Glenn D. Sacks, CPA, of Marks Paneth & Shron LLP, writes that the changes in patent law being ushered in by the America Invents Act will increase the value of patent portfolios and create a system that spawns and nourishes innovation. Here’s how he sees it working:
- Increased funding of USPTO should lead to better initial examinations of patent applications, leading to higher quality patents and less litigation;
- Validity of patents granted should be easier to defend;
- “First-to-file gets the patent” should lead to less litigation on ownership issues;
- As a result of points 1-3, patents will be easier to monetize:
- Net cash flows are expected to be greater, yielding greater values;
- Greater value and less risk will allow IP owners to put more IP into collaborations.
More IP in play is a net increase in innovation, which attracts new capital. New capital creates new products and processes and breeds still more innovation, renewing the cycle.
One risk of IPOs: patent lawsuits
One management risk chief intellectual property officers should take into account when the company is considering an IPO is that they will be hit with patent lawsuits. Take Facebook, for example. “Last year, Facebook was named as a defendant in 22 lawsuits accusing it of patent infringement, double the number from 2010,” notes mybroadband.co.za. “The attacks against Facebook signal that social media has become a new front in the Silicon Valley patent wars.”
Before they filed an IPO, neither online game developer Zynga, Groupon, or LinkedIn ever had a suit filed against them. When they went public in 2010, the patent lawsuits rained down against them. IPOs make aggregators think they can quickly win a settlement from companies.
Ron Laurie, a specialist in IP and investment banking who is cofounder of Inflexion Point Strategy and a member of BVR’s Intellectual Property Management & Valuation editorial board, told mybroadband.co.za that companies are most vulnerable to patent challenges when they file their intention to go public with a form S1 with the U.S. Securities and Exchange Commission. “You just knew when you filed the S1, the letters would start rolling in,” he said.
IPWire keeps you up to date on the hottest topics in IP management! Don’t miss these upcoming webinars:
Trademark audits: an important IP management tool
Some companies do them religiously. Others do not. But any company holding trademarks should consider an annual audit to: (1) identify new and existing trademarks and give the company a clear picture of its assets; and (2) better manage, protect, and fully exploit the value of these assets, notes Christine Baker of www.copyrighttrademarkmatters.com.
A trademark audit, which should be done by someone who understands trademarks and service marks, consists of four steps:
- Thoroughly review a company’s product line or services, web site, and promotional and marketing literature and take an inventory of all new and existing marks;
- Determine that the marks are registered with or are the subject of pending applications before the USPTO and foreign trademark offices;
- Focus on whether important trademarks are in use and have been renewed with appropriate trademark offices—in many countries, trademark rights can lapse and registrations can be cancelled if a mark hasn’t been used for three to five years; and
- Determine whether a company’s federally registered marks have been recorded with the United States Customs and Border Protection (CBP). If the audit reveals that this step was overlooked, consideration should be given to recording trademarks with CBP. That way, customs officials will be able to detain, seize, and forfeit shipments of trademarked goods that violate your company’s federally registered trademark rights.
Two Apple patent filings give a glimpse into its corporate strategy
Filing patents is critical for protecting inventions, but truth be told, it also gives competitors a peek into other companies’ corporate strategies. Take two recent Apple patent filings. In the first, the innovative computer company indicates that it will use Siri, the voice-activated technology in its iPhone 4S, in a wide spectrum of Apple products. “The company filed a patent application for Siri, which includes a diagram showing that the voice-activated assistant could be included in many products and services, including computers, tablets, connected televisions, cameras, Web, and e-mail platforms,” reports mobilemedia.com.
The second patent application reveals an innovative way of designing batteries that could mean both thinner devices and higher battery capacities for Apple products. Clearly, tradeoffs exist in the patent filing business, and part of IP management is developing criteria to evaluate this tradeoff.
Many standalone intellectual properties are worth more than companies in the S&P 500. Early stage technologies rely heavily on IP—without it, they may command little value in the market. Yet, IP valuation remains tricky. There are no comparables in the market, discount rates are not directly observable, competitors can attack protections, and the commercial market may be less than expected.
While correctly assessing IP value can lead to remarkable shareholder wealth creation, incorrect valuation can be very costly. In today’s environment of open innovation and technology partnerships, this is particularly true. A two-day workshop March 6-7 by Mike Pellegrino can provide you with realistic guidelines to correctly value your organization’s early stage technologies. This course provides detailed steps to:
- Identify key sources of value.
- Decide which valuation approach to use for different situations: cost, market, income.
- Correctly assess market potential, value proposition.
- Prioritize opportunities—invest or divest appropriately to maximize ROI.
- Establish ownership, license, and/or partnership deals.
- Protect and leverage your firm’s intellectual property.
- Strengthen your patent and product portfolio.
Pellegrino, who is author of BVR's Guide to Intellectual Property Valuation, Second Edition, and one of the world's foremost experts on how to value early stage technologies, will be leading this hands-on session in San Jose, Calif. Through a combination of methods, case examples, and hands-on exercises, you will learn to take the guesswork out of this critical activity. The registration fee of $1,995 includes workshop materials, luncheons, refreshment breaks, reception, and post-workshop follow-up. To register, click here.
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