1. CET: Center for Entrepreneurship &Technology
Patent Engineering
IEOR 190G
CET: Center for Entrepreneurship &Technology
Week 3
Dr. Tal Lavian
(408)
321 Haviland
Mondays 4:00-6:00
PatentEng-Berkeley-Lavian
Week 3: Patents & Corporations

2. Week 3: Patents & Corporations
Some administrations
Sign up for your presentation date
Subject line on your s to me:
“IEOR 190G” – your subject line
Dyslexia
PatentEng-Berkeley-Lavian
Week 3: Patents & Corporations

3. Today’s Student’s Presentations
PatentEng-Berkeley-Lavian
Week 3: Patents & Corporations

4. Recognizing Intellectual Property 10,000 foot view
REVIEW
Recognizing Intellectual Property 10,000 foot view
Patents
Invention that is new and useful
Trademarks
Logos & symbols
Copyrights
Right to reproduce an idea or information
Includes software
Trade Secrets
Non-disclosed information that is valuable
PatentEng-Berkeley-Lavian
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5. Week 3: Patents & Corporations
Example of a patent
Cover page
Diagrams
Writing description
Claims
PatentEng-Berkeley-Lavian
Week 3: Patents & Corporations

6. Week 3: Patents & Corporations
How Patents Are Used
Corporate
Product protection
Corporate Value
Defensive portfolio
Licensing
Consultant
Entrepreneurial
Professional credibility
PatentEng-Berkeley-Lavian
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7. How Patents Are Used by Corporations
Product protection
Traditional use for patents
Blocks competitors from using invention
Corporate Value
Part of the “book value” of a company
Return on R&D investment
Some small companies are acquired just to get the patents.
Defensive portfolio (war chest)‏
Have patents to “trade” if a competitor accuses company of infringing their patents.
Licensing
License to customers or for non-competitive applications
PatentEng-Berkeley-Lavian
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8. Week 3: Patents & Corporations
Promote Innovation
Strengthen corporate community by focusing upon internal networking and information sharing
Augment sources of innovation by promoting an environment of creativity
Create a simple and supportive environment that builds on ideas heard from any employee and encouragement/mentorship by subject matter experts
Supplement corporate strategy - what exists beyond Transformation - by discovering ideas to invest in now for the future
PatentEng-Berkeley-Lavian
Week 3: Patents & Corporations

9. How Can A Patent Provide Business Value?
Can exclude others from using Company innovations
Can be licensed for income
Can be utilized for other business value (e.g. cross-licensing, if appropriate)
Can be used defensively to avoid or deter litigation
Can enable “freedom to operate”
Demonstrates technology leadership
Business Value/Return on R&D Investment
PatentEng-Berkeley-Lavian
Week 3: Patents & Corporations

10. Offensive patent strategy
Small portfolio of pioneering patents
Market leadership & advantage
Licensing
Deal & merger leverage
Small to medium size companies
Reasonable cost
Market monitoring
PatentEng-Berkeley-Lavian
Week 3: Patents & Corporations

11. Defensive patent strategy
Large portfolio of patents of various scope
Protect products from copying
Cause competitors to design around
Reduce risk of patent infringement suit by competitors = mutually assured destruction
Cross licensing - market entry
Medium to large size companies
High cost
PatentEng-Berkeley-Lavian
Week 3: Patents & Corporations

12. International patent strategy
International patent protection is very expensive
Cost / benefit analysis
Strategically select countries and patents to maximize value
PatentEng-Berkeley-Lavian
Week 3: Patents & Corporations

13. Recent Patent Verdicts & Settlements Or – Why it is really important?
Alcatel/ Lucent v. Microsoft. - (2007) - $1.5 Billion
NTP – Settled with RIM for $612M (plus $53M litigation plus verdict)
Intergraph – over $880M in settlement from patent litigation with Intel, HP and others
Eolas v. Microsoft (2003). $506M Jury verdict
Immersion v. Sony (2004). $82M jury verdict plus royalties
increased (2007) to $150M
vibration game controller - Microsoft settlement on $26
Freedom Wireless v. BCGI (2005) $128 jury verdict
Finisar v DirectTV (2006). 103M (79+24)Jury verdict plus injunction
Tivo v. EchoStar (2006). $74M jury verdict plus injunction
Acacia - $60M in licensing revenue (2004-2—6)
Forgent - $100M in licensing revenue
What is a patent?
Form of property – similar to “real property” (land), one can prevent others from “trespassing” on your intellectual property: i.e. can prevent them from making, using and selling the invention claimed in the patent (claims = boundaries / fence)
Exclusivity – doesn’t occur much in telecom industry
Kodak’s experience
PatentEng-Berkeley-Lavian
Week 3: Patents & Corporations

14. Week 3: Patents & Corporations
NTP
Licensing Company: A company with no products and little infrastructure that amass patents with the intention of prosecuting offending companies
NTP is considered by many to be a patent troll
Co-founded by a Chicago Engineer and his patent attorney in 1990 to protect his inventions.
Main attraction was a system to send s between computers and wireless devices
PatentEng-Berkeley-Lavian
Week 3: Patents & Corporations

15. Week 3: Patents & Corporations
The NTP Case
Late 90’s, RIM hit the market with the BlackBerry
Had around $850 worth of sales that was considered to infringe upon NTP’s patents
NTP contacted RIM and offered to license their patent, RIM didn’t respond
NTP and RIM at first agreed to settle for around $450 million, but the agreement disintegrates over the summer
PatentEng-Berkeley-Lavian
Week 3: Patents & Corporations

16. Week 3: Patents & Corporations
The Case
US Patent Trade Office decides to reexamine the patents that NTP held after RIM presents evidence of prior art.
After dragging their feet in court, RIM agrees to a settlement of around $650 million, and to license the technology from NTP.
Agreement is that the money will not be returned even if the US PTO finds the patents held by NTP to be invalid
RIM was losing customers and companies and law firms were delaying Blackberry upgrades until the case was resolved, so it was in their best interest to resolve it quickly.
PatentEng-Berkeley-Lavian
Week 3: Patents & Corporations

17. Bell Labs Case - The Technology
Late 1980’s, Inventors James Johnston and Joseph Hall (Bell Labs, division of AT&T)
Quantizing noise – approximation of continuous range by values by relatively small set of discrete values.
Invented method and apparatus to produce quantized audio signal using interpolated scale factor.
Advantage - Data compression – Same or similar
signal can be represented with less data
PatentEng-Berkeley-Lavian
Week 3: Patents & Corporations

18. Week 3: Patents & Corporations
Bell Labs Patents
Filed: Dec 1988
Assignee: Bell Laboratories
U.S. Patent No. 5,341,457, Perceptual Coding of Audio Signals, to Joseph L. Hall and James D. Johnston (Dec 1988)
U.S. Reissue Patent No. RE39,080, Rate loop processor for perceptual encoder/decoder, to James D. Johnston (Dec 1988, Reissued Sep 1994)
PatentEng-Berkeley-Lavian
Week 3: Patents & Corporations

19. Week 3: Patents & Corporations
Bell Labs Patents
PatentEng-Berkeley-Lavian
Week 3: Patents & Corporations

20. Week 3: Patents & Corporations
Bell Labs MS Case
In 2003, Lucent files suit against Gateway, Dell, and eventually Microsoft in U.S. District Court, San Diego, CA.
Claim: Infringed two patents developed by Bell Labs in MP3 compression and playback within Microsoft Windows Media Player
Sought 0.5% royalty of total Windows computers sold
PatentEng-Berkeley-Lavian
Week 3: Patents & Corporations

21. Week 3: Patents & Corporations
The Case .
Microsoft claims:
Received license for MP3 technology from Fraunhofer Institute (Bell Lab’s parent research organization) for flat $17 million.
Loop processor not applicable for WMP application.
0.5% rate exorbitant! “Only one of 10,000 features”
PatentEng-Berkeley-Lavian
Week 3: Patents & Corporations

22. Week 3: Patents & Corporations
The Results
Ruling agreed that patents were developed by Bell Labs before joining with Fraunhofer to create MP3
Rights to patents exceeded value of $17 million paid for license
February 22, 2007, Alcatel-Lucent awarded record $1.5 billion in damages from Microsoft. Jury unable to find ‘willful’ infringement for $4.5 billion damages.
August 6, 2007, Microsoft granted retrial. Verdict overturned based on insufficient evidence by Judge Rudi Brewster.
PatentEng-Berkeley-Lavian
Week 3: Patents & Corporations