Wednesday 17 June 2015

IPBC Global 2015: Conference report VIII

The final round of this year's IPBC Global 2015 conference was given over to breakout sessions. This blogger could not resist the lure of attending the session dedicated to a true IP finance topic: "Value conundrums". According to the event's web-blurb, "Patent value drives the IP marketplace. Working out what it is and how it can be quantified are both complicated tasks; but that is what this session sets out to do".
Damon Matteo (CEO, Fulcrum Strategy) moderated a talented panel consisting of Santosh Mohanty (Vice president, head of IP and product engineering, Tata Consultancy Services Limited), Takuya Saito (Vice president, Shobayashi International Patent & Trademark Office), Bruce Schelkopf (Group senior vice president and chief IP officer, ABB Inc) and Nigel Swycher (CEO, Aistemos). Damon promised to keep the presentations short, to allow plenty of time for questions -- with the heady attractions of cocktails to follow.

First to speak was Santosh, who thanked us for attending this session, hoping that this investment of our time would yield dividends. How does Tata value IP? Santosh identified three topics: 
* the context of the valuation: this includes the technological, social and environmental impact of the IP to be valued, and how end products may be created through its use. Further, how does the brand create valuable goodwill in the tangible world of real products? 
* the context of the marketplace: placing the valuation in a context of time and space, with synergies with other items of the IP portfolio and how they might augment market penetration. Also, how the IP affects the relationship of Tata with its business partners; 
* risk and the sustainable nature of the IP's value. This includes the risk of litigation and the risk of poor market performance.
What of the future? Tata's philosophy is the continuous promotion of creation within its organisation (300,000 employees spread through 50 countries), looking for opportunities to make profit by taking new ideas to the marketplace.  It is impossible to do everything in one go, everywhere, so priorities must be established and areas identified in which Tata can be a pioneer. 

Bruce spoke next, explaining his exposure as an employee to "productisation": the job of finding new products from IP that had already been paid for.  This was "a yeoman's task", but it turned out to be a worthwhile idea and it sensitised him to the potential for making money from IP. If money can be extracted from IP, it must be valuable -- but how to value it? This takes us out of the technical field and into the financial field. We have to learn to speak financial language, since that's the language in which IP is valued.  

Expectations are often set by external events, added Bruce, but it's unreasonable to set one's own expectations in relation to transactions and valuations that relate to others' IP, however exciting they are. Patents are valuable if they're good -- and the definition of a good patent is one that you own. At base, it's not the number of patents that counts but the income they yield, the return on investment.  If it's not being used and generates no income, it's not very valuable. Don't use other people's benchmarks either: set your own metric and stick to it. Think about how much you have to generate in terms of sales in order to fund litigation over your patents; that will put your IP's value in context.  Ultimately, it's a successful business strategy that will create IP growth.

Nigel then took the podium, casting doubt on the mantra that patent value was based on Georgia-Pacific and that you have to sue in order to find out how much your patent is worth.  The problem at present is that litigation is not the best way to perform patent valuations, but the data needed for a proper valuation is not easily available. In any event, 90% of patent suits settle before trial and databases of patent licences only scratch the surface in terms of the proportion of all transactions which they are able to record.  More information and more transparency is needed if decisions based on real, factual data are to be made. 

Yesterday's future is today", said Nigel, "which is great".  In future versions of this conference we can expect to see the disappearance of the word "troll" -- a pejorative term which reflects a lack of data upon which to establish sensible pricing of transactions. Transparency will increase and items such as the identity of patent owners will enhance the ability to transact patent deals properly.  This is why the launch of ORoPO as a means of pinpointing the actual ownership of patents is so important. It may be just one small step towards transparency, but it's a step in the right direction -- and anything that industry can do for itself is preferable to outside regulation.

Takuya then spoke about know-how based intellectual property, which is contained within the human brain rather than in the literature.  It has been possible to introduce an electronic notary-based system, with an electronic signature, that allows for the easy dealing with recorded know-how, the preservation of evidence and the identification of tradable content. An example of how this has been successfully done was given in regard to a Japanese sake brewery whose plant was destroyed in 2011 was able to engage in a technology transfer operation which enabled its sake could be brewed in the United States in accordance with its protected know-how. The result of this is that know-how has become another asset class.

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