Patents as a source of business information Krakow
Patents as a source of business information Krakow, 29 February 2008 Johannes Schaaf 4. 5. 3
Patents as a source of business information Why patent information? Part 1 Patent mapping Ø Users Ø Preparation Ø Pitfalls and quality Part 2 Patent valuation and portfolio management Ø IPscore Summary * All examples and data given in this presentation are for exercise purposes only to explain the functioning of the software. The information provided may neither be complete nor accurate.
Information as a basis for decision making? Requirements Øcorrect Ørelevant Øtimely Øcomplete and Ødigestible ØWhy patent information?
Why patent information? ØStandardised interfaces to inventions from every technical field ØOften exclusive publication ØDetailed disclosure of invention and applications in industry ØAnalyses of activity in technological fields (IPC, ECLA. . . ) ØInformation on exclusive rights for determining freedom to operate ØWhy patent information?
Patent information and Porter's 5 forces model Mo we re th ll k an no wn analy co sin mp g eti tio n Customers early detection of. . . New entrants Suppliers Competitors - supplier's forward integration - own backward integration - substitutes for suppliers products - freedom to operate and product clearance - Comparison of patent portfolios (eg Xlicensing) - novelty search (appeal) - competitor's R&D- patentingand marketing strategy Valuepeochainou Inbound rat io ns tbo un d - customer's backward integration - own forward integration - other uses for own technology Substitutes Bold: Threats - technological advantages Italic: Opportunities - determination of switching costs ØWhy patent information?
Integration of patent information in product development process Idea generation Idea development Investment decision R&D Use patent information as inspiration and/or source of solutions Prior art / novelty / freedom to operate Decide on focus Patent mapping Continuous monitoring and early circumnavigation of alien patents When inventions are made: prior art / novelty / freedom to operate
Assessment of a small number of patents strength: retrieval of single highly relevant documents
Uses of patent information Statistical analyses • Assessment of risks (legal status of patents): freedom to operate, product clearance • Who's-who finder (supplier, customer. . . ) • Information on technological solutions: - new technology for own processes/products - new uses for own technology • Identification of business opportunities (gaps) • competition analysis (eg patenting and internationalisation strategy) • Analysis of technological trends (by country, industry, etc) ØWhy patent information?
Part 1: Analyses of large sets of patent data Patent mapping Visualisation of patent analyses to understand complex patent information easily Øpatent mapping
Users of patent maps Ø Management (all functions) Ø Innovators (R&D) Ø Investors (Venture capitalists, promotional banks) Ø Influencers (patent offices, policy makers) Øusers
Preparation of patent maps Gather Analys e Visuali se Øpreparation of patent maps
Preparation of patent maps Gather Analy se Visuali se 1. Define goals 2. Choose database 3. Define query (dates, IPC, key words. . . ) 4. Collect data and remove noise 5. Harmonize applicant names Commercial providers USPTO Øpreparation of patent maps
MIMOSA interface available fields index query history Øpreparation of patent maps
ESPACE ACCESS Content: EP and WO documents Searchable fields AB English abstract IC All classification AD Application Date INV Inventor AF French Abstract KI Document kind AN Application number MC Main classification DC Correction date NO WO-Euro. PCT number DP Publication date PA Applicant DS Designated states PD Priority date EP EP Publication number PR Priority number ET English title PRESENCE Available data FT French title GT German title WO WO Publication number Øpreparation of patent maps
Preparation of patent maps Gather Analy se Visuali se Bibliographic data: Statistical analysis of structured Information Abstract description and claims: Text mining of unstructured information Øpreparation of patent maps
Preparation of patent maps Gather Analy se Visuali se Steps - Export data to spreadsheet (full data set if possible) - Define dimensions of analysis (eg technologies, application) - Add codified dimensions to documents - Run statistical analysis - Check results Øpreparation of patent maps
Preparation of patent maps Gather Bibliographic data: Statistical analysis of structured Information Analy se Visuali se Abstract description and claims: Text mining of unstructured information
Preparation of patent maps Example: Laser diodes Time series Visuali se Source: Bulletin Dec 1978 - Dec 2005 Øpreparation of patent maps
Preparation of patent maps Example: Laser diodes Visuali Pies se EP applications with priority year 2002 Country of applicant Worldwide EPC Country of inventor Source: Bulletin Dec 1978 - Dec 2005 Øpreparation of patent maps
Preparation of patent maps Example: Laser diodes Visuali se Number of applications Graphs 2000 1999 2001 2002 1998 1997 1996 2003 1995 1994 2004 Number of applicants/proprietors Øpreparation of patent maps
Preparation of patent maps Patent portfolios* Own company Company 1 Candidate for M&A Headhunt prolific inventor Company 2 Company 3 IPC 1 Patenting activity IPC 2 IPC 3 IPC 4 IPC 5 *one colour per inventor per company Øpreparation of patent maps
Assessment of importance of invention Problem Pure counting of patents is often not appropriate without taking the importance of the invention into consideration. Suggestions to assess importance • Family size • Triadic patents (US, JP and EP) • Duration of patent in force • Citation information Øpreparation of patent maps
Comparison other sources of information Market data (2005): Application Forecast: Europe takes over 25 % of LD market Source: http: //optics. org/optics/Articles. do; jsessionid=17087 E 6 DF 8 EF 52 C 4 B 83 FE 3 B 5595 BC 5 B 7? type=ole&volume=7&issue=4&article=6&page=1&box_id=olemar 1%5 F 94%2 D 02
Part 2 Patent Valuation and Patent Portfolio Management External information Internal information related to patenting patents technologies markets resources - skills - finance - production strategies (R&D, marketing. . . ) ØIPscore
What „value“ really means Value Individual utility 1 soft drink = satisfy thirst (at home / in the desert) Price Exchange value 1 soft drink = 0, 3 - 2 € Cost 1 soft drink = 0, 2 € The value of a patent is the future commercial utility of the patented invention! Value if exclusively used by patent owner Value to licensees Value as a collateral for a bank loan Value to a company blocked by the patent (Blackberry 600 M$)
Methods for the valuation of patents Quantitative (monetary) Qualitative (multidimensional) net present value market value (licence analogy) cost Technology Strategy real options computer-generated estimations legal-economic methods „The patent is worth € 50. 000“ Market Finance Legal issues „The patent protects a technology of strategic importance for an attractive market, it can be enforced efficiently, but significant investment is still needed “ ØIPscore
Share of patents, % Empirical distribution of patent value average value is somewhere Value of the patent, mio € 50% of (EP) patents are worth less than € 300 k (25% are worth less than € 100 k) Data for about 7000 EP-patents. Source: European research project ‚PATVAL‘.
Share of portfolio value, % The value of EP-patents Cumulated share of patents, ordered by patent value 5% really matter 15% matter a bit 80% are “irrelevant“ Data for about 7000 EP-patents. Source: European research project ‚PATVAL‘. 29/27
cash inflow - cash outflow - interest (hypothetical) = present value time NPV = Σ(present values) „Expected profit due to patent, after cost of capital“ Advantages Disadvantages • Acccepted method for any managerial valuation • Takes into account the specifics of a case • Simple decision rule • • Predictability of cash flows Identification of cash flows Only one scenario, no flexibility Indirect benefits difficult to account for Comparison to an alternative investment Net present value method (NPV, DCF) 30/27
Allocation base (share of product) * Assessment base (e. g. turnover) Sellers * Royalty rate (e. g. 3%) = Value acc. to license analogy NPV to me? of comparable Identification = max. purchase price transactions Adaption to the situation Buyers Adaption to the license contract Fair royalty rate “Sales/license price estimated by comparison to similar patents“ Advantages Disadvantages • Can be simple and fast • Accepted • Seems to be objective and true at first sight • Comparability of the transactions • Low significance if an internal use is intended • Non-experts cannot easily verify results Comparison to prices on the market Market value (license analogy, relief from royalty) 31/27
Historical cost Replacement cost Creation of an equivalent or identical patent/technology today “R&D cost and cost of patenting that have been / would be incurred“ Real cost incurred + inflation Advantages • Clear and objective valuation • Common in accounting and tax law Disadvantages • Ignores profits • Assignment of the costs • Risk is not accounted for • Overspending is rewarded Not a basis for taking decisions Comparison to the cost of creating the patent Cost 32/27
Technical and legal info (patent data) Rough market forecast (patent data) Specific market and company information (not available in patent data) Advantages • • Practical for large portfolios For patents of the competition Low cost Objective patent quality = exchange rate in “average patents“ 80% 20% Monetary patent value (market success) Disadvantages • Only a rough estimate • Not a true economic valuation • Young patents difficult to value Comparison to content of an average patent Computer-generated estimates of patent quality No reliable prediction of the monetary patent value, but measurement of patent quality („exchange rate“) for company level analysis 33/27
IPscore 2. 11 Implementation and further development Envisaged Excluded Ø Ø Ø consultancy on Ø technology Ø financing Ø entrepreneurial decisions Ø legal aspects provision of tool improvement to tool promoting, marketing training help desk ØIPscore
Patent portfolio management and patent information st ve in high Growth of patent activity Circles: different technologies Seize: turnover with technology (all applicants) e as ph low t ou low high Patent position ØIPscore
Summary § Patent information can be very helpful to support decision making in business § Patent mapping helps to assess large sets of patent data § The management of a company's own patent portfolio can be supported with IPscore
Thank you for your attention D 4. 5. 3 Johannes Schaaf jschaaf@epo. org
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