantage

IIMAIIMAJuly 2-4, 2004July 2-4, 2004

M•CAMM•CAM


Why Are We Here?Why Are We Here?Why Are We Here?Why Are We Here?

• To understand the business problemTo understand the business problem

• To understand the userTo understand the user

• To understand the solutionTo understand the solution

• To understand the valueTo understand the value


Patent 101Patent 101Patent 101Patent 101

• Patents are legal property Patents are legal property conveying a limited monopoly conveying a limited monopoly right to a real person or group right to a real person or group of persons who may be of persons who may be entitled to that right in entitled to that right in exchange for the disclosure of exchange for the disclosure of an invention that must be an invention that must be NOVEL, NON-OBVIOUS, and NOVEL, NON-OBVIOUS, and REDUCED TO PRACTICEREDUCED TO PRACTICE


What is a Patent?What is a Patent?What is a Patent?What is a Patent?• ““the right to exclude others from the right to exclude others from

making, using, offering for sale, or making, using, offering for sale, or selling” the invention in the United selling” the invention in the United States or “importing” the invention States or “importing” the invention into the United States.into the United States.

• What is granted is What is granted is notnot the right to the right to make, use, offer for sale, sell or make, use, offer for sale, sell or import, but the import, but the right to excluderight to exclude others from making, using, others from making, using, offering for sale, selling or offering for sale, selling or importing the inventionimporting the invention. .


What’s a “No Trespassing” What’s a “No Trespassing” Sign Worth?Sign Worth?

What’s a “No Trespassing” What’s a “No Trespassing” Sign Worth?Sign Worth?

• Depends where the sign is!Depends where the sign is!


The Business ProblemThe Business ProblemThe Business ProblemThe Business Problem


The Business ProblemThe Business ProblemThe Business ProblemThe Business Problem

• Patents are issued without adequate Patents are issued without adequate quality controlsquality controls

• Patents cost money to obtain, maintain Patents cost money to obtain, maintain and defendand defend

• Most patents never generate any ROIMost patents never generate any ROI

• Most businesses don’t know, much less Most businesses don’t know, much less understand what they ownunderstand what they own


The Pain Within – CEO & CFOThe Pain Within – CEO & CFOThe Pain Within – CEO & CFOThe Pain Within – CEO & CFO

• Corporate AwarenessCorporate Awareness– Most corporations don’t have a Most corporations don’t have a

consolidated accounting of the presence or consolidated accounting of the presence or quality of their patent holdingsquality of their patent holdings

– Impairment Testing for Securities, TaxImpairment Testing for Securities, Tax– Accountability for internal managementAccountability for internal management

• ““Why to we keep patents that we’re not using?”Why to we keep patents that we’re not using?”

– ““Are we holding a toxic wasteland?”Are we holding a toxic wasteland?”


The Pain Within – CTO & R&DThe Pain Within – CTO & R&DThe Pain Within – CTO & R&DThe Pain Within – CTO & R&D

• Build vs. BuyBuild vs. Buy– No good way to know whether R&D will No good way to know whether R&D will

result in a proprietary or 3result in a proprietary or 3rdrd party-owned party-owned interestinterest

• Qualify the “Road Already Traveled”Qualify the “Road Already Traveled”– Chronicle the success and mistakes of Chronicle the success and mistakes of

others before repeating what others have others before repeating what others have done (if they’re not using key components, done (if they’re not using key components, buy rather than replicate)buy rather than replicate)


The Pain Within – M&AThe Pain Within – M&AThe Pain Within – M&AThe Pain Within – M&A

• Am I buying the right property for my Am I buying the right property for my business goalbusiness goal

• Am I buying if from the right partyAm I buying if from the right party• Am I paying for all of it or do I need 3Am I paying for all of it or do I need 3rdrd

party propertyparty property• Have I right-sized the value expectationHave I right-sized the value expectation• Am I buying something that will Am I buying something that will

adversely effect what I already ownadversely effect what I already own


The Pain Within - LegalThe Pain Within - LegalThe Pain Within - LegalThe Pain Within - Legal

• Over 50% of patents reviewed by the Over 50% of patents reviewed by the Court of Appeals held invalidCourt of Appeals held invalid

• Cost of litigation > $2,000,000 with no Cost of litigation > $2,000,000 with no recovery if found invalidrecovery if found invalid

• ““Black-hole” cost center within Black-hole” cost center within organizationsorganizations

• Case only as good as your war chestCase only as good as your war chest


The The datadata Mining Paradox Mining ParadoxThe The datadata Mining Paradox Mining Paradox

• Surface Area of Surface Area of Earth -510,101,000 Earth -510,101,000 kmkm22

• Less than 0.001% of Less than 0.001% of the Earth has goldthe Earth has gold

• 36 tons of extraction 36 tons of extraction of ore yields 1 oz of of ore yields 1 oz of goldgold

Would you accept the status quo patentWould you accept the status quo patentpractices if you had to accept the economic liability?practices if you had to accept the economic liability?

• There are over 45MM patent There are over 45MM patent records and over 1B indexed records and over 1B indexed business, technical, and business, technical, and scientific records scientific records

• Digital archives exist in over Digital archives exist in over 100 languages100 languages

• Almost none of them are Almost none of them are relevant to your business… relevant to your business… almostalmost


Commercial AlternativesCommercial AlternativesCommercial AlternativesCommercial Alternatives• I’d like to….I’d like to….

– Rely on simple keyword Rely on simple keyword searchsearch

• Delphion, MicroPatent, Delphion, MicroPatent, PatentCafePatentCafe

– Leverage citation analysisLeverage citation analysis• Derwent, AuriginDerwent, Aurigin

– Keep looking until I’m Keep looking until I’m satisfied that I’ve done a satisfied that I’ve done a thorough jobthorough job

• All data suppliers make All data suppliers make their money on selling their money on selling documents, not answersdocuments, not answers

– Know whether I really Know whether I really reviewed the data that I reviewed the data that I thought was coveredthought was covered

• If only it weren’t for…If only it weren’t for…– Patents contain Patents contain

heterogeneous termsheterogeneous terms• No data vendors solve No data vendors solve

this problemthis problem

– Inconsistent PTO Inconsistent PTO compliance with MPEP § compliance with MPEP § 904.01(c)904.01(c)

– I’ve got a limited time and I’ve got a limited time and expense budget and they expense budget and they want an answer NOWwant an answer NOW

• M•CAM provides you an M•CAM provides you an answer regardless of answer regardless of volume of datavolume of data

– No patent office or 3No patent office or 3rdrd party vendor has a party vendor has a complete accounting of complete accounting of the data they don’t havethe data they don’t have


Patently ObviousPatently ObviousPatently ObviousPatently Obvious• Volume of DisclosuresVolume of Disclosures

– International focus on number, not quality of patents (viewed as International focus on number, not quality of patents (viewed as litigation “insurance”), has increased volume of work at patent litigation “insurance”), has increased volume of work at patent offices beyond production capacityoffices beyond production capacity

– Disclosures Disclosures Invention necessarily Invention necessarily

• Globalization of InformationGlobalization of Information– Patent data and non-patent literature measured in the terabytes Patent data and non-patent literature measured in the terabytes

making human review impossible without the aid of machine making human review impossible without the aid of machine intelligenceintelligence

– Examiners need to understand consequence for issuing redundant Examiners need to understand consequence for issuing redundant patentspatents

• Absence of Gold StandardAbsence of Gold Standard– No established consensus on what is truly patentableNo established consensus on what is truly patentable– No consensus on what constitutes adequate examinationNo consensus on what constitutes adequate examination– No process for monitoring concurrent innovationNo process for monitoring concurrent innovation


. . . . . . leading toleading to . . . . . .. . . . . . leading toleading to . . . . . .• Patents are often more liability than assetPatents are often more liability than asset

– Owners must not only defend but justify validityOwners must not only defend but justify validity– Small to Medium-sized entities decreasing Small to Medium-sized entities decreasing

patenting activitypatenting activity

• Statutory validity is even challengedStatutory validity is even challenged– The odds of a court finding invalidity and even The odds of a court finding invalidity and even

inequitable conduct rising at an alarming rateinequitable conduct rising at an alarming rate

• Business, Government, Banking and Equity Business, Government, Banking and Equity markets cannot place confidence in patent markets cannot place confidence in patent rights due to the high probability of successful rights due to the high probability of successful challengechallenge


Why It MattersWhy It MattersWhy It MattersWhy It Matters• $330,000,000 one-day $330,000,000 one-day

crash identified by M•CAM crash identified by M•CAM 2.5 months prior to 2.5 months prior to decision: decision: Amgen v. TKTAmgen v. TKT

• $526,000,000 two-day $526,000,000 two-day crash identified by M•CAM crash identified by M•CAM 2 months prior to 2 months prior to decision: decision: Rambus v. Rambus v. InfineonInfineon

Patents all “valid” but many Patents all “valid” but many non-novel upon more non-novel upon more

careful analysiscareful analysis


Quantifying Intangible RiskQuantifying Intangible Risk• What do you uniquely own?

– Quantify patent filing and examination risks > Title Risk

• Is it an operating asset or a liability?– Certain patent characteristics actually predispose their holders to litigation

> Property Risk

• Do you - or do 3rd parties - have the IP you need to operate?– Preserve monopoly to which you are entitled > Business Risk

• Is your current innovation strategy consistent with your corporate goals and market representations?– Your attorney’s clearance opinion may actually acknowledge inadvertent

infringement of unconsidered patents; Securities Reporting and Impairment Testing, Tax > Transaction and Reporting Risk


What Do You Own…with clear title?What Do You Own…with clear title?

• Does your IP suffer from:– Prosecution limitations?– Examination errors?– Co-pending “blind spots”?– Dependencies on 3rd party

holdings?

• Do you know your IP competitors as well as you know your market competitors?


Are you Free to Operate…?Who should you be watching, and who’s watching you?

• Is your patent position encumbered? If so, how can it be resolved?

• Is your current portfolio healthy and serving its purpose?– Maintain, acquire,

file, license?

Sample Triage™ Report: Patent No. USXXXXXXX ABC owned (related)

Historical Precedent (cited similar art)

EP10574XX ABC CORPORATION US39482XX ABC Corporation US39774XX ABC Corporation US39930XX ABC Corporation US40087XX ABC Corporation US40143XX ABC Corporation US40168XX ABC Corporation WO97376XX ABC CORPORATION WO98063XX ABC CORPORATION WO98232XX ABC CORPORATION

EP0391342 Toko Yakuhin Kogyo Kabushiki Kaisha US41112XX ABC Corporation US46120XX ABC Corporation US4725440 E. R. Squibb & Sons, Inc. US4749575 Bio-Dar Ltd. US47833XX ABC Corporation US4859467 Colgate-Palmotive Company US4892740 Taisho Pharmaceutical Co. US4983394 Warner-Lambert Company

Related Patents Uncited by Subject Patent that may be Cross Licensing Candidates

Potential Licensing Candidates based on Concurrent Efforts in Subject Patent Application Derivative Spaces

EP0375063 GIST-BROCADES N.V. EP0391342 Toko Yakuhin Kogyo Kabushiki Kaisha US4013792 Warner-Lambert Company US4018900 The Quaker Oats Company US4064184 International Flavors & Fragrances Inc. US4151270 Wm. Wrigley J r. Company US4173626 Merck & Co., Inc. US4226848 Teijin Limited US4238475 Life Savers Inc.

Abbott Laboratories American Cyanamid Company American Home Products Corporation Andrx Pharmaceuticals, Inc. Bone Care International, Inc. Church & Dwight Co., Inc. Colgate-Palmolive Company Edward Mendell Co., Inc. Hyal Pharmaceutical Corporation Inhale Therapeutic Systems Kinaform Technology, Inc.


The Buyer MatrixThe Buyer MatrixThe Buyer MatrixThe Buyer Matrix

PortfolioPortfolio R&DR&D M&AM&A LitigationLitigation

CEO and senior CEO and senior management management

InvestorsInvestors

Need to know how Need to know how to select between to select between opportunitiesopportunities

Who might be a Who might be a collaborator to collaborator to leverage value?leverage value?

Who can I enforce Who can I enforce against?against?

CEO, CFO, CEO, CFO, Research teamResearch team

InvestorsInvestors

Need to assess Need to assess competitor competitor components and components and offeringsofferings

Am I buying the Am I buying the right components right components from the right from the right party?party?

Who’s coming Who’s coming after me? How can after me? How can I destabilize the I destabilize the brand player?brand player?

CEO, CFO, CEO, CFO, Product ManagerProduct Manager

InvestorsInvestors

Need to identify Need to identify qualified pipelines qualified pipelines prior to “betting prior to “betting the farm” the farm”

Did I get all I need Did I get all I need to dominate my to dominate my market target?market target?

Who’s trying to Who’s trying to destabilize my destabilize my brand? brand?


Emerging CorporateEmerging CorporateEmerging CorporateEmerging Corporate

Portfolio R&D M&A Litigation


The Pipeline CorporateThe Pipeline CorporateThe Pipeline CorporateThe Pipeline Corporate



The Large CorporateThe Large CorporateThe Large CorporateThe Large Corporate



The SolutionThe SolutionThe SolutionThe Solution


Uniqueness AssessmentUniqueness AssessmentUniqueness AssessmentUniqueness AssessmentApplication pendency periods for all cited and citing art

Innovation density and antiquation

Uncited patents with claim redundancy (purple bars); Unconsidered concurrent patents (green bars); and, Unciting subsequent art (orange bars).


M·CAM® Comprehensive Innovation Risk Management

M·CAM® Comprehensive Innovation Risk Management

Patent Commercial Validity-Uniqueness-Dependency-Risk balance by innovation or acquisition

Competitive Intelligence-Monitor the patent holders-Eliminate reliance on classification/keyword paradigms-Quantify exposures in patents or portfolios

Business Management-R&D; M&A; Resource allocation right-sizing-3rd party advisor quality control-Continuous monitoring for internal and external impairment

Reporting and Finance-Reps and warranties-Securities, Tax, Contracts, Collateral-Financial risk rating for intangible assets and intangible operating exposures

The Operating System for the Knowledge Economy © 2004 IPR in Business Use Harnessing IP for Strategic Competitive Advantage IIMA July 2-4, 2004 MCAM.

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