Foresight President Efrat Kasznik gave a presentation titled “Are Patents Promoting Product Innovation? The Role of IP Strategy in the Global Marketplace” at the Product Management Event 2013 in San Francisco on March 4th, 2013. Many of the attendees at the session asked for a copy of our slide deck, so we have attached the embedded presentation. Are Patents Promoting Product Innovation? The Role of IP Strategy in the Global Marketplace from Foresight Valuation Group Incorporate a successful IP strategy to enhance your product management process · Align your IP portfolio with your product strategy and corporate vision · Maximize the offensive and defensive value of your IP as it relates to your products and industry · Accelerate product development through ‘open innovation’ by optimizing the inflow and outflow of knowledge · Implement tools and best practices for managing product innovation activities from R&D to market across your organization

1. ARE PATENTS PROMOTING
PRODUCT INNOVATION?
THE ROLE OF IP STRATEGY
IN THE GLOBAL MARKETPLACE
‘
The Product Management Event
2013
March 4-5, 2013, San Francisco
Efrat Kasznik, Founder & President
Foresight Valuation Group, LLC

2. The Patent Dilemma…
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3. About Me: Efrat Kasznik
 Founder and President, Foresight Valuation Group (Palo Alto, CA), a
Silicon-Valley based intellectual property, valuation and start-up advisory
firm.
 Lecturer on IP Strategy, Stanford Graduate School of Business (MBA
class)
 Licensing Executives Society (LES), High Tech Sector - Leadership
Committee; Chair, Nanotechnology Committee
 Intellectual property (IP) valuation and strategy expert, with 20 years of
experience analyzing IP portfolios for mergers & acquisitions, financial
reporting, technology commercialization decisions, tax compliance, transfer
pricing, litigation damages and business liquidations.
 Work with corporate clients across industries, from Fortune 100 to
start-ups, as well as law firms, universities, research institutions, inventors,
IP brokers and patent funds.
 Co-founder, CFO and adviser to startups in the fields of telecom, media,
cleantech and healthcare.
Foresight Valuation Group © 2013

4. Outline
 Products and IP
 IP Marketplace Overview
 IP Strategy in Product Lifecycle
 Case Studies
 IP Best Practices in Product Innovation
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5. Types of IP
Patents Copyrights
Trade
Trademarks
Secrets
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6. IP in Consumer Products
Copyrights
Trade
Trademarks Secrets
Patents
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7. IP in Digital Products
Patents
Trademarks Copyrights
Angry Birds
Trade
Secrets
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8. Comparison of IP Rights
Type Definition Criteria Life Example
Copyrights Original works of Automatic protection Author‟s life
authorship: literary, + 70 years
dramatic, musical,
artistic, etc
Trademark Word, name, Unregistered (first to use No
s symbol, device – common law), or expiration
used in trade to registered with USPTO as long as
distinguish goods. used
commerciall
y
Trade Business No need to show novelty, Indefinite
Secrets items/info: or disclose publicly; need
1. Economic to take measures to keep
value confidential (stamp, lock
2. Kept up)
confidential
Patents Right to exclude Novel, Non-obvious, 20 years
others from Clearly described; from filing
making, using or Granted by the USPTO
Foresight Valuation Group © 2013 products
selling
covered by

9. 250k Patents Going into
Smartphones
Design Patents
Ex. „slide to unlock‟ feature
Rounded square icons
Utility Patents
Ex. Enlarging documents by
tapping screen
Single touch and multi touch
gestures „pinch to zoom‟
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10. The State of IP in Mobile Devices
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11. Outline
 Products and IP
 IP Marketplace Overview
 IP Strategy in Product Lifecycle
 Case Studies
 IP Best Practices in Product Innovation
Foresight Valuation Group © 2013

12. The Mobile Patent Wars
Source: The Guardian and New York Times
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13. Mobile Market Patent Activity
Redistribution of IP holdings through Land-grab
and Turf-wars…
 Global Litigation
 Globalcourt battles: Apple-Samsung (2011)
 Non-Practicing Entity (NPE=”Troll”) litigation:
NTP-RIM $612.5 MM in damages (2006)
 Multi-billion Dollar IP-driven Transactions
 Patent acquisitions: Nortel patent auction (2011)
 Company Acquisitions: Google/Motorola mobility
(2011)
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14. Multi-Billion Dollar Deals Involving IP
Apple, Microsoft, Google, the losing bidder
Research in Motion, EMC, in the Nortel auction,
Ericsson, and Sony announced the $12.5
joined together in a billion acquisition of
consortium to win an Motorola Mobility, whose
auction for the 6,000 IP portfolio includes
patents of the bankrupt 17,000 issued patents
Nortel at a price of $4.5 and 7,500 patent
billion. applications.
June 2011 Aug 2011
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15. A “Perfect Storm” in the IP Marketplace
IP
Marketplace
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16. US Patent & Trademark Office
(USPTO) By The Numbers - 2012
Over 350,000 6,700 patent
patent applications
examiners
filed annually
Patent prosecution
16 hours of fees can exceed
examination time
per patent
$25,000
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17. USPTO Pendency and Backlog
Increase
Pendency time is close to three years…
… while application backlog is around
700,000
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18. More than 2,500 Patent Suits
Filed Annually Since 2001
Source: Northwestern Law, Searle Center
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19. The New Patent Marketplace in
21st Century – Rise of the
Intermediaries
Enforcement
(Litigation)
IP Creators IP Users
- Operating Companies - Operating Companies
- Independent Inventors Patent - Others
- Universities Sales/licensing
- Research Institutions
- Gov’t labs Cross Licensing
Intermediaries:
•Non-practicing entities (NPEs)
•Patent Funds/Aggregators (Intellectual
Ventures)
•Market Makers (Auctions, patent exchange)
•Financial services (securitization, litigation
finance)
Foresight Valuation Group © 2013

20. Troll Litigation is a Serious
Problem!
“This year, about 61%
of all patent lawsuits
filed through
December 1 were
brought by patent-
assertion entities, as
compared to 45% in
2011 and 23% five
years ago”
Source: Patent Troll Cases Now
Dominated by “Trolls”, Study by
Colleen Chien, Reuters, December
10, 2012
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21. Startups Most Litigated by Patent Trolls
Companies with less At least 55% of
than $100MM annual unique defendants in
revenue represent at Patent Troll lawsuits
least 66% of Patent make under $10MM
Trolls* defendants per year
* Patent trolls, also known as Non-practicing Entities (NPEs) are companies engaged in holding patents for
purposes of enforcing them in the marketplace against operating companies, in the form of licensing or litigation
Source: Startups and Patent Trolls, Colleen Chien, Santa Clara University School of Law, Legal Studies
Research Paper Series, September 2012
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22. America Invents Act (AIA) Highlights
Represents the most significant overhaul to the US
patent system since 1952.
 Main Changes include:
 US moves from First to Invent to a First to File
system (Section 102) – aligns the US with the rest of
the world –Effective March 16, 2013
 Post-Grant Review process for Business Method
Patents at the USPTO (Section 18)
 Joinder of parties >> Bars plaintiffs from suing multiple
defendants (Section 299)
 End of False Marking Claims (Section 16(b))
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23. Outline
 Products and IP
 IP Marketplace Overview
 IP Strategy in Product Lifecycle
 Case Studies
 IP Best Practices in Product Innovation
Foresight Valuation Group © 2013

24. IP Strategy Throughout the Product
Lifecycle
Developing IP Position Portfolio liquidation
Portfolio commercialization &
monetization
Foresight Valuation Group © 2013

25. IP Strategy – New Product
Goals:
• Freedom to operate
• Block competitors
• Support future products
• Hedge against litigation
Developing IP Position
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26. Sources of Product IP
Tech
Transfer
Internal R&D Manufacturing Marketing
Sources of outside innovation:
•In-licensing (companies,
universities)
•Buying start-ups, competitors
•Universities, research
institutions
•Collaborative R&D outfits
(Xerox PARC)
Foresight Valuation Group © 2013

27. The Open Innovation Movement
What is open innovation?
“Open innovation is a paradigm that assumes that firms
can and should use external ideas as well as internal
ideas, and internal and external paths to market, as the
firms look to advance their technology” - Henry
Chesbrough, Center for Open Innovation at the
University of California, Berkeley
Chesborugh ©
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28. Outline
 Products and IP
 IP Marketplace Overview
 IP Strategy in Product Lifecycle
 Case Studies
 IP Best Practices in Product Innovation
Foresight Valuation Group © 2013

29. Product IP Strategy Scenarios
 IP strategy can determine a product’s success,
market share, and profitability
 Freedom to operate
 Block competitors
 Support future products
 Hedge against litigation
 Attract buyers, investors
 Case studies demonstrate that a failure to
properly address IP issues can result in loss of
market share, margin erosion, and reduced
market competitiveness
Foresight Valuation Group © 2013

30. Support Future Products: Xerox PARC
Product: Graphical User Interface (GUI
Overview: In 1979, Xerox‟s PARC (Palo Alto Research Center) decided
not to patent its invention of the GUI because Xerox management didn‟t
see value or business in then small PC market. Xerox had written patent
applications for some of its GUI technologies but decided not to proceed
with its filings.
Outcome: A loss in potential revenues - had Xerox patented the GUI,
even at 1% royalty rate on sales, license fees Xerox could have eared
from 84-98 from Mac and windows sales would have topped half a billion
dollars.
Insight: Failure to patent results of innovative research can lead to
huge financial and strategic losses.
Foresight Valuation Group © 2013

31. Freedom to Operate: Polaroid and
Kodak
Product: Instant Camera
Overview: Kodak launched “Project 130” to develop instant cameras and films
– going after Polaroid‟s patented innovation. Kodak was aware of potential
infringement dangers, since Polaroid was fanatical about surrounding its
products with patents, but went ahead with its R&D strategy.
Outcome: Kodak found to have infringed on seven of twelve Polaroid instant
photography patents and ordered to pay $925M in damages to Polaroid.
Total cost - $3B (700 employees layoff, $1.5B manufacturing plant, $500M
buyback cost of 16M instant cameras, and$100M legal fees).
Insight: Kodak‟s patent strategy focused on having Polaroid‟s patents ruled
invalid if challenged in court instead of designing around the patents and
developing more advanced inventions of their own.
Foresight Valuation Group © 2013

32. Hedge Against Litigation:
Honeywell Int. vs. Nest Labs, Inc.
Product: Home Thermostat
Overview: Honeywell filed a multi-patent infringement lawsuit against Nest
Labs for allegedly infringing on seven Honeywell patents – sought cease and
desist order and collection of damages – not licensing fees.
Outcome: Nest filed for reexamination of Honeywell‟s patents.
Insight: Companies can no longer concern themselves with being innovative
– they must plan for litigation from other competitors in similar markets
(particularly startups and large incumbents)
Foresight Valuation Group © 2013

33. Block Competitors: Lululemon vs. Calvin Klein
Product: Yoga pants
Overview: Lululemon sued CK for allegedly infringing design
patents for its “Astro” yoga pants‟ signature waistband and
design
Outcome: Lululemon has withdrawn lawsuit filing after
companies agreed on confidential settlement.
Insight: The importance of design patents
Foresight Valuation Group © 2013

34. Outline
 Products and IP
 IP Marketplace Overview
 IP Strategy in Product Lifecycle
 Case Studies
 IP Best Practices in Product Innovation
Foresight Valuation Group © 2013

35. Elements of IP Strategy
Offensive:
Enforcement/monetizatio
Internal n
R&D Buying
(filing IP
patents) (patent
s,
In- tradem
licensin arks) Defensive:
g Product centered
(university,
governmen
t labs)
Sources of IP IP Strategy Goals
Foresight Valuation Group © 2013

36. IP Strategy Throughout the Product
Lifecycle
Developing IP position Portfolio liquidation
Portfolio commercialization &
monetization
Foresight Valuation Group © 2013

37. IP Strategy – New Product
Goals:
• Freedom to operate
• Block competitors
• Support future products
• Hedge against litigation
• Attract buyers, investors
Sources of IP:
• Internal R&D  filing
patents
• Buying patents
• In-licensing (university,
government labs, etc)
Developing IP position
Foresight Valuation Group © 2013

38. IP Best Practices: Later Phase
 Defensive Goals – Manage Litigation Exposure
 Don‟t panic! Be Prepared…
 Assess your options, use litigation data - not only legal analysis
(prob. of success, anticipated damages, etc)
 Mitigate the risk (patent defense funds) – be proactive!
 Offensive Goals – Enforcement & Monetization
 Be ready to enforce your IP
 Monetize your portfolio regularly
 Manage royalty, maintenance payments
Foresight Valuation Group © 2013

39. Strong IP Portfolio Supports Later
Phases
Use
Internally
License
Sale
Joint
Venture/Spin
Off
Enforcement Portfolio commercialization & Portfolio liquidation
monetization
Foresight Valuation Group © 2013

40. Patent Licensing Scenarios
Invention
Paten
Patent
t Pool
Infringement Royalties &
>> Lawsuit Licensing
$$
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41. Is Your Industry the Next Litigation
Battleground?
Attribute Characteristics Mobile Your
Industry
?
Market Size Explosive Market, large economic stakes  ??
Products/ Multiple features in one product  ??
Services Multiple layers of Services in Platform
IP Patent thicket – overlapping claims  ??
Landscape Business method patents – broad claims  ??
Competitive Incumbents with large IP holdings  ??
Dynamics Newcomers entering markets without IP  ??
NPE (trolls) patent holders  ??
Foresight Valuation Group © 2013

42. About Foresight Valuation Group
We Are
Foresight Valuation Group, LLC (FVG) is a Silicon-Valley based
intellectual property (IP) consulting firm, providing high quality
analytical services.
We Provide
A full suite of services designed to help our clients increase their
bottom-line results through valuing, strategically managing and
monetizing their IP assets.
 IP Valuations
 IP Strategy
 Economic Analysis & Business Valuations
 Litigation Support
 Startup Advisory
Foresight Valuation Group © 2013

43. THANK YOU!
Efrat Kasznik
President, Foresight Valuation
Group
ekasznik@foresightvaluation.com
www.linkedin.com/in/ekasznik
650-561-3374
www.foresightvaluation.com
Presentation available upon request