MGT 6730 15 December 2021 Show Me The

MGT 6730 15 December 2021 Show Me The Money Simple Three-Phase Strategy: 1. Create successes with IP assets & gain credibility 2. Heavily market those successes 3. Leverage those successes and enhanced credibility for more resources to: 4. Repeat and improve upon steps 1 through 3. Benefits of IP Assets Must be Seen to be Believed 12/15/2021 © Kenneth E. Horton

MGT 6730 15 December 2021 Show Me The Money IP Assets Contribute Directly to the Bottom Line By: ðExcluding Others / Protecting Sales ðLicensing Third Parties for Income ðTrading or Bartering for 3 rd Party IP Rights ðProtecting Income Streams from Joint Ventures ðProtecting Income Streams from Co-Production ðMany Other Less Tangible Means, e. g. , • Exclusivity in the marketplace • Increased cost to your competitors • Third party lawsuits you never incur • Licensing fees you never pay IP Assets Are the Most Valuable Assets 12/15/2021 © Kenneth E. Horton

MGT 6730 15 December 2021 Show Me The Money Excluding Competitors & Protecting Sales Midwest Electric Example 1996 - Sales to Customer equal $ 2. 0 M 1997 - Sales to Customer drop to $ 1. 4 M • $ 0. 6 M of A/C disconnect sales evaporated • Customer discovered Importing from China • Company Owns U. S. Patent No. 5, 854, 961 • Patent covers imported knock-off • Company raises this “issue” to Customer for immediate resolution! IP Assets Enhance and Protect Sales 12/15/2021 © Kenneth E. Horton

MGT 6730 15 December 2021 Show Me The Money 1997 - Customer resolves issue with Company & agrees to: • Source products from Company • Turn over all tooling to Company 1998 - Company receives tooling for 4 (not 1) Company products 1998 - Sales go up to $2. 5 M Quantifiable Benefit of IP to Midwest Electric: – $ 2. 5 M is sales (6% of Total Sales for 1998!) – Total Portfolio Investment Cost = $100, 000 – Return on Investment > 400% But for Patent - $ 2. 5 M of Sales were Gone 12/15/2021 © Kenneth E. Horton

MGT 6730 15 December 2021 Show Me The Money Patent & Technology Licensing Income New Licensees 1997 AB (up-front) $. 25 M 123 (up-front) 1998 1999 2000+ $. 35 M $. 45 M Royalties $. 1 M $. 45 M $ 1. 0 M Component Sales $ 3. 0 M $ 2. 0 M Sub-Total $ 0. 25 $ 3. 7 M $ 2. 9 M $1. 0 M Existing Licensees $ 1. 0 M $ 1. 1 M Total $ 1. 25 M $4. 8 M $ 4. 0 M $ 2. 1 M IP Benefits Exist in Product Sales & Licensing Income 12/15/2021 © Kenneth E. Horton

MGT 6730 15 December 2021 Show Me The Money Return on IP Assets 1997 1998 1999 Sales of Transformer Business IP as % of Total Sales - $173 M $215 M $245 M 2. 1 % 1. 35 % 0. 6 % Net Profit of Business IP as a % of Net Profit - $8 M 1. 5 % $ 38 M 2. 1 % $39 M 1. 6 % Cost of IP Portfolio / year - $50 K Return on Investment (ROI) - 250% 1500% 1200% ROI (including 10 yrs of fees) - 25% 1500% 1200% IP Licensing is Money in The Bank 12/15/2021 © Kenneth E. Horton

MGT 6730 15 December 2021 Show Me The Money Trade or Barter Rights Example - Meter Business Company launches new product => Competitor assert 2 patents against Company concurrently prepares offensive assault => Upon Notice, Company counter-asserts 10 patents Assuming straight cross-license, what is that worth? It’s Trade or Pay - There’s No Other Way 12/15/2021 © Kenneth E. Horton

MGT 6730 15 December 2021 Show Me The Money Trade or Barter Rights Sales of Product Royalty Payments 1% 3% 5% 1997 $ 14. 4 M $144 K $432 K $720 K 1998 $ 29. 3 M $292 K $876 K $1. 5 M 1999 $ 36. 3 M $363 K $1. 0 M $1. 8 M 2000 $ 42. 4 M $424 K $1. 3 M $2. 1 M $3. 7 M $6. 1 M Total Cost Avoidance => $1. 2 M Patents Still in Play Can Trade Another Day 12/15/2021 © Kenneth E. Horton

MGT 6730 15 December 2021 Show Me The Money Income from IP Assets in Joint Ventures Company Model • IP Assets comprise Company’s contribution to venture • Company takes back various commissions & royalties JV Partners 123 Royalty Payments 1997 1998 1999 $ 7. 5 M $ 8. 25 M $ 9. 0 M $ 6. 0 M $ 4. 7 M 345 789 0. 6 M Total Royalty Income $1. 35 M $ 7. 5 M $15. 6 M $ $14. 3 M IP Assets Enable Royalty Income From JVs 12/15/2021 © Kenneth E. Horton

MGT 6730 15 December 2021 Show Me The Money Protect Income from Co-Production Arrangements Model: (1) Company contributes IP assets to partnership, & (2) sells components to, and collects royalties from partner. Partners Royalty Payments/Component Sales 1997 1998 1999 $ 231 K $ 290 K $ 350 K 123 Component Sales $ 500 K 456 Royalties $ 507 K N/A $ 14. 9 M $16. 6 M 123 Royalties $ 330 K 456 Component Sales $ 14. 9 M IP Assets Protect Partner-Derived Income 12/15/2021 © Kenneth E. Horton

Show Me The Money MGT 6730 15 December 2021 Results and Next Steps Simple Three-Phase Strategy: 1. Create successes with IP assets & gain credibility 2. Heavily market those successes 3. Leverage those successes and enhanced credibility for more resources to: ð Build the Size and Quality of the Patent Portfolio ð Enhance the Effectiveness of the Portfolio The Resource War will be Won - One Victory at a Time! 12/15/2021 © Kenneth E. Horton

MGT 6730 15 December 2021 Show Me The Money Build the Portfolio Patent Filings Company is Back in the IP Business 12/15/2021 © Kenneth E. Horton