Category : Patent Strategy

Any business professor will tell you that the value of companies has been shifting markedly from tangible assets, “bricks and mortar”, to intangible assets like intellectual property (IP) in recent years. IP in its various forms is increasingly used as the basis of many business and commercial transactions.  It is fundamental for company valuations (merger, acquisition, bankruptcy); negotiations (selling or licensing); dispute resolution (fair recovery and quantification of damages); fundraising (bank loans and raising capital); assisting in decision making (corporate strategy); and reporting (tax and accounting).

Intangible Assets

An intangible asset is an asset that lacks physical substance and includes patents, copyrights, franchises, goodwill, and trademarks.

The International Accounting Standards Board standard 38 (IAS 38) defines an intangible asset as: “an identifiable non-monetary asset without physical substance.”

IAS 38 specifies the three critical attributes of an intangible asset to be …

  • identifiability
  • control (power to obtain benefits from the asset)
  • future economic benefits (such as revenues or reduced future costs)

IAS 38 contains examples of intangible assets such as customer lists, copyright, patents and franchise agreements.

The Value and Valuation of Trade Secrets

The terms value and valuation and their cognates and compounds are used in a confused and confusing but widespread way in our contemporary culture, not only in economics and philosophy but also and especially in other social sciences and humanities. Their meaning was once relatively clear and their use limited. Value meant the worth of a thing, and valuation meant an estimate of its worth.

This blog will explore the subject of the valuation of one particular form of IP, namely trade secrets.Why trade secrets? Well, IAS 38 clearly indicates that a trade secret is also an example of an intangible asset, so long as it meets the three critical attributes – identifiability, control and future economic benefit. Trade secrets are a very important part of any IP portfolio. It is no exaggeration to say that virtually every business possesses trade secrets, regardless of whether the business is small, medium or large.

Trade secrets are an important, but oftentimes an invisible component of a company’s IP portfolio of assets. However, trade secrets can also be the crown jewels within the portfolio.

Why Conduct a Trade Secret Valuation

Before delving into the details of the valuation of a trade secret, it is important to appreciate that the rationale for conducting such a valuation may vary.

  • For management information purposes
  • For strategic planning
  • For value reporting
  • For accounting purposes
  • For liquidation reasons
  • To support a legal transaction
  • For licensing
  • For litigation support
  • For dispute resolution
  • For taxation planning and compliance
  • For fundraising purposes

Transfer Pricing

Throughout this blog, one particular valuation rationale will be analyzed, namely transfer pricing. Transfer pricing is probably the most important issue in international corporate taxation. In taxation and accounting, transfer pricing refers to the rules and methods for pricing transactions between enterprises under common ownership or control.

A transfer price is the price at which members of a group transact with each other, such as the trade of goods and services between group members..

Transfer pricing also comes into play when the transaction between group members involves intangible assets and IP like trade secrets. In other words, transfer pricing is not limited to just tangible assets. Due to the rather broad the definition of intangibles for transfer pricing established by the OECD, the scope of the valuation as well as the resulting value will often differ from analyses performed for accounting and management information purposes; as stated in the OECD Guidelines (paragraph 6.7):

Intangibles that are important to consider for transfer pricing purposes are not always recognized as intangible assets for accounting purposes. For example, costs associated with developing intangibles internally through expenditures such as research and development and advertising are sometimes expensed rather than capitalised for accounting purposes and the intangibles resulting from such expenditures therefore are not always reflected on the balance sheet. Such intangibles may nevertheless be used to generate significant economic value and may need to be considered for transfer pricing purposes”.

With trade secrets being a prominent example of Intangibles that are not being reflected on the balance sheet, but which may nevertheless generate significant economic value, it is evident that trade secrets cannot be disregarded for transfer pricing purposes. Trade secrets are explicitly recognized within the OECD Guidelines in Chapter VI Section A.4.2.

Tax practitioners which fail to identify relevant trade secrets as well as to develop a clear understanding of the attributable economic value face a high degree of uncertainty in respect to the question whether their transfer prices reflect an arm’s length compensation for the intangibles contributed by individual group members. Hence, with the growing importance of intangibles as the core value drivers within highly integrated value chains, understanding how to properly cope with intangibles and IP like trade secrets in transfer pricing is one of the key challenges faced by tax practitioners. Conducting a thorough stock-tracking analysis and compiling a respective analysis will be invaluable first steps to reduce uncertainty and risks.

The Requirements for Trade Secret Valuation

Conducting an IP valuation exercise requires transparent inputs, reliable and sufficient data, and objectivity of the person conducting the valuation. This applies also if the IP in question is a trade secret. Ideally, the valuation of the trade secret should have …

  • Transparency – Qualification of the valuation inputs, assumptions, risks, sensitivity analysis, and disclosure
  • Validity – Valid inputs and assumptions as of the value date.
  • Reliability – If a valuation is repeated, it should reliably give a comparable and reconcilable result
  • Sufficiency – The valuations should be based on sufficient data and analysis to form a reliable conclusion
  • Objectivity – The appraiser should conduct the valuation free from any form of biased judgment
  • Various financial and legal parameters – When performing a monetary IP valuation, various financial and legal parameters should be taken into account

From a transfer pricing perspective observing and documenting the above requirements will greatly contribute to the defensibility of the valuation. Tax practitioners need to be aware of in this context that tax authorities are extremely sensitive about the effects of information asymmetries. The basic assumption here, whether justified or not, is that tax authorities are generally at a disadvantage when assessing transactions involving intangibles. As a result, they will frequently second guess the valuations during tax audits. The recent discussion in the context of the BEPS point towards an increased (even reversed) burden of proof for taxpayers, as the OECD explicitly stated in the implementation guidance for hard-to-value-intangibles (BEPS Action 8, Public Discussion Draft, 23. May 2017) that:

“This guidance protects tax administrations from the negative effects of information asymmetry by ensuring that tax administrations can consider ex post outcomes as presumptive evidence about the appropriateness of the ex ante pricing arrangements. At the same time, the taxpayer has the possibility to rebut such presumptive evidence by demonstrating the reliability of the information supporting the pricing methodology adopted at the time the controlled transaction took place”.

Without observing the above requirements for the valuation process, rebutting presumptive evidence (hindsight) presented by tax authorities will be challenging indeed.

Trade Secret Valuation Techniques

Let’s now delve into the details. There are a number of techniques / methods in use when conducting IP valuation exercises. Here are some of the quantitative IP valuation methodologies used.

Income approach

The income approach measures the value of the IP by reference to the present value of the economic benefits expected to be received over the remaining life of the IP

Market approach

The market approach measures value based on what other purchasers in the market have paid for assets that can be considered reasonably similar to those being valued

Cost approach

The cost approach measures the value of a IP based on the cost invested in building the IP, or its replacement or reproduction cost

Discounted cash flow

DCF analyses use future free cash flow projections and discounts them, using a required annual rate, to arrive at present value estimates.

Typically discounted cash flow is the methodology used when conducting a trade secret valuation exercise. Discounted cash flow analysis is a method of valuing an asset using the concept of the time value of money. All future cash flows associated with the asset are estimated and discounted by using cost of capital to give their present values.

When conduction a discounted cash flow analysis in the context of transfer pricing (i.e. a sale of intangible assets and / or the relocation of corresponding functions), one should be aware that the valuation should consider the perspective of the buyer as well as the perspective of the seller (i.e. at arm’s length the buyer will generally anticipate to earn higher profits from the use of the intangibles than the seller and the parties will negotiate a price within a corresponding bid-ask range).


Here are some of the rational economic considerations when attempting to calculate the valuation of a trade secret. They may be broken down into four ‘buckets – costs, timing, benefits and risks. These are the inputs as such which feed into the discounted cash flow valuation calculation.

Associated Costs

Investment outlays. The economic outlay to create or develop the trade secret. This may include such details as the time taken to develop the trade secret, time taken to test it, labour costs involved, investment in physical capital (e.g., equipment, property, etc.) plus other related expenses.

Protection outlays: The economic outlay to provide reasonable protection to the trade secret, and may include administrative, legal and technical protection mechanisms deployed to protect the trade secret over time.

Associated Timing

Protection period: The anticipated protection period as impacted by the likelihood of a competitor discovering through reverse engineering or other proper means. Of course, the trade secret owner himself may decide to declassify the trade secret after a period of time for various reasons. Alternatives: The existence or expected development of acceptable alternatives or substitutes that could diminish or eliminate competitive advantages provided by the trade secret.

Associated Benefits

Investment returns. The economic benefits expected as a result of the trade-secret’s use in a product or service, such as greater sales, price premiums, or cost reduction. Internal capabilities: The benefits gained by the organisation possessing the trade secret in terms of its internal capabilities, and/or improved efficiency and effectiveness.

License or sale:  a trade-secret owner might also consider licensing or selling a trade secret—whether as part of a specific IP transaction or as part of a larger business transaction.

Prior User Rights: Having a trade secret in use prior to another entity filing a patent application gives the trade secret owner prior user rights. The trade secret owner does not require a license to continue to use the patent belonging to that other entity.

Recovery of damages: While typically not a preferred way of generating a ROI on a trade secret, litigation involving misappropriation can also provide investment returns through the recovery of damages.

Associated risks

The risk that the company themselves fails to treat the information as a trade secret, by not controlling access and not putting reasonable protection mechanisms in place. The risk that the trade secret is misappropriated by say a disgruntled employee, a former executive, a collaboration partner, a competitor or a hacker. The risk that an independent party either patents or publishes the information thereby putting the information into the public domain.

All of these economic considerations are also relevant for transfer pricing professionals. Having access to respective information will greatly enhance the reliability (defensibility) of respective calculations.

Trade Secret Valuation Report

A proper and professional trade secret valuation report should ideally contain the following sections.

  • position and status of the appraiser
  • purpose of the IP valuation
  • identification of the subject IP
  • details of any IP-related assets valued
  • addressed audience/addressees
  • premise of the IP value
  • approach and methods used
  • valuation date
  • value date
  • data sources used
  • key assumptions and sensitivities
  • limitations

When compiling the report, it is highly recommended to keep the Corporate Tax Department / Function and/or the external Accountancy & Tax Firm in the loop, as the contents will also be of immediate value for transfer pricing purposes. Not only does an overview (list) of the intangibles constitute a compulsory part of the required transfer pricing documentation, the so-called Master File (see OECD Guidelines, paragraph 5.19), it will also be an invaluable source of information to verify whether the trade secrets have been adequately taken into account in the context of intercompany transactions.

Final thoughts

Trade secret valuation is a challenging task that frequently fails to demonstrate transparency in terms of how it reaches conclusions on asset value. In general, trade secret valuation requires thorough analysis and deliberation, the application of complex methodologies, and good levels of business judgement.

We trust that this overview of the valuation of trade secrets is of interest and of value.

Donal O’Connell & Oliver Treidler

Author: 7 months ago

The Defend Trade Secrets Act of 2016 (DTSA) created a uniform federal trade secret law on May 11, 2016, in addition to the existing state trade secret laws. The DTSA is important for non US companies because it provides a stronger enforcement mechanism, is applicable against foreign companies, and offers additional options in seizing competitors’ products on an expedited basis.

What Qualifies as Trade Secret under the Act

To bring an action for misappropriation under the Act, the information allegedly misappropriated must qualify as trade secrets. Trade secrets include confidential, protected information that has economic value. They are specifically defined as “all forms and types of financial, business, scientific, technical, economic, or engineering information … if (A) the owner thereof has taken reasonable measures to keep such information secret; and (B) the information derives independent economic value … from not being generally known to, and not being readily ascertainable through proper means by, another person who can obtain economic value from the disclosure or use of the information.” 18 U.S.C. § 1839 (emphasis added).

Misappropriation of trade secrets, however, does not include information obtained from “reverse engineering, independent derivation, or any other lawful means of acquisition.” Id. Therefore, if a competitor independently develops a technology similar to your company’s trade secret, there is no misappropriation. Indeed, if that competitor also obtains a patent for the technology, it could sue your company for patent infringement for using the same technology. Accordingly, companies should develop a comprehensive strategy to manage both trade secrets and patents depending on various considerations, such as the technology at issue, how easily it can be developed or reverse-engineered, and the value and life span of the technology.

International Reach of the Act

Under the DTSA, “an owner of a trade secret that is misappropriated may bring a civil action … if the trade secret is related to a product or service used in, or intended for use in, interstate or foreign commerce.” 18 U.S.C. § 1836(b)(1). Thus, it is possible to bring an action for acts of trade secret misappropriation that occur outside the United States. For acts occurring outside the United States, an owner of the trade secret may sue under the DTSA only if (1) “the offender is … a citizen or permanent resident alien of the United States, or an organization organized under the laws of the United States or a State or political subdivision thereof” or (2) “an act in furtherance of the offense was committed in the United States.” 18 U.S.C. § 1837 (emphasis added).

Part (1) focuses on who is the offender. Under this part, a plaintiff may sue an offender if the offense occurred outside of the United States, but only if the offender “is a citizen or permanent resident alien of the United States” or the offending company is “organized under the laws of the United States or a State or political subdivision thereof.” Id.

But part (2) focuses on the offense, and under this part, a foreigner or foreign company, who would not have been liable under part (1), can be liable, if the foreigner or foreign company acted “in furtherance of the offense” in the United States. For example, if a foreign company sold products containing stolen trade secrets to a U.S. company, and the foreign company knows or has reason to know the trade secret was stolen, then the foreign company can be sued in the U.S. under the DTSA. 18 U.S.C. § 1839 (5)(A).

Under the DTSA, a non-US company can sue in the U.S. for trade secret misappropriation against any person or company that stole its trade secrets, even if the perpetrators are not based in the U.S., so long as the perpetrators sold products to the U.S. incorporating the stolen trade secrets, or committed any other acts in the U.S. to use or disclose the trade secret.

However, the DTSA’s international reach is not unlimited, because, as with every other legal action in the U.S., the court must have personal jurisdiction over the offender. Under the U.S. Constitution, a federal district court has personal jurisdiction over a defendant only if he or she has “sufficient minimum contacts” with the forum state where the complaint arises, such that the exercise of jurisdiction “will not offend traditional notions of fair play and substantial justice.” In other words, the defendant has to have certain contacts with the forum state, and such contacts can include, for example, selling products into the state, conducting business in the state, having agents or employees in the state, or directing sales and marketing activities to residents of the state.

III. Claims that Arise under the Patent Law and the DTSA can be Brought Together in a Federal Court

Trade secret actions at times accompany patent infringement actions. Before the DTSA was enacted, without diversity jurisdiction (e.g., when two foreign companies both are incorporated in the same state, often in California), in order to bring both patent infringement and trade secret misappropriation claims in a federal court, a plaintiff needed to show that the trade secret and the patent claims “derive from a common nucleus of fact.”

Under the DTSA, however, a plaintiff can bring both trade secret and patent claims in a single suit in a federal court without the need of showing the claims “derive from a common nucleus of fact.” Thus, the DTSA benefits plaintiffs who could not have met the “common nucleus of fact” requirement and allows them to bring both causes of action in the same case. This can help reduce the cost of litigating the different causes of action in different courts.

Bringing both patent and trade secret claims in the same court has an additional benefit—making it more difficult for a defendant to stay court proceedings in favor of an inter partes review (IPR) proceeding. IPRs are an often-used proceeding to challenge the validity of a patent at the United States Patent and Trademark Office (USPTO). A defendant may ask the court to stay an ongoing litigation pending the outcome of an IPR proceeding. By bringing a suit including both trade secret and patent infringement claims, a court is less likely to stay the litigation in favor of an IPR proceeding because the issues arising from the trade secret claims likely will not be affected by the IPR proceeding.

Ex Parte Seizure

An important aspect of the Act is that it makes ex parte seizures available “to prevent the propagation or dissemination of the trade secret,” but only in extraordinary circumstances. 18 U.S.C. § 1836. The plaintiff bears the burden of showing eight factual and legal requirements before the court can issue an ex parte seizure order. Id. In particular, the court must find the following: (1) another form of equitable relief would be inadequate; (2) an immediate and irreparable injury will occur if such seizure is not ordered; (3) the harm to the plaintiff outweighs the harm to the person whose property would be seized and substantially outweighs the harm to any third parties who may be harmed by such seizure; (4) the plaintiff is likely to succeed on the merits; (5) the person against whom seizure would be ordered has actual possession of the trade secret and the property to be seized; (6) the plaintiff describes the property to be seized with reasonable particularity; (7) the person against whom seizure would be ordered would destroy, move, hide, or otherwise make such matter inaccessible to the court, if the plaintiff were to proceed on notice to such person; and (8) the plaintiff has not publicized the requested seizure. See 18 U.S.C. § 1836. Because of these extensive requirements, many of which will be difficult to prove except in extreme cases of misappropriation, an ex parte seizure is unlikely to be ordered frequently.

In summary, the DTSA has potentially broad reach to foreign companies and persons, but the exact scope and effectiveness are yet to be tested. The Act can be beneficial to plaintiffs who otherwise could not have brought trade secret misappropriation claims in federal courts before, particularly when patent infringement claims are involved or if the defendants are companies outside of the U.S. At the same time, it may increase the risk that foreign companies will be called into courts in the United States, to defend themselves against allegations of trade secret misappropriation.

Therefore, as plaintiffs, non-US companies need to protect their proprietary and confidential information in a way that makes the DSTA a strong mechanism for enforcement when the need of protecting itself, protecting its customers, or deterring competitors’ misappropriation, arises. As possible defendants, non-US companies also need to be aware of such risks in hiring new employees, avoiding the use of confidential information of another party in developing technologies, and in formulating its patent and trade secret strategies.

Gary C. Ma and Howard Herr, Ph.D. – copyright © Finnegan, Henderson, Farabow, Garrett & Dunner, LLP. This article was originally published in Commercial Times on September 13, 2016


Author: 8 months ago

In our previous blog we dealt with IP Risk management by looking what it is and where risks typically originate from. In his blog we deal with seven case studies related to IP risk management in general and a special business software tool we developed called the “Alder IP Risk Management Tool“). These case studies involve an up-close, in-depth, and detailed examination of the subject, as well as its related contextual conditions.

Case Studies

The first case study looks at a hi tech enterprise taking the Alder IP Risk Management tool into use, the rationale for this company taking the tool into use, how they went about taking the tool into use, and the benefits it brought.

The second case study looks at an IP Firm taking the Alder tool into use, their rationale for doing so, how they developed a service offering around the tool, and the benefits it brought.

The third case study looks at a Law Firm specializing in the area of M&A due diligence, and why they decided to take the Alder IP Risk Management Tool into use, and the benefits it brought to both the Law Firm and its clients.

The fourth case study looks at a B2B engineering company taking the Alder IP Risk Management tool into use, their rationale for doing so and the benefits it brought.

The fifth case study looks at an IP Insurance Provider taking the Alder IP Risk Management tool into use, why they found this tool of interest and of value, and how they actually utilized the tool with their clients.

The sixth case study looks at a Professional Services firm, why they found the Alder IP Risk Management tool of interest and how they have taken the tool into use.

The seventh case study looks at a medium sized materials technology company going through an exercise to merge two IP departments following an acquisition, and how they used the tool to help them with this integration exercise

Case study #1: Hi Tech Corporation

The company in this particular case study is a medium sized enterprise active in the ‘hi tech’ sector. The company has been in operation since the 90s and now operates worldwide. The Legal / IP function within the company had good people but has limited headcount. The GC of this company faced a number of IP risk management related challenges:

  • too narrow a definition of IP in use
  • little understanding of the diversity of IP related risks the company faced
  • no IP risk management process in place
  • no IP risk management system deployed
  • inability to always link IP risks and IP risk mitigation actions together
  • little understanding of the variety of IP risk mitigation solutions that exist
  • challenges with sorting IP related risks into different categories
  • difficulties in articulating IP related risks to C level Executives
  • no IP risk management governance

The company took the IPEG “Alder IP Risk Management Tool” into use in early 2015. They accepted that the Alder Tool would not magically solve all of these IP risk management related issues but that it would certainly help the company to move up the maturity ladder when it is comes IP risk management. IPEG’s  “Alder IP Risk Management Tool” was taken into use by the company’s Legal & IP function with access to the tool limited to just that function. The fact that the Alder tool was easy to install, easy to configure and easy to take into use proved a major USP. This company actually started to use the tool on the same day that the tool was demonstrated to them.

This company adopted a three phased approach when they took the Alder Tool into use:

  • Phase #1: The company utilized the Alder IP Risk Management Tool initially only for managing one specific type of IP related risk, in this case Trademark related risks.
  • Phase #2: The company then started to gather all historical IP related risks which existed in different places throughout the company (in people’s heads, in e-mails, in different systems, etc.) and inputted all of that historical data into the Alder IP Risk Management Tool.
  • Phase #3: The company then started using the Alder IP Risk Management Tool to log all IP related risks and made this tool the de-facto system to help manage IP related risks across the entire organization.

The key benefits for this company were getting IP risk management under proper control and being able to effectively articulate IP related risks to C level Executives in the company.

Case study #2: IP Firm

The IP Firm in this particular case study is an established and reputable IP Firm with offices in a large number of key jurisdictions, employing a few thousand attorneys and with clients across a diverse range of industry sectors. This IP Firm has received a number of awards and accolades over the years. The IP Firm was anxious to deploy a new service offering to its clients in the area of IP risk management, as it saw a business development opportunity. The IP Firm was aware that many of its clients operating in ‘firefighting’ mode when it came to IP risk management. These clients did not have an IP risk management process in place, they certainly lacked any IP risk management tool and had little knowledge of the diverse range of IP risk mitigation solutions which could be deployed. The IP Firm wanted to become the IP risk management trusted partner for these clients. The IP Firm designed and developed an IP risk management service offering for these clients, using the Alder IP Risk Management Tool as one component of this service offering.

The IP Firm’s IP risk management service offering actually consisted of a number of components:

  • IP risk awareness & education
  • IP risk management process
  • IP risk management tool
  • IP risk management data
  • IP risk mitigation solutions
  • IP risk management resources
  • IP risk management governance

The IP Firm deployed this service offering initially with a few clients, to allow them to stress test the service offering and adjust the offering as needed. The IP Firm acts like a virtual IP risk management team for the client, helping the client to better gather data and properly log IP related risks, to then classify these risks in a very structured manner, to prioritize these risks, to link risks and mitigating actions together, and to properly report IP related risks to the C level Executives. The IP Firm works to connect the client to a variety of IP risk mitigation solution providers if required. The IP Firms also helps the client to establish an IP risk management governance structure.

The IP Firm charges the client an annual fee for this service offering. The fact that the Alder tool was easy to install, easy to configure and easy to take into use proved a major USP. Attorneys, paralegals and administrators at the IP Firm were all at ease around the tool. The IP Firm took a ‘white label’ version of the tool so that their brand is visible on the tool itself as well as on all reports automatically generated by the tool.

Case study #3: Law Firm specializing in M&A

The Law Firm in this particular case study is a reputable boutique Law Firm specializing in the area of small and mid-market M&A deals as well as PE deals. It is headquartered in London but has offices in a number of other key jurisdictions. It has clients across a diverse range of industry sectors including in the financial services area. This Law Firm has received a number of awards and recommendations over the years. This Law Firm conducts due diligence exercises on a regular basis. Such exercises naturally include IP due diligence. IP due diligence is essentially an audit to assess the quantity and the quality of intellectual property assets owned by, or licensed to, a company. It should also include an assessment of the IP related risks facing the relevant company plus details of if and how these IP related risks are being mitigated.

The Law Firm first embraced the Alder Tool in mid-2015 as it greatly improved the manner in which they gathered data on IP related risks, categorized these IP related risks, determined the probability and impact of these different IP risks, and linked IP risks to IP mitigating actions. The Alder Tool reporting functionality also enhanced the manner in which IP related risks were included in the deliverable from the IP due diligence exercise, and articulated to their client.

Prior to taking the Alder Tool into use, such IP due diligence exercises had been very much a pen and paper exercise and the Law Firm was concerned that they were not conducted such IP due diligence exercises thoroughly enough and that some IP related risks were being missed. They had some issues with the manner in which they were gathering data on IP related risks and on the actions being taken to mitigate such risks. They also faced some challenges articulating IP related risks to their clients in a professional manner.

The Alder Tool serves as a central repository for the company’ IP risk information and allows for that information to be properly sorted. Its key function is then to provide the client of the Law Firm with significant information on the main IP risks faced by the company. This allows the client to understand the nature of the IP risks the company faces (the type of IP risk, who raised it and how it could affect the company), to become aware of the extent of those IP risks (likelihood of the IP risk occurring and its potential impact to the company), to identify the level of IP risk that the client is willing to accept (thanks to IP risk prioritization based on its effect on the company), and to recognize its ability to control and reduce these IP related risks (by understanding the actions being taken to prevent these IP risks from happening and/or the risk migration actions taken in case the IP risks do occur).

The Law Firm greatly improved its efficiency and effectiveness when conducting IP due diligence exercises thanks to taking the Alder Tool into use. The fact that this tool was a dedicated IP risk management tool was key. The fact that the tool was easy to install, easy to configure and easy to take into use proved a major USP. The reporting functionality especially the IP risk heat-map graphic proved of tremendous value. Last but not least, the fact that the tool runs on a Microsoft Office platform meant that it was easy in utilize and integrate with the virtual data room platforms they use. In some cases they are still involved in M&A deals using physical data rooms and again in such cases, the tool has worked well.

Case study #4: B2B Engineering Company

The company in this particular case study is a medium sized engineering company providing precision equipment to business clients in a large number of different industry sectors. The company has been in operation since the early 1950s and now operates worldwide. The company is conducting a review of their corporate risk management process across all of their diverse business units at the present time. This review is examining the governance framework and practices relating to risk management across all of these business units. It is also looking at the systems and tools in use supporting this process.  This corporate initiative triggered their in-house Legal & IP function to give some greater attention to their own IP risk process and associated systems. Currently, IP risk governance standards in the company tend to be very high-level, limiting their practical usefulness. There is scope to make IP risk governance standards more operational, without narrowing their flexibility to apply them to the different business units within the company and different IP situations.

Prior to taking IPEG’s Alder IP Risk Management Tool into use, a few high impact and high probability IP related risks were logged into the corporate risk register. However, taking the Alder tool into use within the corporate Legal & IP function meant that they were now much more in control of IP related risks, able to go into much more detail, better able to link risks and mitigation actions and last but not least to greatly improve governance. The Legal & IP function is now slowly but surely rolling out use of the Alder tool to the different business units within the company, starting with that business unit where it was felt that IP had the biggest impact on the bottom line.

Case study #5: Insurance Provider

The insurance provider was established over twenty years ago and is a privately owned MGA that provides insurance to nearly 40,000 businesses, most SMEs. They offer a range of insurance products from professional liability to pollution liability, virus and hacking attack liability, payment of withheld fees, employers’ liability, product liability etc. They also offer IP insurance and have a range of specific products in this category. They acknowledge that IP insurance is a very niche product but one which they would dearly like to grow and develop. It is a challenge selling such type products as most of the clients do not have a good IP risk management process in place and oftentimes fail to recognize the various IP risks they actually face. This insurance provider operates a loyalty card scheme (not that different from the Nectar Loyalty Card Scheme here in the UK) and plans to offer the Alder IP Risk Management tool to certain clients to help these clients to improve their IP risk management process overall. The insurance provider does not charge the client any fee for IPEG’s Alder IP Risk Management Tool. They had been searching for some IP related products or services to offer through their loyalty card scheme, and the tool fitted the bill perfectly.

The fact that the Alder tool was easy to install, easy to configure and easy to take into use proved a major advantage. The staff at the insurance provider were all at ease around the tool. The insurance provider took a ‘white label’ version of the tool so that their brand is visible on the tool itself as well as on all reports automatically generated by the tool. As the insurance provider has only just taken the Alder tool into use, no further details on this particular case study are available.

Case study #6: Professional Services Firm

This is a multinational professional services firm, a major audit firm and one of largest professional services firm in the world. The firm has a number of key services such as assurance, tax and advisory. The firm provides a consistent audit by assembling the right multi-disciplinary team to address the most complex issues, using a proven global methodology and deploying the latest, high quality auditing tools and perspectives. More and more, the firm is finding that IP is a key part of their audit findings. This firm has therefore assembled a dedicated in-house IP team which helps with the IP findings of such audits. This team has a range of sophisticated IP related systems and tools at their disposal to help and support such audits.

IPEG’s Alder IP Risk Management Tool has now been added to their portfolio of IP systems & tools. The fact that the Alder tool was easy to install, easy to configure and easy to take into use proved again to be a decisive aspect. The tool is only used internally within the firm, with only the automatic reports generated being shared with clients. Given the nature of their work, no information on any specific IP audit projects conducted by the firm using the Alder tool have been shared.

Case study #7: Medium Sized Materials Technology Company

This is a medium size material technology company based in Europe. The company merged with another company and then started on the post-merger integration project to join together the two together. The IP integration project team is tackling a number of different layers:

  • IP strategy and top level actions plans
  • IP organisational structure and mode of operation
  • IP processes (e.g. creation, portfolio management, enforcement, exploitation, acquisition & divestment plus risk management)
  • IP related systems & tools
  • IP data
  • IP interfaces internally to the rest of the business (e.g. senior management, middle management, individual contributors)
  • The network of IP Firms & IP Service Providers
  • The culture and values

Of course, as part of this IP integration project, the project team is also looking at IP risks, IP risk management, IP risk management processes, IP risk management systems & tools as well as IP risk mitigation solutions. As neither company had a robust IP risk management process already in place, the company took the Alder IP Risk Management Tool into use. This is enabling the project team to better gather data and properly log IP related risks, to then classify these risks in a very structured manner, to prioritize these risks, to link risks and mitigating actions together, and to properly report IP related risks to the IP Integration Project Steering Group. This project has only just started so no further details are available yet.

More information on the Alder Risk Management Tool

The above case studies proved that this unique, new, risk management is of great value to companies, IP Firms, Law Firms, IP insurance providers as well as professional services firms interested in the subject of IP risk management.

For further information on the Alder tool and a request for a presentation on the tool please contact us at

Donal O’Connell/Severin de Wit

Author: 2 years ago

Altobridge was a privately held Irish technology company that developed wireless network solutions. Its products were designed to enable telecoms operators to deliver low-cost GSM and 3G wireless broadband to unconnected rural and remote communities. The company was founded in Ireland in 2002 by Mike Fitzgerald, Guy Waugh and Bart Kane. Their goal was to use research and development to remove technical and commercial barriers that often denied remote communities from affordable mobile voice and mobile internet connectivity. Their ‘lite-site’ solution was designed to be easily transportable and easily assembled on-site. The site installation and commissioning process took two or less days to complete. This ‘lite-site’ solution served subscriber communities of up to 100 to 1,500 people. In the early years, the company developed and commercially deployed the solutions behind the first commercial GSM service on board passenger aircraft, as well as the first commercial deployment of GSM connectivity on board deep-sea merchant maritime vessels. Altobridge even installed a Remote GSM Solution at Australia’s Antarctic station for its resident scientific team at ‘Casey’ on the continent’s Bailey Peninsula.

The key people involved

CEO, Mike Fitzgerald, had been a Head of Business Unit at Ericsson, working in Ireland, China and the USA. Guy Waugh, was the COO, having spent time at GEC Avionics, Ericsson, Microcellular Systems and InterWAVE. Richard Lord became CTO, having spent many years at Alcatel. Bart Kane was CFO at Altobridge with Jerry O’Sullivan taking over the CFO role in 2012. Dick Spring was Chairman of Altobridge. He was a member of the Irish Parliament (Dáil Éireann) from 1981 — 2002. Formerly leader of the Irish Labour Party, he served as Deputy Prime Minister in three Governments between 1982 and 1997. He also held several ministerial offices: Foreign Affairs, Justice, Energy and Environment.  Board members included David Summers from Advent International, Gunnulf Martenson a consultant at the World Bank and Damien Callaghan from Intel Capital.

Investments in the company

In its early years, Altobridge received significant state investment as a start-up in addition to several million euro invested by the founders, employees and their connections. In early 2011, Altobridge announced that Intel Capital and IFC together invested US$ 12 million in the company. This Series C funding round led by Intel Capital provided the company with additional capital to accelerate the pace of roll out of its wireless communications platform. The funding also allowed the company to commercialize its mobile broadband solution. In early 2013, Altobridge announced that Intel Capital and IFC (International Finance Corporation) had both made a follow on investment of US$ 7.8 million in the company.

Altobridge in the news

As a hi-tech start-up, Altobridge received frequent news coverage. In 2007, Altobridge announced that it had licensed its patent pending Local Connectivity Platform to Ericsson. This agreement enabled Ericsson to provide local switching across its GSM Base Station portfolio. This was a major change for Ericsson who were known to prefer developing all of their own functionality in house. In early 2010, Altobridge announced that it had bought ADC’s GSM Base Station and Switching Product Portfolio together with associated intellectual property. In September 2011, the World Economic Forum selected Altobridge as a 2012 technology pioneer. To be selected as a technology pioneer, a company must be involved in the development of a major technology and/or innovation and have the potential for long-term impact on business and society. Previous winners of this award included Google (2001) and Twitter (2010). In 2011 Altobridge won a Deloitte ‘Best Managed Company’ award plus a Wall Street Journal Innovation Award.

Bankruptcy, administration and asset sale

However, in 2014, Intel Capital and the IFC (subsidiary of the World Bank) who were the larger shareholders in the company, confronted with continuous losses in Altobridge, called in a receiver to recover loans provided to Altobridge. Jim Luby of McStay Luby chartered accountants was appointed receiver of Altobridge Ltd on 30 May 2014. This was a dramatic change from 2011 when the company had a turnover of $16.1 million and had raised US$19.8 million in investments from both Intel and the World Bank’s International Finance Corporation. It is difficult to say when exactly the company started to face serious business challenges. Clearly a few members of the company’s management realized that the company faced financial difficulties as far back as 2011. Forty five jobs were lost at Altobridge in Ireland when it ceased trading in June 2014. The company which had offices in Ireland, Malaysia, North America and China, employed a total of 130 staff internationally.

iDirect, an international satellite communications firm bought the company out of receivership. iDirect is owned by ST Engineering, an $11 billion Asian defense and engineering conglomerate. Altobridge assets were sold by the receiver for €4million to iDirect, with the majority of these funds being returned to Intel Capital and the IFC who had advanced monies under a secured loan arrangement. Interestingly, the company which acquired Altobridge, namely iDirect, was primarily interested in the intangible assets of the company, namely the patent portfolio and the software.

The patent portfolio

Entrepreneurship is not for the faint hearted. Some hi-tech start-up companies manage to grow their business successfully and get through the tough times while others unfortunately fail. Entrepreneurship is a constant roller coaster that most people aren’t willing to ride, and start-ups often need to change and adapt and fight through the bad times before making it to the next stage.

There are many companies like Altobridge out there, with an interesting technology, good people and significant investment, but which ultimately fail to gain a sustainable competitive advantage. Did Altobridge however miss a trick? We would argue that this is the case with Altobridge. We would furthermore argue that Altobridge (more importantly: it’s senior management)  failed to fully appreciate their patent portfolio, the potential value of these assets and the different models available to them to monetize such assets. Leveraging their patent portfolio may have helped Altobridge through their tough times.

plaatje 1True, Altobridge were aware of their patent portfolio. A detailed analysis of their patent portfolio was actually conducted in 2011 and presented to the company. A few in the company pushed to have the patent portfolio put on the Executive Management team’s agenda.

plaatje_2Portfolio Composition -Deltasight

A leading IP Broker was subsequently shown details of Altobridge’s patent portfolio. He positively advised on the value of the patent portfolio and expressed his excitement that many patents in the portfolio showed many “forward citations” from some multi-billion dollar companies (see figure below). Additionally, the geographical coverage of the patent portfolio was impressive. However Altobridge’s management failed to understand the results from this analysis of their patent portfolio and failed to act.

Another fact was timing. At the same time the Altobridge patent portfolio was valued the consultant advising the IP staff of their patent potential pointed out that at the same time, around mid 2011, Nortel Networks Corp., the defunct Canadian telecommunications giant, auctioned off its portfolio of six thousand patents and drew an astonishing winning bid of $4.5 billion from a group of companies that included both Apple Inc. and Microsoft Corp. Unfortunately management did not act upon the monetization advice and could not be convinced to do so, despite the right timing and market conditions, as well as the potential great value of the portfolio.





As this case study shows not only is it important to value the patent portfolio properly but more importantly timing and market conditions are equally important for management to act on a proper valuation of the patent portfolio when a start-up is facing financial difficulties in its ongoing business. The sad truth of the matter is that Altobridge’s case is most likely not an exemption rather a the rule in business practice that senior management fails to take action to truly appreciate the intangible assets of the company and act upon it, after careful considerations of market, timing and pricing conditions.


by IPEG consultant Donal O’Connell. For completeness sake: Donal was also involved in the valuation of Altobridge’s patent portfolio. Opinions expressed above are his personal views on the Altobridge case.
The figures used in this article originate from Deltasight. Deltasight’s mission is to utilize its data mining and analysis technologies to bring transparency to global innovation and technologies.
Author: 2 years ago

This article appeared in a publication commemorating the 100 year existence of the Dutch “Patent Act 1910”, published by the Netherlands Patent Office (“Octrooicentrum Nederland”) in 2010 by Severin de Wit

It is not generally known that the Patent Act 1910 marked the end of an era in which no patent legislation existed. A major feature of the latter half of nineteenth-century Europe was that of an anti-patent sentiment, but it was primarily in the Netherlands that it actually gained a foothold.1 In 1864, the whole industrial sector presented a petition to the King, requesting that the current patent system, which had been introduced in 1817, be abolished. There were several reasons for the movement. Some critics put forward philosophical arguments, such as whether or not intellectual ideas should have ‘owners’, who would be able to monopolize their use (the present-day equivalent is the idea that information should be free).

Others were in agreement with the patent principle and accepted the argument that it was beneficial to society as a whole to encourage innovation by rewarding inventions. Those favoring this view asserted that it would be too difficult to create a system in which ‘real’ innovation would be rewarded. This was summarized by The Economist in 1851:

‘The community requires (…) that skilful men who contribute to the progress of society be well paid for their exertions. The Patent Laws are supported because it is erroneously supposed that they are a means to this end’ 2

The patent system was abolished in 1869, but it is noteworthy that this did not mean that there were no more innovations or technological changes – the groundbreaking invention of Willem Einthoven that led to the electrocardiogram (the string galvanometer3) is a case in point. Schiff4 (1971) researched inventive activity in Switzerland and the Netherlands in the ‘patent- free’ period (1869 to 1912 in the case of the Netherlands) with that of countries with a patent system. He began by asking whether patents markedly increased the level of inventive activity, before examining whether, if so, this also resulted in a more rapid rate of industrial development in a country. No clear picture emerged from his findings in relation to the first question, but there nevertheless appears to be enough evidence that the reintroduction of a patent system in 1910 did lead to greater levels of inventive activity.5 The lack of patent protection did not have any noticeable effects on the rate of industrial development.6

As we celebrate the hundredth anniversary of the Patent Act, little appears to have changed compared to the situation that prevailed as the nineteenth century ended and the twentieth began. Once again, there is growing resistance to patents, the patent system and the quality of patents. This is particularly noticeable among entrepreneurs with small and medium-sized businesses and the IT industry, not least – as far as the IT industry is concerned – because of the emergence and success of open source.7 Many people point to the rise of the IT industry in Silicon Valley in the 1980s, the enormous growth of which came about without the need to worry about patent protection. By the time a patent was granted, the software in question would have become outdated. Software and other IT specialists enjoyed a great deal of freedom in their field of operations, unfettered by copyright or patent restrictions. But it was the growth of open source and open innovation projects that caused many people to wonder whether or not patents were necessary for encouraging technological progress, or whether they actually served to hinder innovative and technological developments. It was no wonder that the introduction of a Software Directive by the European patent community led to unrest among a significant proportion of the IT industry, so much so that when the European Commissioner responsible for the Directive visited the Krasnapolsky Hotel in Amsterdam, he was greeted by a large demonstration.

It is mostly foreign – American in particular – economists who have involved themselves in the debate about whether patents stimulate innovation. There has recently been an increase in anti-patent publications, as apparent from a large number of anti-IP bloggers8 and academic publications.9 This has been caused by the discussions about the activities of the music industry in taking legal action against children and grandmothers for illegal mp3 downloads, the use of patents in developing countries resulting in their having reduced access to anti- AIDS medicines, for example, royalty stacking10 and the consequences for downstream R&D, to name but a few. The rise of an actual Pirate Party,11 which secured no fewer than seven per cent of the votes in Sweden at the last European elections, is a further sign that anti-patent sentiment is no longer at the smouldering stage, but instead is threatening to turn into a burning issue.

It is interesting to see how academics are analyzing this anti-patent trend. Two well-known American economists, Michele Boldrin and David Levine, recently published a book12 in which they fulminate about the patent system, which they assert serves only to inhibit innovation.13 Abolition is the key.14 These are not lone voices in the wilderness, but part of a movement that appears to be gaining ground, as evidenced by the wide-ranging support that opponents of patents are receiving from blogs and academic publications.15 The increasing criticism of the way the patent system works has, in the United States at least, led to greater activity in government and the courts in recent years. In 2003 – after extensive hearings where testimony was heard from anybody with even the remotest connection with the patent system

– the US Federal Trade Commission published its report entitled ‘To Promote Innovation: The Proper Balance of Competition and Patent Law and Policy’,16 containing recommendations for modernising and improving the stuttering patent system. The recommendations are very much worth reading, and are relevant to Europe, too. In the US, this not only immediately unleashed a heated discussion,17 but also resulted in action on the part of Congress, which set about making a major overhaul of the system.18 The country’s courts, too, became involved between 2003 and 2009. The criteria for granting patents were tightened up, and the opportunities for taking out short-term injunctions for patent infringements were drastically curtailed. In academic circles, it is primarily economists who are at the forefront of the discussions on patent reform and its effects.19

This does not mean that the way the patent system works has been ignored in Europe, but it has to be said that, in typical European fashion, there have only been words, recommendations’, and surveys. Little progress has been made on the legislative front, as shown by the attempts at creating a Community Patent.20 The process has been deadlocked for years with successive EU Commissioners trying to breathe new life into it, but to little effect. It has been reported that one EU Commissioner described IP as a ‘headache’ for which no electoral gain was to be had.21

There is now a deafening silence in the Dutch academic IP community, which at present appears to be concerned only with knowledge of substantive patent law. Publications on the relationship between patents and innovation are very thin on the ground, as is awareness of the significance of the economic and legal value of knowledge and the role that patent management, for example, has to play in it. There is also a willingness to leave criticism of how the patent system works to others outside the Netherlands, which is surprising given that academic tradition in patent law has been dominated in recent decades by practitioners from the legal profession and the courts who, as a result of their background and experience, are primarily interested, and have expertise in, the interpretation of aspects of substantive patent law. It is these people, with practical experience, who occupy the Chairs of Intellectual Property at Dutch universities. There is not a single legal or economics faculty at a university in the Netherlands that has a Chair in Intellectual Property Management or a related subject where the social, economic and market aspects of patents are taught.

Industrial expertise in the field of knowledge management and appreciation of industrial property is generated by practical business experience, and not as a result of universities offering a relevant curriculum for young entrepreneurs or lawyers or economists. No serious attention is paid to the role of patents in the economic process, the importance of patents in innovation processes, the value of patents, the conversion of patented knowledge into ‘value’ for an organization or patent strategy at any legal or economics faculty.22

All this will have consequences for the way in which future generations of entrepreneurs regard the economic significance of patents. The lack of any university teaching of economics-based patent management will also be reflected in the actions of politicians and, in more general terms, in the users of patented knowledge.23 Last but not least, it will impact upon Europe’s competitive strength vis-à-vis major powers like China as well.24 It is therefore no great surprise to learn that most CEOs and CFOs have no idea what role, if any, patents play in their organizations. There are a few exceptions: Philips and Thomson in Europe, for example, and many American companies (where, unsurprisingly, education places a much greater emphasis on the subject of IP management).

How will this be reflected in the Patent Act in 2110, assuming for the purposes of our argument that future generations of lawyers and economists can be persuaded to take patent protection seriously? As has been shown in the US, the way in which patents are granted and subsequently interpreted will, to a large extent, determine whether or not we will still have a Patent Act (or European equivalent if it ever reaches that stage), as will a greater focus in the education system on the significance of non-substantive aspects of the patent system. This brings us to the question of where the growing criticism of the quality of patents is coming from, and whether that will affect how substantive patent law will evolve and whether or not we will still have a Patent Act in 2110. Or perhaps we will see a revival of the anti-patent movement of the kind that existed in the nineteenth and early part of the twentieth century?

The emergence of patent auctions in 2006 – started by Ocean Tomo25 in the US – has at least gone some way towards highlighting the value of patents. Much has been said and written about the meaning of intangible intellectual property and patents in particular. It is generally recognized in both tax and economic-related dealings that patents should be treated as intangible assets,26 although this has not led to a clearer insight into the ‘value’ of patents. What the auctions have done is to raise the popularity of patents as a value factor. The value at an auction is, after all, determined by the level of the bid for the patent by the bidder, anonymous or otherwise27. However, the day-to-day reality is not quite that simple. The value at an auction is the price that is offered for the patent. As long as the reserve price is low enough, then a bid will soon result in a sale – in other words, in a sale price. But is that actually what the patent is worth? It depends on whom you ask. For the buyer and his accountant, it probably is: they will record the price paid as acquisition costs on the balance sheet in the form of goodwill. If, in the future, it starts to generate patent license income that leads to a greater return than the acquisition costs, then the patent will have acquired a ‘value’ that bears no relation to the price for which it was bought at the auction. If that knowledge is available at the time of the auction, for example in cases where a patent is sold which is already generating license income, then that will provide a firmer base on which to determine its value. If you ask a lawyer who has to advise his client about the value of a patent on offer, then he will base his answer on a risk analysis. In the legal world, that usually means an opinion in which a prior art publication has popped up somewhere in the world which makes the patent worthless (as a result of being made null and void). However, if the same question is put to an IP manager in a company, then he will set the value according to where the patent fits into the organization, and that depends on whether it serves to protect the organizations own products or those of a competitor, allowing him to obtain a ‘patent truce’.

This is where patents, as intangible assets, are different to other assets. Value is contextual. If, in order to be able to trade its goods, an electronics manufacturer has to ‘buy in’ patent rights from third parties – in the form of a licence, for example – as well as components, the value of the licensed patents is set at the ‘purchase value’ of such rights: in other words, the price of the licence that has been paid to acquire the rights that are needed to get the goods to market. However, if a party has its back to the wall in a patent-related legal dispute, the ‘value’ of a patent that enables it to launch a counterclaim is many times greater than the ‘objective value’ that a similar patent would be worth in normal market conditions. The price that a buyer is willing to pay would therefore be greater than what would be considered justifiable in ‘normal’ market circumstances.

The price of an asset such as real estate is the transaction amount that is arrived at through market supply and demand or, in a non-auction context, a process of negotiation. This price may therefore be higher or lower than the value. It will be determined by market conditions, by strongly subjective motives on the part of both the buyer and vendor, and by their negotiating skills. The value arrived at in this way is the market value – the price that the market is prepared to pay – depending on the quality of the real estate, its location and general market conditions such as access to finance and so on. However, the market for patents is neither predictable nor logical.

Another illustrative example in this context is that of the value of investments (shares, bonds and other negotiable instruments). The overriding theory in this field assumes an ‘efficient market’ that the investment market calculates every relevant factor efficiently, thereby resulting in reasonably predictable market movements. The use of benchmark data is used as a starting point for buying and selling decisions. Unfortunately, a similar generic concept for intellectual property has not been developed, nor has the need for one been very widely accepted. The ‘market’ for patents is therefore anything but ‘efficient’.

Value is not only a topic that returns again and again at patent seminars, but also one that leads to many kinds of discussions, question and academic debates. It also remains a reasonably untapped field, in which standards and best practices are lacking. This is apparent just from the fact that there are presently in excess of one hundred patent valuation methods. Such uncertainty about the value of patents will undoubtedly not help achieve a wider acceptance of patents as something that organizations should factor into their activities, nor to the realization that patent policies should be an integral part of every business strategy.

Any contribution to a publication marking the hundredth anniversary of the Patent Act should end on a positive note, if only because a law that has lasted a century and forms the basis of the day-to-day activities of a large group of IP specialists and academics, merits such appreciation. However, it is not easy to be positive, not least because it is impossible to dismiss the impression that genuine renewal of the patent system continues to elude us. In addition, the courts in Europe, unlike the Supreme Court in the US, are insufficiently willing to take the lead in creating legal certainty and predictability in patent-related decisions. Hopefully, though, this is something we will be able to face up to the next few decades, resulting in a modern, Europe-wide, simple variant of the Patent Act 1910.



1 Machlup F. & E.T. Penrose (1950) The Patent Controversy. The Journal of Economic History, X(1), 1-29.

2 Jaffe A. & J. Lerner (2004) Innovation and Its Discontents. Princeton University Press, 86-87.

3 Barold, S.S. (2003) Willem Einthoven and the Birth of Clinical Electrocardiography a Hundred Years Ago. Cardiac Electrophysiology Review 7(1).

4 Schiff, E. (1971) Industrialization without national patents, The Netherlands 1869-1912, Switzerland 1850-1907. Princeton

5 See Dutton, H.I. (1984) The patent system and inventive activity during the industrial revolution 1750-1852. Manchester University Press, 5-6.

6 For some interesting examples of industrial development in the Netherlands in the second half of the nineteenth century, when no patent

protection existed, such as the emergence of two national industries – from Philips to margarine factories – see Cullis, R. (2007) Patents, inventions and the dynamics of innovation: a multidisciplinary study. Edward Elgar, 212-213.

7 Kogut B. & A. Metiu (2001), Open-Source Software Development and Distributed Innovation (Wharton School, University of

Pennsylvania), Oxford Review of Economic Policy, 248-264.

8 Techdirt, (, Patently-Silly (, Lawrence Lessig’s blog (

9 See, for example, Nobel Prize winner and economist Professor Stiglitz, J. (2006) Making Globalization Work. Norton & Company. See also

note 2.

10 Lemley M. & C. Shapiro (1992), Patent Hold Up and Royalty Stacking. Texas Law Review, 85, 249.

11 See

12 Boldrin M. (University of Minnesota) & D.K. Levine (University of California, Los Angeles) (2008), Against Intellectual Monopoly, may be downloaded freely from, available in hardback via Cambridge University Press.

13 When warnings were issued in the 1980s – I think it was by S.K. Martens – about the anti-competitive aspects of intellectual property, the IP world was too small.

14 See also Jaffe & Lerner, note 2.

15 This is also the conclusion on quantitative and econometric grounds, see the authors listed under note 12, Boldrin, M. & D.K. Levine. (2005), The economics of ideas and intellectual property. National Academy of Sciences, PNAS, 102(4) 1252-1256, who assert: ‘Our own conclusion, based on empirical as well as theoretical considerations, is that on balance it would be best to eliminate patents and copyrights altogether’.


17 See, for example, Merrill, S.A., R.C. Levin & M.B. Myers (2004) (eds), Seven Recommendations for a 21st-Century Patent System, Committee on Intellectual Property Rights in the Knowledge-Based Economy, National Research Council.

18 The Patent Reform Act, for an overview see one of the best-known patent blogs in the US, ‘Patently-O’,

19 Gallini, N.T. (2002), The Economics of Patents: Lessons from Recent U.S Patent Reform. Journal of Economic Perspectives, 16(2), 131- 154.

20 Community Patent; the most recent position at the time of writing of this article is the ‘Recommendation from the Commission to the Council to authorise the Commission to open negotiations for the adoption of an Agreement creating a Unified Patent Litigation System’ (March 2009).

21 See also EU Commissioner McCreevy on EPLA, IPEG blog,

22 Not to be confused with litigation strategy: acquiring the most effective protection for IP by strategically using litigation tools and geographical opportunities.

23 See Maskus, K.E. (June 2005), Emerging Needs for Including Intellectual Property Education and Research in University Curricula,

paper for WIPO International Symposium on Intellectual Property Education and Research, Geneva.

24 Even in China, the country that we in the Netherlands like to assert has little respect for IP, there is a university with IP Management on its curriculum, the University of Technology (Tsinghua University). See Hua Guo, Jones Day, China, Case Study: IP Management at Tsinghua University,   (

25 Ocean Tomo has recently moved the ‘auction business’, which has only produced minimal yields averaging less than the historical cost-

price, to a smaller unit and focused increasingly on more lucrative activities such as litigation support and expert witness work.

26 Blair, M (2001), Unseen Wealth: Report of the Brookings Task Force on Intangibles. Washington DC: Brookings Institution Press. Wilson, R.M.S & J.A Stenson (2008), Valuation of information assets on the balance sheet: The recognition and approaches to the valuation of intangible assets. Business Information Review, 167-182.

27 Most bidders at auctions organized by Ocean Tomo did their bidding by telephone (that is, anonymously); it has been maliciously suggested that most bidders in recent auctions were patent aggregators like Intellectual Ventures (Bellevue, WA, USA); see also Millien and Laurie (2007), Established and Emerging IP Business Models. The Eighth Annual Sedona Conference on Patent Litigation conference paper.







Author: 3 years ago

Patent claims can be mapped to a variety of parameters to support critical business decisions. As the name suggests, patent product mapping is about clearly linking a patent and one or more of the claims of that patent to a specific product or a specific component, part, feature or function within that product. Patent product mapping is frequently used to map one’s own patents to one’s own products, to evaluate the level of alignment here, and to help identify the most important patents in one’s own portfolio and the protection they provide to the products in one’s own product offering. Mapping is important during the patent prosecution phase as one needs to know which claims ought to be taken forward, and which claims should be abandoned. It is not cost effective to proceed with a large number of claims. Of course patent product mapping may also refer to mapping ones own patents to the products of a 3rd party or mapping the patents of a 3rd party to one’s own products.

This blog looks at the issue of patent product mapping, the rationale for doing so, the challenges with trying to conduct such mapping and last but not least some of the approaches and techniques one may employ in order to succeed. IPEG fully understands that one should be quite pragmatic about what can or should be done and what not. As everyone has limited resources (people, time and money), one should only do things which bring clear benefits for the business.

The rationale for mapping

In recent years, intellectual property (IP) has come to play an increasingly important role in the world economy. In the knowledge economy, knowledge has become an important economic good. Thus, IP and patents gain in importance. Patents can bring value in a variety of different ways to a business or organisation …

Freedom to operate

  • Product or feature differentiation
  • Revenue generation (though licensing or selling)
  • Business influence
  • Enabling a technology
  • Supporting technology transfer
  • Cost advantage
  • Positive innovation image in the marketplace
  • Tax benefits (for example the Patent Box in the UK)
  • Attracting investment

To order to obtain many of these benefits listed, a company may need to first conduct a patent product mapping exercise.

Challenges with mapping

Mapping a patent to a product however is often easier said than done. This challenge with mapping was flagged by a number of companies considering to apply for the Patent Box in the UK when the scheme was being deployed in 2013. Why is it so difficult for some? The language and terminology used in patents is rather unique, and somewhat different from that used by technical engineers or product marketing personnel. In a patent, a word must describe a thing very precisely, and have a very specific, unambiguous meaning. When it comes to describing a device or process in a patent application, specificity is ever more crucial because of the risks of encroaching on other patents in process or already granted.

Most patents do not make mention of specific products. There may be no product information contained within the original invention reports when the inventive idea was first documented. The inventor will definitely have been much more focused on the technical invention rather than any product possibly incorporating this technical invention.

When the patent was drafted, there may not have been any specific product information included simply because no product existed as it had yet to be designed, developed and commercialised.

The IP Data Management System in use either by the Corporate IP Department or by its outside IP Firms may not have been configured to record product details. Even if such a field exists, it may have suffered from data integrity or ‘dirty data’ issues. Data integrity is data that has a complete or whole structure. All characteristics of the data including business rules, rules for how pieces of data relate to each other, dates, definitions and lineage must be correct for data to be complete.

The timing of the patent and product may be completely out of sync. A product may launch well before or after a patent is granted as the product development process and the patent creation process are independent processes and not connected as such.

The company may have a very large patent portfolio of thousands or tens of thousands of individual patents to manage and patent product mapping may not have been considered a key issue of importance within the patent portfolio management process. The company may have very busy or crowded technology or product road-maps, making patent product mapping very difficult and therefore not easily accomplished.

The complexity of the products involved may make this mapping exercise extremely challenging. The product may contains hundreds or thousands of hardware, mechanical and software components. The product may change over its lifetime as enhancements or improvements are incorporated. The bill of materials may change as second sourced almost identical components are fitted.

Part of the patent portfolio may have been acquired through M&A activity or part of the patent portfolio may have been bought in. Patent information previously included on say product user manuals may no longer be recorded there. There may simply have been no justification in the past to capture such patent product mapping information. Even if there is some product information documented, it may be difficult to interpret it. Many product development companies use a variety of project names, project codes, SKU numbers, product brand names or numbers, all actually referring to the same product.

Mapping techniques

There are a variety of techniques which may be applied to map a patent to a product. Some are easier to use than others. Not all techniques will apply to each mapping exercise. Some will only make sense if one is attempting to map a patent to one’s own product.

  • Examining the patent and the claims.
  • Patent to technology mapping.
  • Semantic mapping between trademarks and patents.
  • Reviewing data from the invention handling and patent board decision making stages.
  • Examining the patent data management system in use.
  • Examining engineering and product data management systems in use.
  • Looking at special attributes of the patent if they apply.
  • Gathering insights from inventor rewards.
  • Reviewing the annuity process.

Examining the patent claims:

This is the most obvious approach. However, it can be slow and labour intensive. The claims have to be examined to try to identify ways and means in which the patent maps to the product. Basically the claims are examined to see if there is any product mentioned. Of course some software tools may be utilised here to make this examination more efficient and effective.

Patent to technology mapping:

This technique is as such a two stage process. Firstly, a patent to technology mapping exercise is conducted and then secondly a technology to product mapping exercise is carried out. The claims are examined to see what technology is referenced and then the product is analysed to see if that particular technology is embedded within the product.

Semantic mapping between trademarks & patents

This technique uses semantic mapping between trademark descriptions and the language used on patents. The name of the product may be trademarked, and this trademark documentation is examined. Semantic maps are maps or webs of words. The purpose of creating a map is to visually display the meaning-based connections between a word or phrase and a set of related words or concepts, in this case words or phrases in the trademark documentation and hopefully a set of related words or concepts in the patent.

Looking at the invention handling process

This technique involves examining key steps in the patent creation process prior to the patent being drafted to hopefully find and capture some product related information. Key stages worth examining may be …

  • invention disclosure
  • prior art search results
  • patent board meeting and the review and decision making process conducted there

Many innovative and creative companies have invention capture processes and tools. One simple yet effective way to build a level of discipline into the invention handling process is to define a standard template for invention reports coming from the inventor community. If the idea is of potential value and is patentable, then the inventor should complete an invention report.

Such a template may consist of the following:

  • The title of the invention
  • Inventors details
  • Additional contributors to the invention
  • Is the invention related to a specific project or program?
  • Technology area of the invention
  • Does the invention relate to a Standard?
  • A summary of the invention
  • A more detailed description of the invention, together with any figures or drawings
  • Description of all known, related prior art
  • Will the invention be disclosed publicly?
  • Reference material

They may or may not have a field containing product information.

It may be worth reviewing the results of any prior art searches conducted to see if any product information was captured. Additional it may be worth checking what discussions were recorded at the patent board or committee meeting.

Examining IP data management systems

This technique relates to accessing the data stored in the IP data management system of the product company or its outside IP Firms. These systems are oftentimes complex sophisticated IT system containing large amount of data.

Examining R&D data management systems

Mature and sophisticated research and development groups will have various systems and tools in use to capture information as the product moves from initial idea through specification to early prototype stage, and then onto commercial release. Mention of inventive ideas and IP reviews may be captured in these R&D systems, especially if they follow a gated review process. Another approach is to review the product user manuals, including early drafts as there may have been a discussion about including patent details there.

Focusing on special attributes of the patent

Does the patent have any special attributes. A Supplementary Protection Certificate (SPC) in essence extends the term of a patent. Is the Patent a Standard Essential Patent (SEP) and relate to some interoperability standard? If the patent has any such special attributes, then it may be possible to utilise this fact to map the patent to a product.

Inventor reward & recognition programs:

Most innovative businesses provide rewards and some form of recognition to inventors and yes, there are legal requirements in certain jurisdictions to take into consideration. More than 80% of inventions are made by employees and it is therefore important that the company knows its own rights with regard to an invention, as well as the rights of his employees. The general rule is that where an employee creates an invention in the course of his employment, this invention and any patent will belong to his employer. However, there are statutory provisions in place to ensure that the employee does not go unrewarded. Japan and Germany are two examples of jurisdictions where employee compensation is common, but there are others. This technique is therefore based on first checking the inventor was paid a reward, and if so, how was the payment calculated. It may be the calculation included product data as this is actually required in certain jurisdictions.

Checking the annuity renewal process

This technique involves reviewing the annuity / renewals process and how decisions were taken on maintaining the patent in question. Oftentimes key patents are maintained because they protect important products. As a final thought: as companies strive to better leverage and exploit their patent portfolios, the requirement to master patent product mapping will significantly increase in importance.

Donal O’Connell,

IPEG Consultant
Managing Director, Chawton Innovation Services Limited
Chawton Innovation Services Limited The Stables, Gosport Road, Chawton Alton Hampshire GU34 1SH, United Kingdom


Author: 3 years ago

In the 2014, volume 3 edition of the “Journal of Intellectual Property Law and Management” an article is published by IPEG’s managing partner, Severin de Wit, called “Challenges in Public and Private Domains will shape the Future of Intellectual Property“. The Journal is published by the National Taipei University of Technology (“NTUT”),  a national university located in Taipei City, Taiwan. The Journal is run by the Institute of Intellectual Property, an educational organization of the NTUT.


Market failures, troubled access to medicine, impediments to free flow of information, copyright over-extension, digital right protection, overkill and patents stifling rather than stimulating innovation are just a few of the disparaging themes around intellectual property. The main drives behind changes in IPR systems are growing discontent with the right to exclude that is essential to most IPR systems, the diversity of IP policies between the West and the Developing countries as well as digitalization of information. The future of IPR will be shaped by its users more so than by international IP legislative initiatives. This article explores the main drives behind a growing critical view on intellectual property and how the law can change so as to restore confidence in the workings of intellectual property systems.

The NTUT article can be found here.

For other publications by Severin de Wit, see Selected Works

Author: 4 years ago

The patent prosecution highway (PPH) is a set of initiatives for providing accelerated patent prosecution procedures by sharing information between offices that have entered into an agreement under the PPH. At present, there are a variety of PPH bi-lateral agreements existing between many pairs of intellectual property offices worldwide.

An example of such a bi-lateral agreement is the PPH agreement between the United States Patent and Trademark Office (USPTO) and the United Kingdom Intellectual Property Office (UKIPO) where an applicant who receives a ruling from either office that at least one claim in an application is allowable may request that the other office fast track the examination of claims of similar scope in the corresponding application.

Global Patent Prosecution Highway

A pilot for a Global Patent Prosecution Highway (G-PPH) was launched on Friday 10 January 2014 with an agreement between 17 intellectual property offices. The pilot G-PPH works on the same basis as the existing bi-lateral agreements but rather than accelerating prosecution of a corresponding pending application in just one office allows applicants who have had a set of claims found allowable by one participating office to ask that co-pending applications in as many as 16 other participating offices be accelerated.

The 17 offices that are within the agreement include the patent offices of Australia, Canada, Denmark, Finland, Hungary, Iceland, Israel, Japan, South Korea, Norway, Portugal, Russia, Spain, Sweden, United Kingdom and the USA. The other office is the Nordic Patent Institute (NPI) which acts as an international searching authority (ISA) and international preliminary examining authority (IPEA) for PCT applications filed at the patent offices of Denmark, Iceland, Norway and Sweden.


The pilot G-PPH is aimed at cutting the time and cost of seeking patent protection in key global markets.

The pilot G-PPH means that if, say, a set of claims is found allowable on a Canadian patent application by the Canadian patent office, that can be used to accelerate prosecution of a corresponding patent application in Norway as both the Canadian patent office and the Norwegian patent office are part of the pilot G-PPH.

Very often, territories in which patent protection is sought are chosen on a cost basis based on, for example, the activities of competitors. Other territories may be discounted as the patent protection that may be on offer in those territories does not justify the cost that would be necessary to secure protection in those territories as well. The G-PPH, offering accelerated prosecution provided set of claims is found to be allowable in a first territory party to the G-PPH, can reduce the cost of pursuing patent protection in the sixteen other territories by hopefully reducing duplication of the work involved and also reduce the time taken to pursue patent protection in the other territories.

Dr Julian M Potter and Alistair McKinnon, WP Thompson


Author: 4 years ago

Many companies with a meaningful or substantial number of patents in their portfolio organize their portfolio by means of a so called Patent Review Board, a formal review meeting, the purpose of which is to evaluate inventions, to determine which ones should be submitted as patent applications and to genarally discuss patent renewal issues and patent strategy. The decision to file a patent application is ultimately a business investment decision, so some kind of professional decision making process is needed. The actual terminology used within companies and organisations varies with ‘Patent Boards’, ‘Patent Review Boards’ and ‘Patent Committees’ being some of the names commonly used to describe such meetings.

As with any meeting, when they are conducted properly, they can be a powerful management tool, but poorly conducted meetings can be a drain on time and resources, as well as an activity that increases hostility, apathy, and stifles new ideas. It is therefore imperative that the patent board, as a decision making body, is properly resourced, that the objectives of  the meeting are clear to all participants and that such meetings are well planned and organised, in order to run efficiently and effectively, and that there is consistency and transparency throughout all proceedings and decision making.


The decision about who is to attend will depend upon what you wish to accomplish in the meeting.  This may seem too obvious to state, but it is surprising how many meetings occur without the right attendees being present. Membership of these boards is therefore critical.  The Patent Board should ideally comprise of people with diverse skills and competencies, and involve people from the Intellectual Property Department, Technical and Business Units of the company.

All members should add value and contribute to the meeting.  Meetings will often fail because participants have not prepared well enough.  Consequently, meetings overrun and decisions cannot be made. Some companies will involve the actual inventors in their Patent Board meetings while others choose not to do so.

The chair of the patent board meeting plays a crucial role in the proceedings.  Sometimes this role  is held by a representative of the intellectual property department, and other times it is held by a business unit representative, so that they can have ownership of the decision making process in some cases.


The actual invention report itself is obvious, but it is not the only input …

The invention report

  • Summary of the invention, including information on the advantages or benefits provided  (useful for non-technical Patent Board members)
  • Prior art search results and analysis
  • Opinion/s of technical experts
  • Patentability analysis results
  • The ease or difficulty in detecting infringement
  • Filing targets (how does this invention help achieve the set filing targets, if such targets exist)
  • Rating of the case (if a rating or scoring system is in use)
  • Guidance on how such a patented invention would add value to the business

One or multiple patent boards?

Many larger corporations hold multiple patent boards on a regular basis, given the volume of inventions to be reviewed.  These patent board meetings are often organised by technology area or business focus, in order to ensure that the individual patent board meetings are focused.

  • Patent Board #1 : Technology #1 / Business #1
  • Patent Board #2 : Technology #2 / Business #2
  • Patent Board #3 : Technology #3 / Business #3

It is usually more effective to have such patent boards organised by technology area rather than by physical location or by business group, as this helps avoid duplication of effort.

What questions are typically asked at these Patent Board meetings?

The obvious question to try to answer is whether or not to file a patent application on the particular invention under review.  However, to help to answer that question, some more probing questions will need to be answered:-

  • What problem does the invention solve?
  • How does it improve over existing solutions?
  • Is the invention likely to be implemented by you and/or by others?
  • Is it easy to design around?
  • Is it easy to detect infringement?
  • Does it offer differentiation in the market?
  • Does it offer a licensing opportunity/are third parties likely to want to utilise this invention?
  • Does it have technology control point potential?
  • Does it relate to an Interoperability Standard?
  • Does the invention align with the filing targets?
  • If protection is required, in which counties is it required?
  • Is there likely to be a return on the investment?
  • How would such a patented invention add value to the business?

It is important that the decision making process is consistent and transparent.

Decision options

A number of decision options are usually available to the Patent Board:-

To file a patent application

  • To reject a patent application
  • To request more information from the inventor
  • To keep the invention as a trade secret
  • To publish the invention

There may indeed be other decision options made available to the Patent Board as well as those listed above.  Some national laws may also impact the decision options available to the Patent Board as these options invariably change from country to country, depending on the country law concerning inventor/employer ownership.  It is generally straight forward in the United Kingdom, but more complex in Germany and Finland at least.

Some patent Boards serve multiple purposes

Many patent boards serve multiple purposes:-

  • To evaluate invention reports and determine which ones should be submitted as patent applications
  • Setting of time-lines for preparation and filing of the patent applications
  • To decide on the foreign filing strategy (in which countries to file)
  • To review existing patents due for renewal/annuity fees (continue or abandon)

When to hold Patent Board meetings?

These meetings should be held on a regular basis to avoid a long wait on decisions for rejecting or filing of invention reports and in some jurisdictions there is a time limit in place regarding the making of such decisions.  The frequency of patent board meetings will depend on the volume of invention reports being submitted, the backlog, the workload of the intellectual property professionals analysing these invention reports and the availability of the patent board members.  Additionally, the quality of the inputs previously defined, the efficiency of the decision making process and the relative importance of the first filing date will also be a consideration.

Automating these Patent Board meetings

Some IP Data Management Systems offer functionality to help automate many aspects of these Patent Board meetings:-

Meeting scheduling

  • Invitations to participants
  • Distribution of materials
  • Voting to file or not prior to the actual meeting
  • Capturing the discussion during the actual meeting
  • Recording the decisions taken and the rationale for these decisions
  • Informing the inventor/s of the decision taken
  • Gathering various metrics on the efficiency and effectiveness of these meetings

A simple web search will highlight the wide range of such systems and although there is this huge choice of systems and tools available which can add value to your Patent Board meetings, I suggest that some thought needs to be given to the selection of any such system. System selection is best addressed once the Patent Board process is defined.  Your first step should be to define and agree how you wish to operate your Patent Board meetings and then to select the systems necessary to support them.

Key performance indicators

Metrics are a set of parameters or ways of quantitative and periodic assessment of a process that is to be measured, along with the procedures on how to conduct such measurement, plus the procedures for interpretation of the results if necessary. The practice of performance measurement and gathering statistics is often seen as a time consuming chore, but if you don’t know how you are performing how you are you able to identify problems and introduce improvements.

Given the importance of the patent board, it is most important that there are metrics in place:-

  • Volume of cases being handled
  • Participation rate of Patent Board members
  • Pass/fail rate by technology area
  • Spread of ratings of cases
  • Time taken from invention report submitted to decision taken
  • Quality of the inputs as described previously

It is important to note that you generally get what you measure, therefore it is essential to decide upon the correct measures.  There are numerous examples of failures due to the incorrect metrics being monitored or rather, the failure to monitor and measure the correct metrics.

While metrics may not be perfect, conducting a series of measurements following the same methodology, which produce evenly flawed results, may nevertheless prove the trend and may prove to be valuable.  This is important, as hard measures are sometimes difficult to obtain for soft targets such as quality.  The absence of metrics on soft targets may flaw the overall measuring system towards only hard numbers, thereby favouring the hard numbers, such as the volume of cases being handled, at the cost of quality.

Fast tracking certain cases

It is imperative that your invention handling and decision making process can accommodate urgent cases if and when needed, allowing the quickest and most direct route to achievement of the goal of filing a patent application. The Patent Board should acknowledge how urgent cases are to be fast tracked, and how such decisions are to be made and recorded.  Some ad-hoc meetings may be held via e-mail if needed to handle such urgent cases.

Is is important to empower your most experienced Patent Attorneys to be able to file urgent applications if and when necessary, for example, an invention to be submitted to an Interoperability Standards Working Group or an invention related to some imminent product launch.  However, that Patent Attorney would then need to justify his/her decision at the next Patent Board meeting and ensure that the rationale for such action is documented for future reference.

Feedback to the inventor

Some form of feedback to the inventor, explain the decision of the Patent Board, is imperative if the flow of invention reports is to be maintained, and if good relations between the Patent Department and the inventor community are to be established and kept in place. On the case specific level, it is important that there is a good professional working relationship between the inventor and the patent professional who is responsible for drafting, filing and prosecuting the case through the patenting process.  The inventor should be kept informed of progress as the case progresses and, if for any reason a decision is taken not to progress with the invention through to the patenting process, then that decision should also be explained to the inventor.  It is most important to remember that just because an idea is not put into the patenting process it does not mean that it is not a good idea.  The establishment of an appeals process is also worth considering.

Most innovative businesses provide rewards and some form of recognition to inventors.  There are two main reasons for having a reward and recognition program in place for inventors.  The first is that there are legal requirements in certain jurisdictions to take into consideration and secondly and more importantly, a good comprehensive reward and recognition program encourages and motivates innovation and creativity

The components of a reward program may include elements such as financial awards, plaques, patent festivals or celebrations and recognition of the inventor by Senior Management.  Other small but simple and effective ways to indicate top inventors are top inventor get-togethers and published league tables of the top inventors within the organisation.  The value of a simple ‘thank you’ or ‘well done’ should also not be overlooked.

Final thoughts

The importance of intangible assets is growing, often equaling 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.  In the mid-70s, approximately 80% of the value of a company was made up of tangible assets, with the remaining 20% being made up of intangible assets.  Today this is completely reversed, with intangible assets making up 80% of the value of the company and only 20% being made up of tangible assets.

Patents can be an important subset of a company’s intangible assets.  It is therefore imperative that Patent Board meetings, the purpose of which is to evaluate invention reports and to determine which ones should be submitted as patent applications, are run efficiently and effectively.  The most efficient meetings are as those which have been well prepared in advance, so that the focus of the actual meeting itself is about the decision.

Donal O’Connell, consultant IPEG Consultancy B.V (

Author: 4 years ago

Today an interview with IPEG’s founder appeared in The Korea Times. The interview was taken by email by Technology reporter Yoo-chul Kim. The full text used for the interview read as follows


 *Is Apple really an innovation killer? If not, please say why. 

To call Apple an “innovation killer” would be a travesty of facts. No matter from which part of the world you are or on who you want to side in the current technology disputes, Apple introduced a revolutionary and innovative way to distribute music. iTunes and the iPod caused the music industry to change its out-of-date business models. Later it also influenced publishers and movie industry to revisit their business models when Apple introduced the iPad. It created a whole new experience on how people engage in music, TV shows, apps, podcasts, books and so on. In doing so it created a giant innovation in terms of business models. Hence the patent fight as competitors jumped the wagon Apple started to set in motion.

*The U.S. Patent and Trademark Office nullified Apple’s patent claims on a touch-screen “bounce back” feature, a decision that could help Samsung in its fight against a $1 billion patent infringement verdict. What do you think about? What’s judge Koh’s bet?

As it goes in many global patent disputes, the longer the legal worldwide battles go on, the more holes are made in a party’s patent position. Every large patent battle starts with a selection of easy-to-explain patents, preferable user-interface patents, like the “rubber banding” patent that now is being revoked by the USPTO. The longer you fight, the greater the chance that the battlefield becomes a patchwork of wins and losses, making the outcome in the various jurisdictions unpredictable and much less understandable (for both sides, that is). Its hard to understand why even courts in one country can disagree among each other whether a party infringes a patent or whether a patent is invalid or not, let alone how the outcomes of the legal battle in different countries affects each party’s position. Patent fights become a  jigsaw, leaving both parties at odds what the final result of the patent battle brings them.

As far as I understand US patent law, I don’t think Judge Koh has any say on this other that that she has to accept that the party granting the patent in the first place, the USPTO, revised its opinion and withdrew the patent. This USPTO decision can be appealed by Apple, but Judge Koh can’t influence that anymore. However it gives legal weight to Samsung’s argument that some Apple patents were initially granted in error.

*Apple was ordered by Koh to publicize its key financial figures. Koh is changing her mind? Apple is a secretive firm. The order will hurt Apple’s decades-long values? And Why?

That is a way too dramatic view. It is all part of a fierce Intellectual Property battle, a win here a loss there. Winning a damages order, having to disclose financial data to prove its alleged damages, its all part of the game. Apple has still many options, I guess, from appealing to asking for a protective order not to disclosure their proprietary financial data to the other party, only to a trusted third party, or many other options the US counsel may advise.

*U.K. court ordered Apple to launch an advertisement. You think the ruling will affect other issues in other countries?

Personally I find this a rather odd decision. The Court, as I understand it, ordered Apple to publicly state that Samsung did not infringe a certain patent, so as to “diminish” the public relation exposure Samsung got after the first wave of publicity painting Samsung as a copycat rather than an innovator. Given the amount of publicity every bit of information on this high profile patent battle seems to get, any news of a “win” of one party over the other creates a new avalanche of blogs, publications, editorials and comments, enough to restore whatever impression the public has over on one of the parties. It only contributes in my view to the irrationality of patent battles and will only enlarge the frustration many feel over this type of IP litigation, asking what, if any, result in the market this type of legal fights have.

*Apple said jury foreman Hogan was balanced not biased. But Korean media (hope you understand about Korean media’s favorable stance towards Samsung _ off the record) said Hogan is disqualified citing his involvement in Seagate issue and quotes quoted by many foreign media. Hogan biased or balanced. Please say why.

I am not particularly familiar with this small piece of court-related razzle-dazzle. I seriously doubt how relevant this is, honestly. Of course any small “victory” in a court battle is being magnified so as to distinguish the “good” versus the “bad” guy. Overall I believe it’s just one of the many issues that always seem to happen in any large scale IPR (and other legal) battles. Not very exciting in my view.

*You think is there a possibility that the California verdict may be

thrown out by Koh in December 6 or is there any possibility that the judge Koh to decide Samsung to pay below $1.05 billion. Please say why

In general it is my impressions that most jury awarded damages are later overturned or dramatically lowered by Judges or Courts in the US. Of course in this highly visible and hugely “public” patent battle, big numbers like the jury award of over a billion dollar, bodes well for the generally laymen public that follows this titanic struggle. Look at the outrageous rumors on internet gossip that followed the jury award that Samsung intended to pay with nickels, 30 trucks of five cent coins. It fits in the current time: facts and fantasy shaking hands. I am sure that things are sure to simmer down over time.

*How can you define about the dispute. My Samsung sources said Samsung doesn’t have any plans to sign a cross-licensing deal because Samsung still believes the axis for smartphones is still divided by the both. That’s why Samsung recently announced to build another handset factory in Vietnam (Korea Times exclusive, which Samsung confirmed, later). What do you think. You think the dispute will keep continue throughout next year as well?

If you look at the statistics, over 90% of electronics and related patent fights end in a settlement, sooner or later. I am convinced that over time this will be true for the Samsung Apple dispute as well. However, its way too early now for any party to settle. The price would simply be too high. There is a risk for Apple though. The initial “drive” behind the fierce global IP fight was for Apple to draw a line in the sand, to show that it would not accept any party to go beyond sound competition by “copying” its main features and what they believed to be their hard fought innovation. The more the battle starts to resemble an Emmentaler Cheese (cheese with holes), the lesser effective Apple’s efforts to draw a public image of Samsung as the copier and Apple to be the innovator, will stick in the public mind.

*What Apple exactly wants for the fight with Samsung.

It’s a well known phenomenon: as soon as a dominant player in the market loses market share (Apple) against a forceful newcomer (Samsung), the fight shifts from the marketplace to the court. So did Apple. It took on Samsung in patent litigation at many different fronts to see if the Korean company could be stopped eating its market share. Its as old as patent litigation itself. It happened to ASML, now the world’s largest lithography equipment maker in the world. After ASML (Netherlands, former subsidiary of Philips Electronics) started to eat market share from Canon and Nikon, who traditionally dominated the market for these machines (that makes chips form silicon wafers, that those machines produce), Nikon started a multi-jurisdictional patent fight, trying to curb its market failure.

The Australian Judge called the patent dispute over wireless transmission technology “ridiculous” and suggested this might be best settled in mediation between the two giants. Is it indeed “ridiculous”? There is some truth in it. This is why. Both Apple and Samsung perfectly realize that there has never been any company in the world that managed to throw competition out of the market all together by means of patent litigation only, so what is the ultimate goal of this costly litigation strategy?

It’s the fine combination of playing the litigation card, starting preliminary settlement talks here and there, force competition to alter details of its product in some markets, drive production costs to go up by forcing the other to adept workarounds are the core of any patent litigation strategy.

This enforcement strategy was preluded by a stage in which both parties amassed as many relevant patents as they could possibly get (either by own creation or by acquisition depending on R&D outcomes and timelines) to make  sure that life of the competition can be made as difficult as possible. All this to maintain market dominance (for Apple) or to achieve effective market entrance (for Samsung). So, patent litigation is therefor not a goal by itself but rather a supporting market tactic, but always part of a larger corporate strategy to maintain (or increase for that matter) market share.

The ultimate goal however is, both parties know that, not to push competition over the market edge but to let them “pay”. Not just for paying lofty monetary compensation by means of license fees that one party wants to force upon the other, but also to refrain competition from using nice add-ons for their products, making the competing product less attractive. The market of consumer electronics is fast, small steps in product improvement are short lived and consumer behavior is capricious, so any advantage in time for “must-have” gadgets means better market penetration and consumer loyalty. Being able to force competition to alter those “goodies” or make expensive workarounds will immediately pay off in terms of market share.

A good example is Apple’s multi-touch user interface, covering tasks that people often use smartphones for — displaying a list of instant messages or e-mails, reviewing photos and documents, scrolling, displaying their calendar, viewing a Web browser and looking at maps. It made all the difference when Apple first launched this multi touch technology in its iPod and later iPad and iPhones (“techno-ready marketing”). There is no way any competitor of Apple could have entered the market not having these multi touch features. So using the patents to make competition’s life as difficult as possible o force them to work around these “must-have” features, causing launch delays or even potential market failures is in the patent strategist portfolio of tools. The positive side-effects of using user interface patents in court is that it is much easier to explain to any court than using overcomplicated patents that can only add to the Russian Roulette outcome of patent litigation in many jurisdictions (especially jury type of litigations) and hence complicate strategy aims.

*Need your perspective about Tim Cook leadership.

Haha, who am I to have a fair judgment on this subject? From a distance, being a rookie when it comes to running a company, let alone a tech giant, it seems he is doing very well, wouldn’t you agree? If you follow the fashionable way to judge a CEO by the way the share price of his company is doing he might not be the Steve-Jobs 2.0, but taken the economic climate we are in, Apple is in great shape and an role model for many companies, an example of how to stay in the forefront of an extremely volatile market

*Tell me your thoughts on the patent dispute among firms in the IT industry. Are these mostly legitimated claims? Or do you think they hamper innovations as some would say.

I have a feel that I know where you are coming from. Many voices are heard these days that software patents, take the ones in this Apple-Samsung IP litigation as an example, are wrongfully granted, that it is that they are too easy to get. The threshold for “inventive step” should be higher, or, alternatively, they should not be granted at all. I disagree. Like in any other industry patents for new and innovative IT products are necessary to maintain innovation, to be used in cross licensing, to function as a strategy tool and to encourage R&D activity. Of course when it comes to software it remains a challenge to make sure the examiner has access to a sophisticated source to find whether a proposed patent covers what is already known or practiced. Even if many software source code is not “published” third parties should be allowed to show that a patent application covers what has been done and used already in the market. Other creative solutions should be considered to make sure software patents are not granted too easily. That’s a work in progress. Many Patent Offices around the world are working to improve the system. Abolishing the system all together does not help, certainly not Western economies that thrive on knowledge.

*In your mind, who is the viable candidate that challenges Apple the most in the IT industry? Can Samsung Electronics be called such a contender?

No doubt about it. Of all smart phones sold in the world, 1 out of 3 is a Samsung

*Samsung still believe Apple’s request to pay just a dollar in return for using Samsung-owned mobile patents is unacceptable. You think design is more valued than technologies? Without techs, design should be meaningless.


I am not sure what the last has to do with the first. The dollar-per-patent is just a means to get paid for what Apple believes it has created and should be rewarded for. In my view that has little to do with appreciation for design. Of course design is as important as technology. A well designed phone that does not function well is as unattractive as a jewel of technology that has an awful look and feel.

*How about pre-conditions for Samsung and Apple before entering a comprehensive cross-licensing periods? Please tell me.

Cross licensing only makes sense for either party if there is something in for both of them. I cannot see that that is the case, unless one party has or will achieve a technological advantage over the other in a technology that is crucial and imperative to maintain market share. I am not familiar with the facts enough to have an opinion on this whether this is the case (or will soon be). In the absence of this I don’t see a cross licensing to happen any time soon

*You think Samsung is a copycat company? Don’t you think the patent fight is a growing pain for Samsung? Designers are influenced from here and there. It looks far Samsung simply copied Apple. Needs your opinion about this.

In general I cannot believe that a tech giant like Samsung who has done so remarkably well in the market for consumer electronics where other companies like Sony and Philips, Nokia and others have failed to maintain market momentum should ever be called a copycat. As a reminder: most of the American and European companies that became giants in their own right, started off by looking (too) closely to their competitors, or, probably more exact, started of by copying but soon became creators themselves. Being a copycat alone or remaining a copycat, will not help to survive in this highly contentious and competitive market for consumer electronics.

*Final words for the presiding judge Koh? Please…,

I wish you all the wisdom in the world, with a couple of million eyes and ears that follow each and every step you make, knowing that in the public eye, you never do it right. Be a jurist and a fine and sharp one and remember, its only an opinion, after all.

Author: 5 years ago