What to do after your patent issues

1. SO YOU HAVE GOTTEN A PATENT -
NOW WHAT?
BY:
KIRBY DRAKE

2. Perspiration + Time = Patent
• “Genius is one percent inspiration and ninety-
nine percent perspiration” - Thomas Alva Edison
• Many patent applications filed each year
• 760,924 patent applications awaiting action by
Examiner in 2007
• 1,112,517 pending patent applications in 2007
• 1 out of 3 patent applications issue into a patent
• Patent applications generally take 2+ years to
issue into a patent

3. Is This Where Your Patent Is?

4. Making Use of Patent After Issuance
• Most patents retired to file
cabinet and not source of
revenue generating activities
• 15-20% of all patents do not
have their first maintenance
fee paid – go abandoned
Typically have 20 years of patent term –
find ways to make perspiration and time worthwhile

5. Patent Issues – What Next?
• Options for Using Patent
• Litigation
• Licensing
• Spinout or start-up business
• Partnerships, joint ventures

6. Patent = Litigation Against Infringers
• Around one percent (1%) of patents find their
way into the United States District Courts through
patent infringement suits

7. Patent = Litigation Against Infringers
• Depending into which technical area a patent
falls, the chance of a patent being named in a
litigation varies widely
• Chance of litigation as high as 0.41% for medical
patents to as low as 0.16% for chemical patents
• Even for “most ‘valuable’ drugs and health
patents” low rate of litigation
Out of the 166,000 patents that issued in 2001, under 1,700
will ever be litigated over their lifetime.

8. Patent = Litigation Against Infringers
• Litigation offers less certainty than other uses of
patents
• However, only 1 of 7 cases end with a court’s judgment
• Most of the rest of cases end before trial begins – i.e.,
via settlement
• Concerns about patent validity challenges,
whether infringement is present, and whether
significant damages can be demonstrated
Want reasonable confidence about these issues before
going litigation route

9. Patent = Litigation Against Infringers
• Benefits of Successful Litigation
• Monetary damages
• Potential injunction
• Establish credibility of patent - formation of basis for
ongoing licensing program
• However, may not want to risk patent through
litigation – other options?

10. Unlitigated Patents = Still Valuable
• Litigated patents not the only valuable patents
• Unlitigated patents may be valuable
• Defensive measures
• Deterrent to block others
• Create a patent thicket
• Signaling purposes
• Generate revenue through licensing and other
business relationships

11. Unlitigated Patents = Less Controversial?
• Generally, when a company receives a demand
letter for alleged patent infringement for
something they think they invented and invested
to build the market for, they aren’t happy and
less willing to deal
• It is more akin to trying to get the proverbial pig
to fly - it doesn’t work, and it annoys the pig

12. Patent = Licensing Program
• Can be effective way to generate revenue and
to establish credibility of patent and business
• Examples of companies with well-known
licensing programs
• IBM
• Qualcomm
• Texas Instruments

13. Licensing and/or Using Your Patent - IBM
• For each of the past 15 years (1993-
2007), IBM has been granted more
U.S. patents than any other
company
• IBM received more than 38,000 US
patents in 1993-2007
• In 2007 alone, IBM received 3,125
U.S. patents

14. Licensing and/or Using Your Patent - IBM
• IBM licenses technology primarily to
enhance the return on its investment in the
technology
• License fees are at market rates
• Licenses generally involve combinations of
up front payment and royalties based on
revenues generated from use technology
• IBM benefits from long-term commitment to
a broad range of fundamental research –
had good sense to patent much of
fundamental research before patents
became fashionable

15. Licensing and/or Using Your Patent -
Qualcomm
• Qualcomm has powerful CDMA licensing model
• But service providers and handset makers didn’t
initially beat a path to Qualcomm’s door even
though CDMA initially was technically superior to
TDMA
• Qualcomm had to build the components, the
handsets, and even pay for the initial network
build-outs (in Los Angeles and New York) before
they started to generate licensing revenue
• Licensing program generated more than $200
billion in revenue in 2005 alone

16. Licensing and/or Using Your Patent – Texas
Instruments (TI)
• TI has built an impressive patent portfolio
• Derives considerable strategic advantage
• Licensing revenues in excess of $800M per year
• TI may have benefited from Patent Office delay of
several years in issuing some of their early
semiconductor patents
• Able to amend patents while they were still pending to
make them more applicable, and by the time the patents
issued the technology was being used by many others

17. Licensing and/or Using Your Patent
• Texas Instruments, Qualcomm and IBM make
patent licensing look deceptively easy
• However, more akin to a 10+ years of effort with
huge upfront investment rather than anything
resembling an overnight success
• IBM, TI, and Qualcomm all generated patent
licensing revenues by first creating - or at least
finding - the business model and market for the IP
rather than sending out a mass mailing of
demand letters

18. Licensing and/or Using Your Patent
• Many companies already license some products
or sell products that are covered by patents, but
may not take advantage of all the opportunities
offered by an effective patent licensing strategy
• Not every company has a patent portfolio the size
of IBM’s, but even a small company is not
precluded from adopting patent licensing as a
business strategy

19. Licensing and/or Using Your Patent
• No one-size-fits-all license agreement or
approach to patents
• Many issues to consider not only for each patent,
but for each deal
• Should a patent be licensed on a per product royalty or
on a per use basis
• What is the “product” upon which the royalties are
based on
• What is a fair royalty?
• What is the scope of use?
• Can you maximize revenues by licensing
geographically? By narrow fields of use? By time?

20. Patent = Other Ways to Monetize
• Just like a good football team has a variety of
formations and plays, should always look for
more than one way to monetize patents

21. Patent = Other Ways to Monetize
• Various alternative to litigation and straight
licensing
• Technology transfer
• Start-ups
• Spinoffs/spinouts

22. Patents = Startups
• June 2007 - North Carolina Biotechnology Center
established business-support programs to
encourage the state’s public and private
universities and research institutions to start
commercial ventures based on patents derived
from their faculty research
• North Carolina A&T University - Provagen
• North Carolina State University - Sirga Advanced
Biopharma

23. Patents = Startups
• North Carolina A&T University - Provagen
• Formed to commercialize unique protein technology developed
by a molecular biologist and research coordinator at the
University’s Department of Animal Sciences
• Technology based on patented “Synthetic Protein V” can be
used to purify and isolate antibodies that can be used in several
disease treatment and diagnostic applications
• North Carolina State University - Sirga Advanced
Biopharma
• Capitalized on research by professor of biochemistry
• Using patented technology to identify novel therapies for drug-
resistant diseases and other difficult-to-treat human health
conditions, including HIV and autoimmune diseases

24. Patents = Startups
• Too early to fully evaluate success of these
startups
• Expect short-term and long-term benefits
• Address significant unmet technological needs
• Establish stronger industry-academia relationships
• Provide new job opportunities
• Obtain royalties from licensing technology and/or selling
product

25. Start-Ups Acquiring Patents – From University to
Start-Up
• Nano Terra – startup based in Cambridge, MA
• One of largest nanotechnology patent deals to date – licensed
rights to more than 50 patents from Harvard University
• Patents cover techniques for designing materials that
assemble themselves into microscopic lenses and data
storage devices, to tools for patterning complex nanoscale
circuits over large, irregularly shaped surfaces
• Using patent portfolio as basis for business strategy to create
products that its clients cannot make at all or cannot make
cheaply
• Already has development agreements with the Department of
Defense, Merck and 3M
• Not all patents may be breakthroughs
• Many improve on earlier work
• However, interest is present and brings benefit to Harvard as well
as Nano Terra

26. Start-Ups Acquiring Patents – From Industry to
University
• NutriJoy, Inc.
• Company was created and supported by the efforts of
NISTAC and Kansas State University through two
technology donations from the Procter and Gamble and
Company (P&G)
• P&G donations included:
• Protein particle stabilization (PPS) technology the basis for
Cal·C®, that provides a method to make shelf-stable
beverages containing juice and milk; and rights to use a
proprietary P&G calcium fortification technology (calcium
citrate malate); and
• A nutritious snack food technology, the basis for
GoodBites™- technology protected under at least 3 U.S.
patents
• Parlayed technology into Coca-Cola acquiring majority
interest in company because of profitable growth in area

27. Patents = Corporate Spinouts
• Technology companies identify good technology to use for
spinouts
• Corporate patent spinouts typically have certain
characteristics:
• Completed product or prototype in an advanced phase of
development
• Significant prior corporate investment and several years of
prior R&D
• Early customer interest and engagement
• Initial revenues, or less than 12 months from first revenue
• Highly capital efficient due to reduced equity investment needs
going forward
• Technology team and other key employees available as part of
the spinout
• Availability of critical IP via assignment or exclusive licensing

28. Patents = Corporate Spinouts
• Avoids stranding novel technology and patents
within a corporation
• Corporate parent – at no additional expense –
may recoup initial R&D dollars and potentially
reap substantial rewards if spinout blossoms
• Spinout benefits from acquiring technology and
having relative autonomy to develop technology

29. Establishing a Patent Strategy
• Whatever path is chosen for using patents, need
a well-considered patent strategy
• Supported by management
• Result of patent audit
• Supported by patent expertise
• Managed by a centralized patent assessment group

30. Steps to a Viable Patent Strategy
• Obtain corporate support
• Strength and success only as successful as the
willingness of entire company to pursue and support
strategy
• Consider company’s core business and willingness to
(i) capitalize on patents both in a defensive (such as
cross-licensing) and offensive mode (such as
conducting litigation to stop infringement), and (ii)
license patents to potential competitors
• Understand how patent licensing and/or litigation fit into
company’s overall vision

31. Steps to a Viable Patent Strategy
• Conduct a patent audit
• Patent audits can be conducted in many different ways and
for different goals
• Identify the patents and potential patentable technologies of
your company, the markets and companies to which those
patents would apply, the strategic value of the patents to the
core competency of company, and the industry environment
for accepting licenses
• To build a strong patent portfolio, the audit should also
include an analysis of how company identifies and protects
patents
• May need audit to provide the data necessary to obtain
corporate support

32. Steps to a Viable Patent Strategy
• Create a centralized patent assessment group
• Identify which inventions should be patented
• Identify which patents should be licensed/litigated
• Formalize company’s approach to dealing with third
parties
• Valuate patents and assist in selecting potential
licensees/partnersConcentrates patent efforts within a set of individuals
working across business units, adds continuity and
consistency to process, and presents a unified front

33. Patents = Value
Patent strategy
+
Methodical execution of patent strategy
=
Great rewards