Panel Session V: The business of IP venturing with IP

Transcription

1 Panel Session V: The business of IP venturing with IP Sunday, October :00-15:30

2 Trevor Cook, Wilmer Hale (Moderator) Tim Heberden, Glasshouse Advisory Jane Perrier, Telstra David Postolski, Gearhart Law 2

3 GEARHART LAW The Business of IP-Venturing with IP AIPPI David Postolski October RIVER ROAD, SUMMIT, NJ (908)

4 GEARHART LAW WHO AM I? Economics of Innovation is changing in the US and abroad 41 RIVER ROAD, SUMMIT, NJ (908)

5 GEARHART LAW September 16, March 16, 2013 Structural evolution of the U.S. economy. U.S. has been transitioning from a manufacturing economy to a service economy since the 1970s. GIG ECONOMY, SHARING ECONOMY, REMIX CULTURE U.S. is transitioning to a knowledge-based economy where wealth creation stems from technological innovations that give rise to important IP rights. Rise of Companies such as Apple, Google and Facebook. Banking scandal- Dodd Frank- traditional investors such as Banks and SBA are OUT! INTANGIBLE ASSETS= IP Ocean Tomo, intangible assets as a percent of market value are at an all time high of 84% for S&P 500 companies while tangible assets have declined from 83% (1975) to 16% (2015). Global Patent and TM Harmonization- WIPO REPORT This is has caused, and why we are here today: 41 RIVER ROAD, SUMMIT, NJ (908)

6 GEARHART LAW IP ASSETS BEING USED AS COLLATERAL Collateral- something pledged as security for repayment as a loan, to be forfeited in the event of a default The number of patents pledged as collateral grew from less than 10,000 in 1995 to nearly 50,000 in Since 1980, 16% of all U.S. patents have been pledged as collateral before their expiration. By 2013, 40% of all firms with patents outstanding had pledged their patents as collateral at some point. TREND and we live it everyday: Intangible assets, particularly patents and TMs, are being pledged as collateral for secured financing at all stages of the innovation cycle 41 RIVER ROAD, SUMMIT, NJ (908)

7 GEARHART LAW Make no mistake, patents and TMs have to either generate royalty income or offer HIGH probability of doing so in the near future. Traditional Banks don t take these risks but the rise of the entrepreneur has created 41 RIVER ROAD, SUMMIT, NJ (908)

8 GEARHART LAW THE RISE OF THE NON TRADITIONAL LENDER and METHODS for raising money: Private equity/hedge Funds University Incubators The Entrepreneurial Bug Venture Capital Funds with ACCESSIBILITY Crowdfunding/Crowd financing Corporate Accelerators 41 RIVER ROAD, SUMMIT, NJ (908)

9 GEARHART LAW 41 RIVER ROAD, SUMMIT, NJ (908)

10 GEARHART LAW STEPS in IP DUE DILLIGENCE we must address: Due Diligence- searching, appraising, pre filing and post grant Ownership and Inventorship Public Disclosures and barriers of entry Proper TM usage and world wide searching Copyright issues- work made for hires and other unexpected issues 41 RIVER ROAD, SUMMIT, NJ (908)

11 GEARHART LAW STEPS in IP Valuation we must address: Limited Term to Patents Continuation Practice Accelerated Examination Enforcement on what's claimed 41 RIVER ROAD, SUMMIT, NJ (908)

12 GEARHART LAW 41 RIVER ROAD, SUMMIT, NJ (908)

13 GEARHART LAW Limit on what a company can raise through Title III equity crowdfunding remains at $1 million. If a company wants to raise more, there is always equity crowdfunding s prettier cousin, a Regulation A+ mini-ipo to consider The law limits investors to (a) the greater of $2,000 or 5 percent of the lesser of their annual income or net worth, if either the annual income or the net worth of the investor is less than $100,000 and (b) 10 percent of the lesser of their annual income or net worth, if both the annual income and net worth of the investor is equal to or more than $100, RIVER ROAD, SUMMIT, NJ (908)

14 GEARHART LAW A company must disclose to investors, and file with the SEC, the price of the securities, the method for determining the price, the target offering amount, the deadline to reach the target and whether the company will accept investments in excess of the target. US SEC removed Audit burden, and now a company using the law for the first time must only have reviewed financials to raise more than $100,000, and lesser financial disclosures when raising less than $100, RIVER ROAD, SUMMIT, NJ (908)

15 GEARHART LAW INCUBATORS AND ACCELERATORS, AND PRE REVENUE PROGRAMS.OH MY!! Definitions- really don t matter. Since the 1 st US Accelerator in 2005, they are backed by PE, VC, ENTREP, CORPS, BANKS, this is the new game in town $191M was invested into more than 8,800 startups across five major regions, including the United States and Canada, Latin America, Europe, the Middle East, and Asia and Oceania. 41 RIVER ROAD, SUMMIT, NJ (908)

16 GEARHART LAW SOSV- Princeton headquarters As of June 2017, the firm had funded over 680 startups, and continues to fund over 150 startups per year. In 2017 it became the world's third most active seed fund. 41 RIVER ROAD, SUMMIT, NJ (908)

17 GEARHART LAW US-based 500 Startups invested more than $18MM Techstars US, with a total investment of $17MM in US startups. Start-Up Chile ($7MM) Latin America s NXTP Labs ($6MM) Europe s Accelerace ($4MM) Canada s Alacrity Foundation ($3MM) 41 RIVER ROAD, SUMMIT, NJ (908)

18 GEARHART LAW Working with an accelerator early, or proving your concept, building your prototype, and achieving commercial success is the information a late stage investor, collateral financer, patent aggregator, Non practicing entity or a potential licensee/strategic partner are looking for! 41 RIVER ROAD, SUMMIT, NJ (908)

19 The business of IP - venturing with IP The Economics of IP Backed Funding Tim Heberden IP Economics Director 19

20 Securing funding through IP Debt > Use of IP to support corporate loan > IP as standalone collateral Equity > Communication IP quality & value within information memorandums > IP as cornerstone asset for early-stage tech companies 20

21 Economic characteristics of IP Upside Potential > Not diminished by use > Non-rival (simultaneous use) > Non-linear returns - high upside > Legal protection Risk > Extent of legal protection can be complex > Non-linear returns - risk of wasted investment > Impact of contributory assets/ best owner > Inefficient market 21

22 Earnings Potential Not all intangible assets are equal High High Earnings Potential/ Low Protection High Earnings Potential/ High Protection Strong patents, trademarks & copyright 1 Low Earnings Potential/ Low Protection Low Earnings Potential/ High Protection Legal Protection High 22

23 Quantifying IP value and risk 23

24 Quantifying IP value and risk 24

25 Market & Asset Assessment Quantifying IP value and risk Commercial Utility Legal Protection Market Attractiveness Economic Life Valuation Inputs/ Assumptions Value $ Development Risk Commercial Risk 25

26 Standards and guidelines Country specific standards 26

27 Discussion points > Strong IP rights are the crown jewels of intangibles - but. IP is a complex asset category > Robust IP valuation increase visibility of earnings & risk - require multi-disciplinary inputs > Funders need to be clear whether lending/ investing against: - IP as a standalone asset - IP as a means of protecting the competitive advantage of a business 27

28 AIPPI World Congress 2017 The Business of IP Venturing with IP Jane Perrier Special Counsel, Technology, Innovation & Intellectual Property Telstra Corporation Limited October 2017 Telstra Corporation Limited 2017

29 Traditional IP Rights Knowledge Based Capital Processes & Methodologies Firm Specific Skills Strategy Knowledge Management Software Methods [Big] Data / Databases Architecture Human Capital (Talent) Analytics Telstra Corporation Limited 2017

30 Innovation & IP *OECD Innovation Strategy 2015: An Agenda for Policy Action Telstra Corporation Limited 2017

31 How do Enterprises innovate? Enterprises innovate in different ways, to achieve different outcomes, for example Develop their own products, services & solutions Acquire capabilities, & talent, businesses, technologies & IP Collaborate with partners (vendors, customers, etc. ) Invest & engage with early stage & growth entities Access 3 rd party proprietary & open innovations Curate multi-party innovations & technologies IP is one of the capabilities ( levers ) an Enterprise can use to achieve these outcomes and deliver value Telstra Corporation Limited 2017

32 How does IP deliver value? Framework to control & access Innovation Engage with Experimental Exploratory (blue sky) technologies Unknown outputs & value Unknown competitive advantage Unknown revenue potential Unknown markets Open Non proprietary technologies Generic updates & maintenance of known technologies Revenue raising Brand profiling Shared ideas and resources Use Own Proprietary Core business technologies Output of quantifiable value High $ investment Medium long term utility High competitive advantage Home Market Collaborative Growth and new technologies Access to 3 rd party & multiparty innovation, capability & talent Partnering Competitive opportunity Adjacent Markets Curate/ Joint or Licenced Telstra Corporation Limited 2017

33 How does IP deliver value? Collaborative and Curative Engagements Curate Collaborate Innovate Telstra Corporation Limited 2017

34 How does IP deliver value? Attracting Talent & Developing Eco-Systems Telstra Corporation Limited 2017

35 How does IP deliver value? Sharing Resources & Know-How Telstra Corporation Limited 2017

36 What influences value type? Business Technology Market Internet Customer Market/s Partner/s Competitors Collaboration v Competition Data Security Law Reform / Trade Agreements Resources Monetisation Telstra Corporation Limited 2017

37 Align Innovation & Strategy Culture Engagement Governanc e Culture Governance Resources Innovation / IP Policy Resourcin g Budget Alignment Processes & Positions/Stance IT Systems & Processes Education Communication & Resources KPIs Accountabilities, reporting, benchmarking Risk & compliance frameworks Attracting & retaining the right Talent and Collaboration Partners Reward & Recognition Telstra Corporation Limited 2017

38 End Game Opportunities Competitive advantage To prevent imitation exclusivity; first to, or only in, market; temporal or geographic freedom To capture & reuse knowledge to gain efficiencies To increase entry barriers for competitors Risks Can you do what we want to do? e.g. Do we have freedom to operate, without risk of a 3rd party infringement/conflict claim? Collaborate with others? To create value asset generation; revenue (royalties) stream; other investment To trade IP for - $; market share; something else? To access technology; expertise; talent To curate 3 rd party technology & innovation How will you be impacted, if you don t have appropriate access to a technology? Loss of differentiation / competitive advantage Vendor dependency Cost exposures To benchmark your innovation capability Telstra Corporation Limited 2017

39 How will IP deliver value for your innovations? It's about timing. If it's too soon, no one understands. If it's too late, everyone's forgotten. (Anna Wintour, editor-in-chief, Vogue) Telstra Corporation Limited 2017

40 Thanks for your attention!