In The Atlantic magazine, Sen. Birch Bayh, who represented Indiana from 1962 to 1980, and Joseph P. Allen, president of Allen and Associates, responded to part of the new Start Up Visa Act, a bill that would change the landscape of university technology transfer created and nurtured since 1980’s passing of the Bayh-Dole Act. Sustained high unemployment rates and the increasing exportation of R&D jobs led the Kauffman Foundation (The Ewing Marion Kauffman Foundation) to recommend major changes in the innovation paradigm in the United States. Essentially there are six pillars to the Kauffman Foundation proposal:
- Establish a new immigrant status for those with degrees in science, technology, engineering, and math (entrepreneur visas and green cards);
- Provide startup firms with access to early-stage financing and capital gains tax benefits;
- Allow shareholders of smaller (or not so small) companies relaxed financial reporting responsibilities;
- Reduce patent fees and backlogs;
- Provide licensing freedom for academic innovators; and
- Reduce the regulatory burden faced by small companies.
Number 5 started tremors throughout the technology transfer world. In effect, these recommendations urge lawmakers to remove technology management from the universities and place it in the hands of academic inventors. “They can present no evidence that this would improve commercialization rates of new technologies while ignoring warnings that it would harm our competitiveness.” Presumably, federally sponsored research would revert back to the way it was pre-Bayh-Dole, with government ownership of the IP and/or academic inventor management of federally funded inventions.
The authors argue two points: 1) Bayh-Dole was passed in 1980 to address the problems with a system that the Start Up proposal will re-create; and 2) the current system is working, citing current startup and patent statistics and their effects on the economy.
The new proposals were adopted in the report of President Obama’s Jobs Council and are included in the Start Up Act in the Senate (S. 565: Start Up Visa Act of 2011), sponsored by John Kerry. (GovTrac gives it a 4% chance of passage.)
In a press release this week, Philip Solis, ABI research director, predicted a strong improvement in smartphone royalties as technology switches to LTE. Lost in the narrative, however, is a critical point for valuators and IP owners.
Value of a patent depends upon its remaining useful life, or, as Mike Pellegrino states, its “economic life.” The smartphone marketplace is a whirlwind, as technology shifts from 2G to 3G to 4G. GSM, GSM/WCDMA, and GSM/WCDMA/LTE handsets are generating royalty streams. Here is the key: Solis states there will be a massive shift in “power” to LTE patents over the next five years. The remaining economic life of the 2G patents valued just five years ago might have been five to seven years at the outside. 3G patents being valued today may well have an even shorter remaining economic life.
Smartphones provide just one example. In a review of hundreds of purchase price allocations, BVR has noticed many instances when remaining economic life was confused with legal life. A patent may be granted for 20 years, but with many technologies, that is irrelevant with respect to its value.
The complete Table of Contents to Mike Pellegrino’s Guide to Intellectual Property Valuation is presented here. BVR’s research into purchase price allocation benchmarks and living data will be available in June.
The LES survey received responses from 52 companies for the period from 2008 through 2011, with a total of 228 completed deals being submitted. Seventy-six percent of the deals involved patents.
These high technology fields are reflected: aerospace, software, clean technology, communication, semiconductor, consumer products electronics, and computer hardware.
Lost in the lay press coverage of Microsoft’s purchase of 800-plus AOL patents is the PR battle that is being waged between valuation shops with widely disparate conclusions of value.
Early on, at the request of a major shareholder, IPNav determined that AOL might realize up to $1.3 million per patent for the package. (For perspective, recall that the Nortel package that started this mind-boggling buying frenzy went for approximately $750,000 per patent.)
The IPNav valuation was heavily criticized, and others predicted the AOL package would ultimately fetch no more than a third of the IPNav number.
The Wall Street Journal reported AOL has agreed to sell 800-plus patents to Microsoft for $1.1 billion. Microsoft also gets a nonexclusive license to AOL’s remaining patent portfolio. AOL spokespersons said the agreement was the result of an auction process, but Microsoft had to be the target strategic buyer here, because their patents reference the AOL patents over 1,000 times.
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