The keys to effective IP monetisation
IAM Strategy 300 Global Leaders interviewees reveal what it takes to build a world-class IP monetisation programme and what metrics they use to assess success
The inaugural IAM Strategy 300 Global Leaders guide has just been published. In it, we carry interviews with some of those featured in this year’s IAM Strategy 300: The World’s Leading IP Strategists in which they reflect on their professional journeys to date and offer insights and guidance into career development, practice management and patent industry trends.
Among the various topics covered, we asked our interviewees to explain what they consider to be essential for a world-class monetisation strategy and how they measure success.
“A good strategy must evolve with the times”
“When intellectual property stands out, it also transacts through higher margins or an economic moat and attracts licensing and collaborations,” states Safir Anand, senior partner and head of trademarks and contractual and commercial intellectual property at Anand and Anand. This requires an IP strategy that can make future predictions and position itself accordingly. “A good strategy must evolve with the times,” he says. “It must assess risks of obsolescence or theft including within the set up. It must assess titles and be consistent and scalable, and it should embrace an ease of conversion with new technologies.”
While the end goal will vary depending on the business, for a world-class strategist, it generally involves multiple transactions. “The deal structures that bring the most sense of accomplishment are typically multi-channelled, where an initial larger investment or transaction leads to multiple downstream monetisation events including licensing, venturing and sales using different parts of the portfolio,” reflects Patrick Snow, CEO and founder of Inception Venture Partners.
The IP monetisation space is a relatively young one, but Snow notes that expectations are increasing year on year. “The first driver for change is the need for higher quality assets; this is evident from patent owners wanting to target their highest value patents for monetisation purposes or patent investors acquiring assets of the highest strategic importance.”
“In addition, timescale is key for both sellers and buyers as the speed of technology obsolescence increases and the strategic importance of closing a deal quickly and effectively becomes ever more crucial,” he continues. “Finally, companies are becoming more discerning in their requirements as the market matures. The term ‘less is more’ springs to mind, with a marked preference for deal structures that involve fewer high-quality patents with a correspondingly higher monetisation potential.”
IP valuation is key to getting everyone on the same page
Whatever the aim, the first step is valuation. “Whether licensing, internally leveraging or even selling IP assets, understanding both the value and the path to generating value are inextricably linked,” states Michael Dansky, founder and CEO of Intellectual Property Strategies. “Understanding how and what to protect, which assets are more valuable, how to get value from them and the relevant risk parameters are all linked to IP valuation.”
From there, strategists can establish realistic expectations for any potential deal making.
“We try to help clients understand what is reasonably achievable in any transaction by conducting a deep analysis of the patents at issue, including claim coverage, infringement and market analysis,” says Steven Steger, founder of Steger IP, LLC.
“Using this information, we develop detailed financial models for what a licensing campaign could be expected to generate, with or without litigation. Doing this work before launching a monetisation campaign helps to set reasonable expectations and to avoid some of the pitfalls of going to market with pricing guidance that is too high for the portfolio, which can seriously handicap any monetisation campaign.”
In fact, when it comes to monetisation, “there are a lot of issues that could arise”, admits OSO-IP strategist Andrew Gordon. “Examples include Section 112 written descriptions, Section 101 patent eligibility and Section 102/103 anticipation/obviousness. They also include potential issues related to patent prosecution, such as prosecution estoppel, disclaimer, inventorship and assignment. Thus, properly vetting patent portfolios prior to monetisation is crucial. Ultimately, the goal is to uncover potential issues that may arise during litigation. During this vetting process, risks and potentials can be addressed and monetisation goals ascribed.”
From there, a clear strategy can be developed and shared with all stakeholders. “In this way, not only is everyone on the same page with a strategy unique to a particular patent portfolio, but there is also a path whereby potential unforeseen issues can be addressed,” Gordon states.
“It all comes down to strategic continuation practice”
“One technique we like to use to address these unforeseen issues is through patent continuation practice,” Gordon explains. “Continuation practice is where one or more active pending continuation applications is maintained in the same patent family as the patents being litigated.”
This has numerous advantages – both before and after enforcement, explains OSO-IP LLC colleague and firm principal Kevin Zilka, who prides himself on garnering significant returns in deals that other patent market leaders have passed on. “Often, licensing professionals primarily look just at issued patents when deciding whether to purchase from or partner with a patent holder,” he states.
“While patent monetisation is already a long game, we are prepared (and even eager) to play the longer game – often by starting over when building a patent portfolio using strategic continuation practice. Thus, for us, assuming that everything else is perfect, the decision to partner always comes down to the existence of a pending continuation and sufficient patent term to do something substantial with that asset. If that scenario exists, limitations in any patents (or lack thereof) can be rectified by filing more patents in order to build the strongest case for the patent holder from scratch and with the current infringement landscape in mind.”
This practice can then be used to further bolster and refine the portfolio during litigation. “Depending on where the case is in litigation, these newly issued patents could even be added to the existing litigation or used in follow-on litigation against the same accused infringers,” says Gordon. “With more and more hurdles being erected before patent holders (eg, inter partes reviews and Alice motions), it is more important than ever for patent owners to employ each and every strategic advantage to achieve success, including strategic continuation practice,” Zilka emphasises.
‘Success’ is a company-wide concept
But what exactly is success in this context? For Kent Richardson, CEO at Richardson Oliver Insights LLC, a winning patent monetisation strategy can be chalked up to three things: “Successful alignment of specific business goals with patent management practices; a stated definition of ‘success’; and a set of metrics that align with near, mid and long-term components of success.” However, it is the responsibility of the entire company to determine what that success looks like. “Success is defined by not only the patent team, but by cross-functional teams across the business,” he states.