Valuation & Marketing of Intellectual Property Joseph S. Holmes, MS, MBA President / CEO Acuity Edge, Inc. Adjunct Professor Duke University [email protected]Federal Laboratory Consortium Mid-Atlantic Region Annual Meeting Harbourtowne Resort St. Michaels, MD October 22-24, 2007
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Valuation & Marketing of Intellectual Property Joseph S. Holmes, MS, MBA President / CEO Acuity Edge, Inc. Adjunct Professor Duke University [email protected].
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“Only 1.5% of NASA patents were used outside the Agency from 1959 to 1979 compared to less than 5% commercialization rate of the 30,000 patents held by the US federal government as a whole” (Jolly, Commercializing New Technologies, introduction)
3,000 Raw Ideas = 1 Commercial Success! (Stevens, Greg A., Burley, James, Research Technology Management, 08956308, May/Jun 97, Vol. 40, Issue 3)
Execution Distribution: Send collateral to targets Navigation: Find the right contact(s) Interaction: Facilitate Q&A Qualification: Determine if target will turn to lead Transition: Move into value-extraction phase
6-12 weeks to determine quality and quantity of leads
Early stage technology Utility may be unproven A capability, not a product Field of use licensing Applicability may change with time Paper vs “paper + support” The “Champion Factor”
Value to owner = the value of each projected cash flow discounted to today’s dollars (aka discounted cash flow….commonly accepted valuation methodology). Using this method, one can value anything that can be monetized into cash flows. For example, $100 projected to be received 3 years from now at a 10% discount rate is worth $100/(1+10%)^3 = $75.13 (i.e., $75.13 invested today at 10% compounded interest would yield $100 in 3 years).
EPV Expected present value The value of the set of cash flows in today’s dollars (i.e., accounting for the time value of money & expected value concepts)
L Length of IP life Life of a US patent is now 20 years from date of application
n Year cash flow occurs Cash flows are assumed to occur at an annual basis (could be positive/income or negative/expense)
Pn Probability that cash flow at year n occurs
Likelihood that a given cash flow will happen (fraction between 0 and 1)
FCFn Free cash flow that occurs at year n
See finance texts for proper definition (could utilize net income as a rough figure for back-of-the-envelope calculation)
dn Discount rate at year n Interest rate you would expect from an investment of comparable risk-reward profile
Summary (cont’d) Every cell of a product-market matrix deserves its
own marketing plan & value estimation
Tech transfer requires methodology which is simple, precise/accurate, flexible, and universal
Use a simplified income method built upon a discounted cash flow technique for ballpark calculations (hold model constant and focus on gathering data and assumptions)