2. By Steven W. Lundberg Schwegman, Lundberg & Woessner, P.A.
An Analytical Framework for Determining the Value of Patents to an Ongoing Business
By Steven W. Lundberg Schwegman, Lundberg & Woessner, P.A.

3. A Brief Introduction to SLW
National Practice and Presence
80 Patent Attorneys
Deep industry expertise, all technologies
Procurement, Opinions, Diligence
Assertion, Threat Response
Portfolio Analysis, Strategy, and Management

4. Demanding and Patent-Savvy Clients
Boston Scientific, eBay, Cisco, Micron, Intel, Apple, Honeywell, Cray Research, Fairchild Semiconductor, Silicon Graphics, Columbia University, University of Minnesota, University of Wisconsin, Iowa State University, Cornell, and University of Missouri, among others.

5. Recognized Quality and Cost-Effectiveness

6. Recognized Global Expertise

7. Industry-Recognized Innovation and Leadership
Invented at SLW
Spun out
Sold in 2005
Used worldwide
Invented at SLW
Spun out
Other Projects:
ClaimTracker

8. Questions Answered Today
What are patents really worth?
When do patents really matter?
What can I learn from a patent landscape?

9. Raw Count of Patents in Force 1980-2009

10. Primary Uses for Patents
To provide a barrier to
competition for an
ongoing business.
As a licensing asset to generate royalties , as a cross-licensing tool, or as a deterrent to would be aggressors.

11. Value for Ongoing Business
Used as a barrier to competition, value or importance of a patent is relative to other natural or non-patent barriers.
A patent only functions to enhance the value of a company’s technology/pricing power – if it doesn’t do that or isn’t needed, its useless.

12. How Much Value Enhancement?
BEWARE!
The vast majority of patents
narrowly cover
increments or species of technology
that have little value and
therefore the enhancement
is of little value unless it is
large in scale.

13. The Value of Most Patents
Graph of Patent Value
The Value of Most Patents
Zero or Incremental
Great Value

14. Patents are Rarely Critical
A patent is a “last resort” barrier to entry – its best not to be entirely dependent on patents.
Almost all successful businesses
enjoy many non-patent barriers. to entry

15. Non-Patent Barriers to Entry
Advertising/Branding
Investment
Control of resources
Network effect
Cost advantages
Research and development
Customer loyalty
Inelastic demand
Distributor agreements
Supplier agreements
Economy of scale
Sunk costs
Government regulations
Vertical integration
Trademarks/Copyrights
Trade Secrets

16. BUT Don’t Forget Exceptions
Sometimes patents are of great value or importance to a business, and greatly enhance the value of the business or technology.
But when are they of value?

17. When are Patents Most Valuable?
When even strong non-patent barriers to entry are insufficient to provide an acceptable technology ROI; or
When patents are powerful enough to provide pricing power/market control on a valuable technology.

18. Examples of Important Patents
Patents on FDA approved
devices or drug
Patents on breakthrough
technology

19. Can a Narrow Patent be Valuable?
For new technology requiring FDA approval, patents only have to cover the approved device or drug to be effective protection.
Here the ability to design around is restricted by Government regulation.

20. What Value do Patents Have?
For an ongoing business, the value of a company’s patents depends on whether the patents cover the company’s most valuable technology.
If the patents don’t cover key technology, then may be worthless, unless its difficult to tell what is worthless and what isn’t.

21. What Can I Learn From Patents?
If a company has valuable technology, its patent portfolio should reflect that value relative to other companies in the market.
If a company’s portfolio is poor relative to competition, it raises concerns about the company’s technology position.

22. Companies that Don’t Need Patents
Software companies
Information companies
Retail businesses
Service businesses
Financial services

23. Companies that Require Patents
Medical Tech
Drugs/Life Sciences
High technology
Technology leaders

24. For Large Portfolios
Very large and dynamic portfolios – e.g., more than 5,000 patents – have unique benefits due to several factors:
“Incremental” protection is powerful if in large scale
These portfolios are difficult to decipher
If new patents are added each year, there is fear factor

25. One More Thing: FTO
A company also needs freedom to operate (FTO) in its technology space.
This base needs to be covered to be safe, but usually only presents an issue with emerging growth companies or start-ups.

26. Patent Landscape
Because a company’s position in the patent landscape is often a reflection of its technology position, its worth looking at.

27. Basic Landscaping Methodologies
Patent statistics for a Technology Area
Total Patent Counts
For example, “Social Networking”
In contrast, “Social Networking” v. “Stents”

28. Basic Landscaping Methodologies
Patent statistics for a Technology Area
Filing Trends and Timelines for “Social Networking”

29. in M&A activity or private investing in Social Media
Social Media M&A/Private Investing
In 2008 and 2009 there
was over $2.2 B
in M&A activity or private investing in Social Media

30. Basic Landscaping Methodologies
VCR or “Video Cassette Recorder” Technology
versus DVD or “Digital Versatile/Video Disk” Technology

31. Basic Landscaping Methodologies
Assignee Statistics
Assignees by Volume of US Patents for "Social Networking"

32. Basic Landscaping Methodologies
Assignee Statistics
Assignees by Volume of Patents and Revenue for "Social Networking"

33. Basic Landscaping Methodologies
Assignee Statistics
Assignees by Volume of Patents, Vision, and Resources for "Social Networking"

34. Basic Landscaping Methodologies
Assignee Statistics
Assignees by Date of Activity for "Social Networking"
who has earliest patents
who has most recent patents

35. Blue Ocean Patent Scenario
Company is technology leader.
Technology is emerging.
Many opportunities for good patents, more freedom to operate.

36. Red Ocean Patent Scenario
Company is technology follower.
Technology is mature.
Few opportunities for good patents, less freedom to operate.

37. Four Take-Away Principles
A company’s patent position tells a story that is worth looking at
If a company is a technology leader, patent portfolio should be strong
If a company has a poor patent portfolio, it may indicate the company has a weak technology position
All things being equal, a company with good patents is a better investment than one without patents

38. Thank you for your participation.
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