1. Third WIPO/INSME International Training Program Financing your business with Intellectual Property Topic 2 Acquiring your Intellectual Capital: The relevance of an IP audit in your business strategy Bob Hodgson Zernike (UK) Limited Geneva December 2010 ZERNIKE (UK)

2. First some simple definitions  Technology – is how we do things now  Knowledge – is what we already know  Innovation – is doing things differently  Science – is one of the main drivers of innovation  Development – is how we apply science to do useful things  Research – is what we do to find out what we currently do not know Bob Hodgson Geneva 2010

3. ZERNIKE (UK) National competitive strategies and SMEs  Natural resource based:  seen as second order  but crucial to jobs and dependence  Labour surplus:  productivity still an issue  quality standards in products  Systems integration:  rapid adoption and adaption  source of innovation  Advanced technology:  R&D driven leading edge  commercialisation emphasis Bob Hodgson Geneva 2010

4. ZERNIKE (UK) Alternate business strategies and intellectual capital  Lowest cost – efficiency savings for cost edge  Value performance – upgrading at acceptable cost  Most advanced – best performance driver  Greenest – lowest accredited footprint  Service +/- product – speed and responsiveness Bob Hodgson Geneva 2010 All rely on knowledge and for some innovation is central

5. ZERNIKE (UK) Mismatches at different levels  National imperative - upgrading productivity and promoting innovation essential  Business level success is continuing to do right what you have always done – change is risky!  Competitiveness challenge:  reconcile the two positions  grow new higher value businesses  improve existing businesses Bob Hodgson Geneva 2010

6. ZERNIKE (UK) Real Economy: innovation engines  ARM – Advanced RISC Machines  IP generator  income from Licences and Royalties  market cap - billions  Generics Group Plc – technology solutions provider  IP accumulator  and commercialiser – spinning out companies  massive P/E ratio on flotation – hope value  Supported by specialist service providers Bob Hodgson Geneva 2010

7. ZERNIKE (UK) The starting point: has it potential value  Who will buy or already buys my product/service?  What will they pay?  How many potential customers are there?  What will any innovation replace?  Will it work and how much will it cost to make?  Is it likely to be profitable? Bob Hodgson Geneva 2010

8. ZERNIKE (UK) Communicating potential: investment readiness  Business plan  Market data and evidence  Communications skills  Differentiating the investment pitch  Cultivation of the risk takers Bob Hodgson Geneva 2010

9. ZERNIKE (UK) Recognising what is there and what to be added  An IP audit to codify present technology  Identification and packaging  An IP search  Negotiation and acquisition Bob Hodgson Geneva 2010

10. ZERNIKE (UK) Personnel and Intellectual Capital  Skilled people are the capital of the knowledge economy  Codified v tacit knowledge  Methods of protection:  formal registration  contract of employment  equity share  Restrictions of trade? Bob Hodgson Geneva 2010

11. ZERNIKE (UK) What are your Intellectual Capital Assets  Advanced technology – the archetypal IP candidate  Market credibility – trade marks and brand reputation  Production expertise – control and quality oriented  Product performance – incremental advances or radical changes Bob Hodgson Geneva 2010

12. ZERNIKE (UK) Sources of technical and business innovation  Clients or customers70%  Competitors  Internal sources  Associations  Technical standards50% +  Conferences/trade press  Scientific journals  Consultants  Universities  Government labs20% Bob Hodgson Geneva 2010

13. ZERNIKE (UK) Supply side perspectives  The inventor:  the idea that will change the world – huge hope value  and make me rich  The research institution:  an output in its own right  with weak commercial perspective  The commercial licence provider:  revenue generating expectations  tempered with restriction of own potential action  Alignment of risks and rewards  clarity and competence of owners  capacity to pay and to exploit  position in market Bob Hodgson Geneva 2010

14. ZERNIKE (UK) Valuation: the unresolved challenge  Easy – when there is a revenue stream  But even then worries about sustainability  Before the revenue stream it is much more uncertain  And is characterised by information asymmetries  inventor knows the technology  entrepreneur knows the market  investor needs to independently evaluate both  and then to reach a deal! Bob Hodgson Geneva 2010

15. ZERNIKE (UK) Some additional limitations  IP system is not always applicable  advanced engineering around F1 racing  accumulated tacit knowledge  Commercial perspectives can cripple business  Pro fit and its American licensee  defence costs can overwhelm revenues  all but a few USA universities spend more on IP than they receive Bob Hodgson Geneva 2010

16. ZERNIKE (UK) Making the market work Bob Hodgson Geneva 2010  Stimulating the supply side  Stimulating interest among MSMEs  Training brokers and agents  Educating fund managers  Ensuring quality implementation  Building the history

17. ZERNIKE (UK) Thank You Bob Hodgson Geneva 2010 BOB HODGSON ZERNIKE (UK) Ltd The Grove High Street Sawston Cambridge UK CB2 4HJ 0(044)1223 526980 bhodgson@zernikeuk.com