Monday, 29 February 2016

The Demographics of Innovation in the US: what can we learn?

"The Demographics of Innovation in the United States" is an 87-page report by the Information Technology and Innovation Foundation (ITIF). ITIF is "a non-partisan think tank whose mission is to formulate and promote public policies to advance technological innovation and productivity internationally", so its thoughts and findings should prima facie be presumed relevant, if not in all cases crucially important, to the understanding and decision-making processes of many readers of this weblog.

So what is this study about, and what does it find? In summary:
“This study provides a detailed portrait of individuals who are driving technological innovation in the United States—including their gender, ethnicity, countries of origin, education, and age—as well as the settings and circumstances in which they are creating their innovations, such as the institution (or institutions) behind the advances, the commercial status of the innovations, and their funding sources. 
To gather this information, ITIF surveyed more than 900 people who have made meaningful, marketable contributions to technology-intensive industries as award-winning innovators and international patent applicants. The study finds that immigrants comprise a large and vital component of U.S. innovation, with 35.5 percent of U.S. innovators born outside the United States. Women represent just 12 percent of U.S. innovators, and U.S.-born minorities (including Asian Americans, African Americans, Hispanics, Native Americans, and other ethnicities) represent just 8 percent of U.S.-born innovators. 
Contrary to popular conceptions about precocious college drop-outs with big ideas, U.S. innovators actually tend to be experienced and highly educated—and most hold advanced degrees in the fields of science and technology.”
We add a few points for reflection.
* The persons surveyed were identified as those who had made "meaningful, marketable contributions to technology-intensive industries as award-winning innovators and international patent applicants".  This suggests that the innovations in question were probably made several years ago, to give time for them to be commercialised or implemented and for their "meaningful contributions" to be recognised. On that basis, the survey results may be somewhat historical. 
* The breakdown of innovators by ethnicity, national origin and gender is interesting in itself, but demands more data before it can be said to be significant. For example, it should be read in the context of the make-up of the workforce as a whole, so that significant deviations can be spotted. Further, it would be good to match up this profile of US innovators against the corresponding profile of US project managers, product developers, corporate investors and risk capitalists. Might something of significance be revealed from this exercise?   
* It would also be good to match up these figures against 900 respondents whose innovations also contributed to technology-intensive industries but won no awards and received no acclamation. Would demographic analysis of the two groups show a perfect correspondence? 
* We learn that "immigrants comprise a large and vital component of U.S. innovation, with 35.5 percent of U.S. innovators born outside the United States".  Within this statistic, one wonders what proportion of the immigrants were both educated and trained in the US, how many migrated to the US in order to pursue their innovation-based ambitions and how many were educated abroad and then recruited or head-hunted, or worked for US-owned corporations in their home countries, before gaining recognition for their innovations. 
* The conclusion that reality does not coincide with the popular conception of the typical innovator being the precocious college drop-out is welcome, but it is unlikely that these findings will change the popular view.  Successful innovative college drop-outs make for romantic tales of improbable success against the odds which in turn generate media interest, boost click-throughs and sell newspapers. To the extent that the existence of this stereotype attracts publicity and interest, it will persist and continue to overshadow the dull reality of patiently-evolved team work of highly educated and organised graduates.
Ultimately we must remember that the success of an innovation cannot be measured in terms of how many patents are granted, or how many prizes are awarded, but rather on how the path from drawing-board (now computer monitor or tablet) to market is navigated, and on how people who are often far distant from the innovation in both cultural and technological terms carry out their analytics exercises, spot competitors and allies, do their sums, invest their cash and launch their product or process before their customers. It is this that helps define the data set from which researchers into the demographics of innovation will select their respondents. 

Thursday, 25 February 2016

Glee and grin-and-bear -- but Indian shift on software patents will provide data test-bed

It is now no secret that India is to refuse patent protection to certain software-related inventions. The decision, announced on 19 February, has been met with a predictable mixture of glee and grin-and-bear.  This change is not the result of legislation; rather, it is the result of the issue by the Indian Patent Office of revised Patentability Guidelines for Computer Related Inventions. It does not bar all software patents per se. Before this change, section 4.5.4 of the August 2015 Guidelines read:
If a computer programme is not claimed by ‘in itself’ rather, it has been claimed in such manner so as to establish industrial applicability of the invention and fulfils all other criterion of patentability, the patent should not be denied.
This version has now been replaced by the following:
The computer programme in itself is never patentable. If the contribution lies solely in the computer programme, deny the claim. If the contribution lies in both the computer programme as well as hardware, proceed to other steps of patentability.
How much of a difference will this make, and to whom? According to the Global Legal Post,
India's Controller General of Patents, Designs and Trade Marks has reaffirmed its position that allowing the patenting of software would hinder innovation and competition in the country's tech industry.
Once such patents are no longer available, economists, software experts and IP analysts will be scrambling over the data in order to ascertain whether and, if so, to what extent, this statement is true.  The casual observer of the Indian software scene will already have noted that it is vast, creative and focused on global as well as national products, services and applications.  Tata Consultancy Services, Infosys, Wipro, HCL Technologies and Tech Mahendra lead the way and many others are in their wake. Have they been so impaired by existing patent-eligibility rules that they will now be unshackled and enabled to compete effectively, or will their activities now be increasingly unprotectable and vulnerable to emulation?

Another point to bear in mind is that innovation and competition in the software sector are not solely the product of the availability of patents, since those rights -- however much they are treasured by their owners and respected by their investors -- operate in the same space as copyright, trade marks and contract law as a means of creating and preserving goodwill and marking out corporate territory into which rivals venture at their own risk.

Now that the US Supreme Court in Alice Corp v CLS Bank and the Indian Patent Office have weakened or dislodged the grip of patent protection on computer-related inventions, while the European Patent Office has not, we have a great test-bed for measuring visible innovation, investment and creativity in three major zones of economic activity.  Patent applications and grants, the entry of new companies and the disappearance of others, as well as the migration of investment funds between businesses, sectors and geographical regions will all come under scrutiny.  But the resultant figures provide analysts, economists and politicians with the knowledge they need if constructive IP policies are to be enacted and enforced?

Further reading on the Indian Guidelines:
  • The Times of India here 
  • Global Legal Post here 
  • The Tech Portal here 
  • Spicy IP here

Tuesday, 23 February 2016

Terra of the unknown: trolling in Europe and corporate cosmetics

An Opinion piece published yesterday morning in Management Today reminds us of something that has sometimes been overlooked or deliberately ignored in the debate over the role of non-manufacturing patent owners that has taken place over the past few years in the United States. Abusive and evocative slogans condemning patent trolls have hogged many headlines in the course of this debate, and the distance from the headline to the head can be vast. Slogans are not however a convenient substitute for clear thinking and, even where the need to take action is clearly established, the need to avoid an over-reaction cannot be conveniently bypassed.  Patent trolls are a case in point. We can surmise that some patent-enforcement activity is good, some is neutral and some is bad -- but how we define and deal with the bad stuff is something that should be dealt with in an objective and logical manner, not on the basis of a knee-jerk response.

Yesterday's piece, by London-based patent attorney John-Paul Rooney (Withers & Rogers), bears the title "Blocking patent trolls threatens genuine innovators" and succinctly addresses a serious issue: the fact that the new European unitary patent and Unified Patent Court comprise a sort of terra incognita when it comes to trolls and the exploitation of patents. In his article he explains:
"Legitimate non-practising entities (NPEs) are similar to trolls in that they hold patents for products or processes they don’t directly bring to market. However, beyond this there is a fundamental difference in that although they develop products themselves they work closely with manufacturers, usually through long-standing collaborative relationships. They also tend to invest heavily in R&D and the development of new technologies. While they may choose to enforce their IP assets through the Courts, legitimate NPEs have a more positive role to play in fostering innovation and helping to bring new products to market.

Some of the UK’s most innovative companies are in fact NPEs and this business model tends to work particularly well in fast-moving sectors, such as consumer electronics. Some of the world’s leading fabless semiconductor developers, for example, are based in the UK and while they tend not to manufacture anything using their own technologies, they invest large sums of money in R&D and support innovation".
While this is all true, we are nonetheless faced with a problem in that patent ownership and enforcement does not occur in a binary setting in which all players are, by definition, trolls or non-trolls. Even assuming that we can all agree upon a legally cogent definition that enables us confidently to identify good and bad NPEs, patent-owning businesses in the real world appear to spread their activities across a wide spectrum of behaviour. Indeed, some may be both trolls and non-trolls at the same time, in relation to different technological sectors or territories. 

Within Europe, the European Union has had several decades to practise dealing with patent licensing practices via its competition policy, both through EU legislation (anti-abuse laws tempered by patent and then technology transfer block exemptions) and through Commission inquiries and litigation. All of this has been aimed at patent owners or groups of owners which have occupied a dominant market position and would appear to be ill-equipped to deal with the sort of trolling conduct that has attracted the attention and indeed the ire of legislators and legitimate businesses in the US. 

Soon the EU will offer the prospect of a pan-European patent injunction for the first time, potentially giving a patent owner a degree of economic leverage over a 28-country market with about twice the population of the US.  Yet there is no clear indication as to how the EU and its hybrid, synthetic and untried Unified Patent Court will tackle trollism.  Rooney continues:
" ,,. it is positive that those responsible for designing the legal framework in Europe are aware of the risks posed by patent trolls and are prepared to take action to block them. However, there is a risk that some legitimate European NPEs could get caught in the crossfire and find it more difficult to operate as a result. To avoid suffering in this way, these organisations may prefer to reshape their businesses so they can’t be confused with patent trolls in the future".
One can only feel sorry for "good" businesses that are mistaken for the "bad" boys. And how can the "good" boys reshape their businesses so they can't be confused with patent trolls?  It's hard to imagine that corporate restructuring ahead of a patent enforcement or licensing operation would be viewed by the European Commission as being anything other than a sort of cosmetic surgery, designed deceive if not disguise one's ulterior commercial motives.  One can only wonder if the day will come when a client, sitting across the desk from a corporate legal adviser, will be asked: "have you thought of making your business look a bit different ...?" 

You can read John-Paul Rooney's piece in full by clicking here.

Monday, 22 February 2016

What can unicorns tell us about the real world?

Currently hiding behind an IAM paywall, but none the less interesting for all that, is a piece by Aistemos CEO Nigel Swycher and his colleague Sebastian Müller-Borges entitled "What unicorns can tell us about the real world". The traditional unicorn is a mythical beast and the 21st century corporate version is pretty rare [when this blog post went out, there were just 146 of them according to the WSJ unicorn-counter and 159 in the TechCrunch unicorn leaderboard-- showing a sharp rise over the tally of 115 on which Aistemos reported six months ago]. This being so, one might have thought that there wasn't much that unicorns can teach any of us -- except a few things we already know, like
* investors, financial analysts and journalists are fascinated by large sums of money [this is why we are now being taught to pay even more attention to "decacorns" -- unicorns sitting on a cash pile in excess of S10 billion];
* "unicorn" sounds a lot more attractive than "relatively new business with more cash than experience or intangible assets"; 
* investors are encouraged to put their money where other people have previously put theirs, on the basis that following the herd is the same thing as the wisdom of crowds.
"What unicorns can tell us about the real world" builds on an earlier piece of Aistemos research, "Billion dollar startups -- do unicorns like patents?", noted shortly on this weblog here last September and now available on the IAM website here.  It provides plenty of current patent- and finance-related data (a sample of which we reproduce here).

Unicorns by sector
The figure above is an interesting one, in that it shows the dominance of patents in the fields of software and computing, patents which have now come under pressure following the 2014 US Supreme Court Alice ruling on the patent-eligibility of computer-implemented abstract ideas. It will be good to watch these figures over time, to see whether the increasing difficulty in obtaining and defending patents for computer-implemented inventions may be reflected in the diminution of that statistical dominance.

Where do unicorns come from? There is no significant unicorn community outside of the US and China, though India is closest to catching those jurisdictions, as the figure below shows. For all its long-expressed commitment to encouraging investment and protection of innovation, the European Union has made little impact on the overall scene.
Unicorns by country

The figure below shows that, while the aggregate numbers show that US companies exist in greater number, it is the Chinese unicorns that have shown the fastest rate of patent-filing growth. They are however more likely to confine their filing to their home market than to make an initial play for wider patent protection:

Top 10 patent-owning unicorns: patent portfolio size and growth

After warning about the dangers of drawing too many conclusions from too little data, and observing that companies are increasingly expected to explain their IP policy (or lack of it) for the benefit of investors, the authors conclude:
"What unicorns tell us about the real world is that no two companies, sectors or geographies are the same from an IP perspective. However, understanding these differences matters. The significant advances in the availability and accessibility of IP analytics mean that there is now greater transparency about who is doing what and why. Gone are the days when understanding the importance of patents was confined to IP specialists. While unicorns are rare and magical, patents are the manifestation of real-world innovation".
Reminder: you can read the IAM piece in full here.

Thursday, 18 February 2016

When no opportunity for misunderstanding is missed: the case of IP taxation

Does the world of finance know
more about gravitational waves
than it does about IP?
Why is there so much attention on the taxation of intangibles?  Here are a few of the most likely explanations, explains Aistemos CEO Nigel Swycher:
First, since 70% of the enterprise value of major corporations is captured within this asset class, money issues always gravitate to the action. Secondly, as an asset class, intellectual property rights have not been well understood by the world of finance. This is not helped by the fact that the majority of these assets do not appear on the balance sheet, or at least not with valuations that have any close accord with commercial reality. 
Combining the first reason (high value) with the second reason (poor understanding) is pure dynamite to the world of finance, which seldom misses an opportunity to arbitrage such positions. Thirdly, intangibility has been misconstrued to mean invisibility, or at the very least elasticity. This has led to the creation of a whole range of internal corporate structures driven purely by the desire to achieve a particular fiscal result -- often with no regard whatsoever to the torture inflicted on a particular intellectual property right.

The combined effect of all of the above is that IP rights are now centre stage in national and international reforms of the taxation system. There is only one point on which everyone agrees: companies should pay their fair share of tax. So when you read in the Sunday papers that Google, Shell, BAT, Lloyds and AstraZeneca pay virtually no tax in the UK, this is news that offends everyone. But this is a myopic and emotional response.

All multinationals have, by definition, business in many jurisdictions, and all of these countries want a share of the action. This so-called tax-tourism is a two-way street. It is not the fault of the taxpayer that businesses are drawn towards the low tax jurisdictions. Countries actively promote these benefits to attract the multinational “customer”. Viewed through this lens, it is not unreasonable to judge the critical reactions to the UK Patent Box as hypocrisy. Why is a reduced corporation tax, if profits relate to patented inventions, any better or worse than the incentives offered by Ireland, Luxembourg or Bermuda for that matter?

So the implementation of the new base erosion and profit-shifting (BEPS) regime should be greeted sympathetically. Its heart is in the right place -- there should be no artificial structures to syphon profit to low tax jurisdictions. At the same time, understanding what makes up the value of an intellectual property right is hard. Where is a brand created? Does it reside with the legal owner of the registered right or in the place where the marketing takes place? Where is the heart of innovation? With the company that funds the R&D and applies for a patent, or at the physical location of the scientists?
These questions will be explored by an expert panel of Paul Morton (head of Tax, RELX), Kelvin King (Valuation Consulting) and Dominic Robertson (Slaughter and May) on 23 March. 

Click here for further details or to register for the event.

Also on this subject: "The road ahead for Taxation on IP", here.

Tuesday, 16 February 2016

Unannounced investments and IP protection: two types of secret

It now seems that investment
may be unannounced too
Readers of this weblog will by now be fully aware that the Aistemos blogteam has taken a keen interest of the role played by trade secrecy in the protection of intellectual property, in the management of trade secrets and in the problems which they pose for IP analytics -- a methodology that depends the availability of information as a precondition for being able to analyse and draw conclusions from it.

A sponsored feature in today's Telegraph, "IP protection: secret deals and investments", reports that a large number of 'secret' equity deals are being made by tech companies keen to keep their ideas and intellectual property under wraps. This article, by Rebecca Burn-Callander continues in relevant part:
"In its latest analysis of the UK’s equity , the data company Beauhurst [which describes itself as "the leading source of deep data on fast-growth companies in the UK"] found that unannounced investments worth £757m were made in 2015. “Unannounced” means that no press releases were issued and the deals were unearthed only through reviewing official company filings. This represents 1,640 individual deals, which is actually more than the 1,292 publicised fundraisings across the whole of last year.

Why are so many companies deciding not to make any noise about the fact that they have raised capital?

One answer may lie in the kinds of companies that are keeping quiet – overwhelmingly these are technology companies rich in intellectual property (IP). These businesses raised £307m last year, across 538 deals.

Within this category, software was a big sector, representing the lion’s share of secret deals. When you are developing a new product or service, especially in the technology sphere, it should make sense to shout about it, to raise the company’s profile and win more customers.

This is not true for every company – some require just one customer to care, or are so early-stage that there is no point in drawing public attention – but in the main, more awareness means more business. ...

The fact that so many companies choose not to make the most of these chances to expound on their virtues is interesting. Are they worried that by shining a light on what they are doing, they are more open to copycats or could give rivals too much insight into their operations?

Anecdotally, I have noticed that IP-rich firms that do talk about their fundraising are often incredibly cagey about the details – not necessarily the amount invested but certainly how it is to be spent, and specifics about the science behind an invention.

According to Beauhurst, many of the secret deals it uncovered may involve software businesses that are in “stealth mode” – a phase of growth where products are in development.

The majority of unannounced deals do seem to involve earlier-stage companies but these are not small amounts of money. The average unannounced investment was worth around £460,000. A handful were even in excess of £10m – including £19.2m invested in one single transaction, according to Beauhurst’s data.

This may prove that the mechanisms for protecting an idea are not fit for purpose. It is incredibly difficult for a young business with limited resources to make sure that its intellectual property – or even its basic concept – is safe, and the situation seems to get more difficult as the world becomes an ever-smaller place, connected 24/7 through the internet and every kind of communication tool. ..."
Before anyone gets carried away, £757m sounds a lot more than it actually is.  That sum, spent on unannounced investments last year, would only buy you around a quarter of Real Madrid, Barcelona or Manchester United, according to Forbes' 2015 valuations.  It will be good to watch for year-on-year comparables before looking for explanations and drawing too many conclusions.

It is also important to distinguish secrecy concerning fundraising deals and secrecy as an adjunct to or substitute for other means of protecting a business's core intangible assets through patents, copyright and other rights.  Each type of secrecy has its function and, in the case of potentially patentable inventions for which protection has yet to be sought, secrecy is essential if patentability is not to be lost through premature disclosure.  Disclosure of what a technology is predicted to do may have a significant market function: it is quite a different matter from disclosing the technical means by which that prediction is fulfilled -- and the strategic decision whether to disclose the first of these things is of a quite a different order from any decision to disclose the latter.

For a selection of Aistemos blogposts on aspects of trade secrecy, click here.  We have also started trade secrecy-related discussions on our LinkedIn IP Discussion Group here].

Monday, 15 February 2016

Aistemos LinkedIn IP Discussions: our most recent topics

The Aistemos LinkedIn Group, which now has almost 300 members, has recently offered three more discussion topics since we last drew the attention of our readers to it at the end of 2015. Our most recent discussion topics look like this:
* Practical guidance for rating patents. Donal O'Connell's guest post, offering practical guidance on rating the relative value of a business's patents and patent applications, has received surprisingly little attention -- particularly from SMEs and their advisers. Is there more to be said about this important and little-discussed field of activity?

* Fluctuations in share prices are sometimes based on a misunderstanding or what is apparently complete ignorance of the IP background to a deal or the outcome of litigation. The movement of Nokia's share price following news of the outcome of a patent is a perfect example. But what can be done to persuade analysts that patent data is a better guide to a company's prospects than their hunch about the deep significance of more ephemeral events?

* IP dispute resolution and the role of analytics. We posted this short item on our blog about the possible advantages of deploying IP analytics in IP dispute resolution, triggered by news of the increased use of third party funding of patent litigation. How great are these advantages, and are there any downsides too?
The Aistemos LinkedIn Group is a serious and responsibly moderated LinkedIn Group which welcomes discussion and debate. Do join and feel welcome to share your thoughts and opinions with us.

If you like what you see, why not sign up to receive Aistemos blogposts by email? Just enter your address in the facility at the top of our blog's home page sidebar.

Friday, 12 February 2016

From bragging rights to benchmarks: advice on the need to rate inventions

While patents are undoubtedly of great importance in the protection of innovation and the encouragement of investment, anyone following the comments of analysts on Twitter and elsewhere would likely conclude that they have become an obsession, and that there is an automatic correlation between the size of a company's patent portfolio, its inherent value, its stock price and its ability to compete.  

The most widely-read Aistemos blogpost in the past month ("Patents: quantity is vanity, impact is sanity", here) criticised the tendency to use the number of patents granted or applied for as an excuse for exercising bragging rights, arguing for a more sensible approach to the assessment of a business's patent holdings.  Transposing this theme into a more practical mode is the following guest blogpost from our occasional contributor and consultant Donal O'Connell (Chawton Innovation Services Ltd). Here Donal looks at the need to rate patents and considers the sort of procedures a company should put in place in order to evaluate their worth.  This is what he writes:
Rating inventions, patent applications and patents 

The concept of rating things

 A motion picture rating system is designated to classify films with regard to suitability for audiences in terms of issues such as sex, violence, substance abuse, profanity, impudence or other types of mature content. The movie rating system used in the United States was created in 1968, with the rating system originally consisted of four ratings but now including five. The body that assigns these ratings is the Rating Board, located in Los Angeles. 

A credit rating estimates the credit worthiness of an individual, corporation, or even a country. It is an evaluation made by credit bureaus of a borrower’s overall credit history. Credit ratings are calculated from financial history and current assets and liabilities. A rating is the evaluation or assessment of something, in terms of quality (as with a critic rating a novel), quantity (as with an athlete being rated by his or her statistics), or some combination of both. 

Rating inventions, patent applications and granted patents

 This concept of rating also can be applied in the world of intellectual property, and specifically to inventions, patent applications and granted patents.

IP rights are valuable assets for any business, possibly among the most important that it possesses.  It is therefore imperative that the relative importance of each and every case is known. This should not be a surprise to anyone involved with IP, but still there are many organizations who have not embraced this concept and who do not rate their cases, thus in essence treating all their cases as being of equal importance.

The very nature of innovation means that inventions can vary from incremental through to radical, can relate to products, services, process or business models, and can refer not just to that 'what', but also to the 'who', 'how' and 'where'. The innovation process involves ambiguity, controversy and non-linearity, and this is also reflected in inventiveness, a subset of innovation.
 A key point to understand is the importance of each invention. 

Some facts and figures about patents
The sheer volume of patents owned by some companies alone means that a rating scheme should add considerable value.  

According to the WIPO Indicators 2014 report, there are 9.45 million patents in force worldwide. There were 2.6 million patent applications submitted in 2013, a 9% increase versus 2012 numbers. Over 80% of patent applications occur in the top 5 Patent Offices of China, USA, Japan, Korea and the EPO.

Although these are global numbers, it is not uncommon for many large companies to have tens of thousands of patents in their own patent portfolios. According to some amazing analytics conducted by Aistemos using their Cipher system, 77 organizations own 25% of all patents in existence while 773 organizations own 50% of all of the patents in existence. Aistemos acknowledges however that the patent data has some integrity issues. The size and diversity of such IP, both in terms of its maturity, its geographical coverage as well as the applicable technology again means that a rating scheme should bring benefits. 

Patenting can be expensive, therefore, costs must be weighed carefully and managed well. Cost management involves the planning, coordination, control and reporting of all cost-related aspects. One should identify all costs and make informed choices about options that will deliver best value for money, but knowing the importance of each case can help greatly when prioritizing.
 Patents adds value in multiple ways from providing freedom of action, protecting product differentiation, generating revenue, granting business influence, enabling a technology, bringing cost competitiveness, supporting technology out-licensing through to providing positive image.  

Just how much value each case brings can be reflected in its rating.

 Examples of rating schemes in use by companies 

Based on benchmark data, there is no 'one size fits all' when it comes to rating schemes in use across companies. Some opt for a very simple two level scheme marking cases as either strategic or tactical or even as 'in use' or 'not in use'. Others have designed and implemented more complex schemes for example using a scale from 1 to 5, with one being the least important and five the most important.

Is the invention to be implemented in 'our own' products or services? Does the case offer licensing opportunities? Is the invention likely to be implemented by 3rd parties? Does the case offer some control point over some technology of interest to the industry? Does the invention relate to some unique selling feature or function of 'our' product(s) or service(s)? Has the invention been submitted and adopted by some Standards Setting Organization, and thus qualify as 'essential IP'? Does the case align well with 'our' key products and/or key 3rd party agreements or contracts? What is the possible use of the invention in the future, particularly if it is links to some fundamental research?

These are just some of the questions which may be asked in order to rate a case and assign it its score or level within the rating scheme.

 Rating a case over time 

When should a case be first rated, and when should this rating be reviewed again, and possibly be updated? Benchmark data suggests that it is best to first rate a case when it is first reviewed at a formal patent board or patent committee meeting when the decision is taken to file a patent application, although some companies rate the cases earlier in the process.
 This rating should however be reviewed and updated as necessary at all key milestones in the patent processes, for example when any 'office actions' are received from the Patent Examiner, when the case is filed in foreign jurisdictions, when the patent application is published at eighteen months, when the case is granted, if and when any objections are raised and when any annuity / renewal payments are due. By creating and implementing a process by which the rating of a case is reviewed and updated if necessary at all key milestones, this compels the question “how important is this case now” to be answered. The fact that technology changes, companies change, and industries change over time is one key argument to justify why the rating of cases should be reviewed and updated if necessary at key dates along the patenting process. 

Having a rating scheme impacts the key patent processes

 Having a rating scheme in place affects all of the key processes:

  • Invention handling.
  • The patent board or committee stage where inventions are reviewed and decisions taken as to whether to file a patent application or not.
  • The patent application process from first filing through to grant.
  • Foreign filing.
  • Patent maintenance.
  • Patent portfolio management.
Different technology areas may have different priorities based on the technology and business strategy of the company. The maturity of the invention may prompt some delay in the process. Certain type cases may provide options for extra divisional filings. 

Portfolio management may be seen as that process which brings alignment of IP with the business, to help gain a deep understanding of what IP you have, and do not have, and to provide guidance on what actions to take. It is basically a means to link and synchronize all of your IP activities together. The rating of cases is critical to this process. The rating of cases can actually be utilized to help run this particular process in a much more efficient and effective manner.

Best practice

 The rating scheme should be formally documented and made available to the key stakeholders in the invention handling and patent process. It is important that whatever rating scheme is designed and implemented, that it is maintained in a consistent manner over some period of time. Constant changes to the actual rating scheme should be avoided. The rating of cases should be recorded into the IP data management system, and the associated data field(s) should be handled with the same level of professionalism as any of the other key data fields supporting the key patenting processes. Transparency is crucial in terms of qualification of the rating inputs, assumptions, risks, sensitivity analysis, and disclosure. If a rating is repeated within a very short period of time, it should reliably give a comparable and reconcilable result. The individual giving the rating should conduct the valuation free from any form of biased judgment. Any changes to the rating of a particular case should be recorded, indicating the new rating as well as information on who made the change as well as their rationale for making the change together with any supporting material. 

Rating schemes should not be confused with patent classifications systems

Patent classification is a system for organizing all patent documents and many other technical documents into relatively small collections based on common subject matter. Each subject matter division includes a major component called a class and a minor component called a subclass. A class generally delineates one technology from another. Subclasses delineate processes, structural features, and functional features of the subject matter encompassed within the scope of a class. Every class has a unique alphanumeric identifier, as do most subclasses. A Patent Classification is a code which provides a method for categorizing the invention.

 These classification systems should not be confused with rating schemes. Rating schemes provide a means to rate the importance or value of the case, whereas classification schemes provide a means to identify the technology of the case. 

Final thoughts

The importance of intangible assets is growing, often equalling or surpassing the value of physical assets for a company.  The state of the intellectual property of a company determines their share and corresponding influence on the market.  The size and quality of a company’s intellectual property portfolio will have a direct impact on several factors, such as the reputation of the company, the level of returns on investments and their access to the market, amongst others.  The way a company is valued has also changed considerably.  It is therefore imperative that the associated rating of cases is also treated with the respect that it deserves.

Thursday, 11 February 2016

Nokia and IP again: no great shocks in Q4 and 2015 report

Last week this weblog noted that investment analysts can give advice that has a surprising and unjustifiable impact on a company's share price, if it fails to appreciate the deeper intellectual property context within which a news item is reported. The trigger for that blogpost was the fluctuation of Nokia's share price in the wake of news of the outcome of its patent licence arbitration with Samsung (see "Nokia price fall a "wild overreaction" -- and it's not the first, either", here).

Today saw the publication of the Nokia Corporation Report for Q4 2015 and Full Year 2015, noted by SPi here. What then did the company have to say about intellectual property?

In his CEO Statement, Rajeev Suri said:
"We have said consistently that we believe that our portfolio of innovation and intellectual property is second to none in the industry and that it has significant value that can be monetized. We expect to have further discussions with Samsung related to intellectual property and technology assets that were not covered by the arbitration process and will continue to pursue new licensing opportunities in a variety of sectors over the course of 2016 and beyond".
This fairly upbeat message is somewhat mitigated by a list of "Factors, including risks and uncertainties". These factors "include, but are not limited to ..." some 27 numbered items. Down towards the bottom of this list are the IP bits:
"(23) Nokia Technologies' ability to maintain its existing sources of intellectual property related revenue or establish new sources; 
(24) Nokia Technologies' dependence on a limited number of key licensees that contribute proportionally significant patent licensing income, including the outcome of any pending arbitrations or negotiations; 

(25) Nokia Technologies' dependence on adequate regulatory protection for patented or other proprietary technologies;

(26) Nokia Technologies' ability to execute its plans through business areas such as licensing the Nokia brand and other business ventures, including benefits and plans related to technology innovation and incubation; ..."
These risk-and-uncertainty factors are by no means unique to Nokia and are faced by most high tech operations one way or another. Dependence on a limited number of key licensees is likely to be the biggest headache, but it is at least something that a good data set can address: current and future alternative technologies that might attract key licensees can be picked out via the available patent data, as well as indications that the market itself might be metamorphosing towards fresh products and services, or even dying out.   


Readers who found this interesting may also like to check out a blogpost from 20 August 2015, "HERE today, gone tomorrow - but still here: the paradox of Nokia", here.

Wednesday, 10 February 2016

Entrepreneurship and Talent Management from a Global Perspective

The enticingly-titled Entrepreneurship and Talent Management from a Global Perspective: Global Returnees is a new book in the Edward Elgar New Horizons in Management series. Edited by Huiyao Wang (President, Center for China and Globalization, Beijing) and Yipeng Liu (Senior Lecturer in Entrepreneurship, Birmingham Business School, University of Birmingham, UK), it spans 300 pages and 12 chapters -- mainly multi-authored -- on various aspects of the management of creative talent.  

According to the publishers' web-blurb:
"Talent has become the most important resource for organizations across a wide range of sectors throughout the world including business, non-profit, and government. These organizations are now engaged in an increasingly fierce competition to acquire the best talent as they seek to gain the upper hand in today’s fast changing environment. By combining the body of knowledge on entrepreneurship and talent management from a global perspective, this book provides a synthesized understanding of entrepreneurial mobility and talent management in the entrepreneurship and innovation ecosystem.

The expert contributors combine empirical evidence and case studies to provide a nuanced understanding of global talent management from an international comparative perspective. The topics discussed include China’s return migration and its impact on Chinese development, local engagement and transformation of Chinese communities in England, and reverse migration from the US to China. Furthermore, from a comparative perspective, contributors examine global talent and entrepreneurial mobility in the contexts of Silicon Valley, European university spin-off practices and entrepreneurial ecosystems in France, Italy, and South Korea, respectively".
Given the massive impact of Chinese innovation and patent-filing in so many areas (see for example the China data in earlier blogposts on aquaculture, wearable technology, brewing, and cybertechnology), as well as the increasing need of innovative companies to manage the creation, protection and commercial exploitation of trade secrets (discussed by Donal O'Connell here), this is clearly a book of topical interest and importance.  

The contributors are mainly what might be described as business-facing academics and the text is anything but academic: the chapters are unencumbered by scholastic footnotes and contain a wealth of relevant data, practical points and sensible discussion. Patents, licensing and university spin-offs are addressed, as are a number of other IP issues. While this is not a textbook for businesses, it's a good read for anyone in business who has to strategise talent management, whether their horizons face East or West.

Publication details for this book can be accessed here.

Tuesday, 9 February 2016

Third party funding and IP dispute settlement: another role for IP analytics

From Legal IT Insider comes an article today, "Third party litigation funding: Bentham reports 60% leap in U.S. investment opportunities" here, which makes fascinating reading for businesses in the world's most litigious jurisdiction.  It's not aimed specifically at the intellectual property community but it carries a message for them.  In relevant part, this piece reads:
"The U.S. business of IMF Bentham has reported a 60% leap in investment opportunities over the past year as the third party commercial litigation funding giant this year opens an office in Toronto ...

Bentham IMF in the U.S., which doubled in size in 2015, has over the past year seen the successful or partial conclusion of six funded matters, including three portfolio deals with law firms, and several large-scale disputes with additional recoveries expected going forward.

It has given new funding to 15 disputes (out of nearly 300 presented for the firm’s consideration in 2015) and its annual U.S. claim value now represents one-third of the company’s global annual claim value, with projections that the figure will reach 50% in the next several years. Recoveries include cases involving insurance claims, patent and copyright disputes, international arbitrations and whistle-blower claims. ...

Globally the business has grown by more than 60 professionals across the U.S., Canada, the UK and Australia, ... 
As of 30 June 2015, Bentham had completed 175 cases, of which it settled 117, won 13, lost 10 and withdrew in 35. According to its website, the company has made total recoveries of $1.6bn, of which $1bn was returned to clients".
The easy message is that, if you have a good-looking case you can't afford to fight, you can get third-party funding which is tied to a considerable body of litigation expertise, with the prospect of a decent financial return.   The deeper message is one that relates to IP analytics. With two cases in every three being settled, an accurate appreciation of the value of the action in an ever-changing market can assist the settlement process. For example if you can show that an allegedly infringed IP right belongs to a technology that is facing obsolescence or, to the contrary, is heading to be a technical standard, the maths leading to a settlement payment may more accurately reflect the value of the IP in its industrial and commercial context than the relative strengths of the disputing parties.

Monday, 8 February 2016

Patents: what lies at the heart of defibrillators?

Towards the latter part of month Sector Marketing Intelligence (SPi) posted an item on a Radiant Insights report on the size and scale of the world market for defibrillators (devices for delivering a therapeutic dose of electrical current to the heart in order to depolarise a critical mass of the heart muscle and, by doing so, terminating irregularity of heartbeat). The market potential for these devices is immense, as the title of the item ("Defibrillator Market Size Worth USD 15.75 Billion By 2020" indicates). But what is the spread of patent activity in this lucrative field -- and does it teach us anything?

The first figure, below, depicts the defibrillator patenting activity of the main performers in the field from 1987 to 2013.  Spanning a period of more than two and a half decades, the data shows a general crescendo until around 2000, followed by a plateau lasting around five years and a subsequent sustained decline.  The figure shows just the seven most active players in the field: Medtronic, Boston Scientific, St Jude Medical, Philips, Sorin, Biotronik and Greatbatch.  While the market is US-dominated, there is a notable European presence thanks to Philips, Sorin (now LivaNova, following a 2015 merger) and Biotronik. Notable players from Asia, though some way behind in terms of patenting activity, are Japan's Nihon Kohden, Opto Circuits (India) and CU Medical Systems from South Korea.

The second figure reflects the patent holdings of the same leading companies: it shows that, while patenting activity has declined, the size of their holdings has continued to grow -- though in a pronounced manner for Medtronic and Boston Scientific than for the rest.

The third figure gives some idea of the magnitude of the companies' current patent armouries, and of the lead which the "big three" -- Medtronic, Boston Scientific and St Jude Medical -- have over their competitors.  St Jude holds around as many patents as all the following pack combined.

What does all this show? First, it appears that defibrillators at present a mature and stable market and where there is a growing demand for products. The decline in patenting activity suggests that the leading companies are consolidating on their position and cashing in on past innovation rather than desperately seeking new breakthrough technologies. It also seems that this is an area in which the patent-holding advantage of the leading US and European manufacturers and innovators is not set to be immediately usurped by Chinese and other Asian patent filers.  

You can read the SPi article on defibrillators here.

Thursday, 4 February 2016

Nokia price fall a "wild overreaction" -- and it's not the first, either

"Nokia's fall after the patent license arbitration with Samsung shows investors overreact wildly to intellectual property news" is the title of an Opinion piece by Aistemos CEO Nigel Swycher which appeared on CITY.A.M. ("Business with Personality") earlier today. This is how it reads:
When Nokia released information about the outcome of its patent licensing arbitration with Samsung, its share price fell by over 10 per cent within hours. This is not the first time that stock prices have reacted in an unpredictable fashion to intellectual property (IP) news.

The poster child for this mispricing was when GoPro stock fell by 12 per cent on the grant of a single Apple patent. While universally accepted, in retrospect, to be a gross over-reaction, it provided yet more evidence pointing to a simple fact: investors don’t have access to the kind of IP data they need if they are to digest news relating to intellectual property in a more measured fashion.

Further evidence came in the form of Kyle Bass, whose fund launched attacks on the patents owned by Shire, Biogen, Calgene and others last year.

The point here is simple. If the importance of patents is not understood, how can you measure the impact of losing one?

That is actually two questions, both of which are worth considering.

First, does this matter? My view is it matters now more than ever. For more than half of all listed companies, intangible assets account for up to 70 per cent of enterprise value - and for many companies a large part of this is attributable to patents. This is relevant to pharma/biotech and technology sectors, and equally to a range of others including media, automotive, fintech, defence and capital goods.

Secondly, how can the information deficit be addressed? As so often is the case, the answer is in the data.

Don’t let people kid you that patents are for scientists and specialists only. There are many objective measures of quantity and quality that can support financial analysis.

Back to Nokia. The news was that as a result of the Samsung award, Nokia Technologies would increase its 2015 earnings to over €1bn (up from €578m in the previous year), and that there was at least another €1.3bn to come in the next couple of years. Did this justify the dramatic repricing? Did anyone look at the underlying patent data? Alcatel-Lucent was never part of Nokia Technologies future (ALU’s portfolio is largely unrelated to Standard Essential Patents (SEPs)), so why does ALU take a hit?

Compare Nokia’s patent portfolio with Ericsson’s.
Whether one analyses the two according to portfolio over time or on a geographic coverage basis, you can fairly conclude that they are similar.

This suggests that when Nokia finalises its arrangements with LG, Apple and others, it will end up in the same place.
On what basis do the markets conclude otherwise?

While it fair to say that the Nokia announcement could have been clearer, the investor community has the opportunity to engage with IP data in preference to the cycle of over-reaction and then correction which too often occurs in this area.

Let’s hope it does just that, sooner rather than later.
You can read the original on CITY.A.M. here.
Nigel Swycher's CITY.A.M. profile is here.

Monday, 1 February 2016

January's Aistemos posts: a handy summary

Now that January is over, here's a list of Aistemos blogposts which we have composed and published during the past month, together with a short synopsis.  Each blogpost comes with a moderated comment facility, so please feel welcome to respond to anything you read, whether you disagree with it, wish to amplify or clarify its points, or merely provide further links to relevant material.

To check each post out, just click the title:

Friday, 29 January 2016

The road ahead for taxation on IP

Forget the clichés about death and taxes, face the reality. Here's news of a specialists-only roundtable discussion, billed for 23 March, that will review the options for IP taxation in a changing world.

Tuesday, 26 January 2016

Rabbits join Unicorns in the Investment Menagerie

Regular readers of this weblog will know that over the past six months we have had a good deal to say about Unicorns. 2016 has been trumpeted as the Year of the Rabbit -- but what other acronym-driven coporate animals are lurking in the IP undergrowth?


Monday, 25 January 2016

Plastics, patents and a platform for innovation

The New Plastics Economy: Rethinking the future of plastics report offers a fascinating contemporary portrait of an industry that is so large and all-pervasive that we are in danger of being of being quite unable to keep it in perspective. But why does this portrait make so little mention of patents?


Friday, 22 January 2016

Joint venture strategies: a new book

Joint Venture Strategies: Design, Bargaining and the Law, by Zenichi Shishido, Munetaka Fukuda and Masato Umetani, is quite the most interesting read we've seen for quite some time. Why not find out why?


Wednesday, 20 January 2016

Creating an inventive ideas template: some practical guidance

This guest post by Donal O’Connell offers a real-world perspective on managing innovative ideas from their very inception till the time they reach the point of possible patentability, and beyond.


Monday, 18 January 2016

After the gold rush -- the end of the (banking) world?

Writing for Global Banking and Finance Review, Aistemos CEO Nigel Swycher again directs his focus on FinTech.  This is what he has to say.


Thursday, 14 January 2016

Patents: quantity is vanity, impact is sanity

Some IP commentators and news services seem to be obsessed with the number of patents applied for or granted, as though this alone was a reflection on a company's well-being. The truth is that it's not how many patents that counts, but what they are worth in industrial terms.


Wednesday, 13 January 2016

Investment, finance and entrepreneurship -- two new titles

Two new books have recently been released by Edward Elgar Publishing, each of which might be imagined to offer something to readers who work in the field of investment and entrepreneurship. Do they deliver the goods, or do they leave something to be desired?


Monday, 11 January 2016

The Man Who Sold the World ... Bowie Bonds

The death of British-born rock star David Bowie, at the early age of 69 following a lengthy battle with cancer, brought a volley of tributes to his musical creativity. For the intellectual property community, though, he will be remembered for something else.


Friday, 8 January 2016

Where do IP-related risks originate?

This imaginative and helpful guest post from Donal O’Connell points out that IP-related risks can spring from a wide variety of sources. Once you know where they come from, you can make better preparations to deal with them.


Wednesday, 6 January 2016

Putting the record straight: when the data you access is erroneous

Businesses, investors, patent searchers and analysts are now highly dependent on the information they can access online. this post looks at the data correction policy of a major host.
You can check out Aistemos's earlier posts from other months too:
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