Issue #2-2 | July 28, 2011

IRI study challenges top IP managers to “share”

Don Tapscott, long time believer that intra-industry collaboration is an imperative to competitiveness and sustainability (and a favorite of IPVW), says “it is in industry’s interest to share rather than to hoard.”  Tapscott’s view includes sharing of R&D and IP and he cites five industries in particular that can “fix what currently ails them” this way: 

  • pharma
  • music recording
  • banking
  • manufacturing, and
  • healthcare.

A new Industrial Research Institute (IRI) study offers guidance on how the IP community can lead the collaboration game at their organizations. Stewart Mehlman, Director, Licensing, Alliances, and Emerging Technology for Praxair, recommends great care in IP areas such as non-disclosure and joint development agreements, particularly.

The IRI study identified best IP protection strategies by asking four key questions—questions every manager should as about their organization:

  • What intellectual assets must we share with the partnering company?
  • What intellectual assets may we share with the partnering company?
  • What intellectual assets must we never share with a partnering company?
  • How will we protect the partnering company’s intellectual assets?

Small victories—and another big case to watch—in product counterfeiting

Two small anti-counterfeiting victories occurred last week: one in a Canadian court as Singga Enterprises and Carnation Fashion, both of whom had been selling fake Louis Vuitton and Burberry handbags for nearly three years, were ordered to pay the latter two $1.5 and $1.14 million respectively in damages.

The second occurred in the European Court of Justice in which the court found the operators of online marketplaces are not exempt from liability if they have “knowledge of, or control over, information about (the legitimacy) of items for sale on their websites.” 

BVR points out however, that most any product can be digitally photographed, transmitted to an array of awaiting global counterfeiting operations, reproduced to near perfection and offered for sale online, at flea markets, consignment shops, or even enter legitimate supply chains in a matter of days. 

So, legitimate manufacturers who assume patents and/or trademarks are sufficient to deter product counterfeiting are, at best, wishful thinkers because IP infringement - product counterfeiting have become integral to many country’s GDP and manufacturing base. There’s little indication of political will strictly enforce national/international IP laws when so many depend on it as their primary means of livelihood. 

Judicial decisions are coming close to the legal notion of secondary (contributory) infringement as characterized in Perfect 10, Inc. v. Google Inc., wherein P10, Inc. alleged that Google committed contributory (secondary) infringement by encouraging users to visit sites known to be selling infringed – counterfeit goods..  As summarized by MGM v Grokster, “one infringes contributorily by inducing or encouraging direct infringement, and infringes vicariously by profiting from direct infringement while declining to exercise responsibility to stop or limit it.”

IPVW will continue to monitor court cases in this area, and their impact on the major online sites which appear to be adding substantial resources to scour their websites for illegitimate products.

FTC recommends 35 steps to improve patent policy

The FTC, better known for its anti-trust and consumer protection oversight than IP matters, issued a new report titled “The Evolving IP Market Place: Aligning Patent Notice and Remedies with Competition.” In the FTC’s view, companies should rely less on their own R&D and seek invention it needs from outside resources.  (One great source for this is the University Startup Directory which lists emerging tech plays.)

The FTC report focuses on how well the patent system and competition policy could work together if there were:

  • More clearly defined patent rights and notice. Unclear patent notice undermines discovery of, and investment in, emerging IP. Competition is weakened as businesses are forced to design products with incomplete knowledge of costs and other potentially relevant technologies.
  • Patent remedies that replicate the reward the patent holder would have earned absent infringement.  Effective remedies relative to the patent system’s incentives to innovate are essential, the FTC report says. The FTC wants remedies to protect patentee’s ability to earn returns by stopping or deterring infringement through injunctions, and/or by making patentees whole through damage awards when infringement has occurred.  On the other hand, compensatory damage awards that under or overcompensate patentees for infringement compared to the market can adversely affect innovation and competition.

In IPVW’s view, the report is instructive.  Those wishing to wade through all 300+ pages will find 35 recommendations directed to Congress, the USPTO, and the courts.

Dimolitsas’ eight keys to IP commercialization success…

Spiros Dimolitsas, Senior Vice President and Chief Administrative Officer of Georgetown University and a member of the U.S. Council on Competitiveness, knows innovation always starts with an idea.  The problem is, can it be brought to market? 

In his Perspectives on Technology Commercialization, he provides a great summary of commercialization success factors:

  1. Talent – includes diversity of expertise, personal commitment, and mobility.  Talent is essential, but needs to be integrated constructively in terms of what (talent) is needed to follow through and what role the talent that contributed to developing the original idea play in the ‘follow through’ process?
  2. Networks – what formal and informal networks and/or partnerships are necessary?  The probability of success grows exponentially Dimolitsas says, when networks of mutually supporting economic actors exist within the same geographic region. i.e., a local context that encourages investment, upgrading, and availability of specialized inputs such as HR, physical, administrative, information and scientific/technological infrastructure, capable suppliers, and the presence of networks of industries.
  3. Conditions – management teams need to recognize the conditions that need to exist to facilitate and enable follow through, i.e., what partnerships are required? 
  4. Customers – The presence of a core of sophisticated and demanding local and global customers.
  5. Questions – management teams must know what questions need to be asked that may not have been considered relevant or important during the invention or innovation phase?
  6. Understanding Risk – management teams must recognize risk has three facets:
    • Capital at risk: availability of early stage capital to fully develop the concept, define it’s value proposition, and develop a validating prototype.
    • Personnel at risk, i.e., the inventor perceives losses and unacceptable increases in risk, and has mechanisms in place to manage/mitigate the risk.
    • How to treat risk for the capital providers, inventors, and other stakeholders.
  7. Discipline – management teams need to ask four key questions:
    • what is the unmet customer and market need?
    • what is the best approach to address this need?
    • what are the benefits relative to the costs of this approach?
    • why are the benefits relative to the cost better than those of the competition?
  8. The presence of support systems – a technology commercialization unit that can provide guidance on IP protection and patenting, business plan execution, marketing, interface with the commercial sector, and generating licensing opportunities and contracts.

BVR is now offering Technology Transfer Strategies as one further roadmap to success in this incredibly challenging part of the economy.

Mary Adams to lead BVR webinar on intangible drivers of company value

Value Creation is the study of what drives the operations of companies today.  In this 75-minute program, acclaimed author Mary Adams (Intangible Capital), the highly respected intangible asset strategist, brings clarity to how successful companies look, how they work and what drives their financial performance.

Adams covers what every business valuation analyst needs to know in the increasingly knowledge-based economy in which IP and intangibles constitute 80+% of most companies' value and sources of revenue.  This program acknowledges core valuation methodologies do a good job of getting at the stand-alone value of intangibles while pointing to opportunities to improve the level of analysis of knowledge-based companies by:

  • explaining why 47% of the average merger price ends up in goodwill
  • demonstrating how data on the accumulated investment of intangibles (which now exceeds tangible investment in the U.S.) tell a clear story of the creation of a new kind of knowledge infrastructure in today's company that includes intellectual property as well as a variety of intangible asset
  • making the connection between  this intangible infrastructure and revenues, performance and overall corporate value
  • suggesting how an understanding of these intangible value drivers will improve the analysis you do of both stand-alone intangible assets and overall corporate valuation.

Check out BVR's IP valuation training options here.

Contact Us:

Business Valuation Resources, LLC
1000 SW Broadway
Suite 1200
Portland, OR 97205
(503) 291-7963


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Valuation of IP


Upcoming Events

Valuing Sports Franchises
September 15, 2011 10:00am - 11:40am PT
Featuring: Drew Dorweiler

Analysis of the Intangible Drivers of Company Value
September 20, 2011 10:00am - 11:15am PT Featuring: Mary Adams

Patent Damages: The Entire Market Value Rule
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October 13, 2011
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October 26, 2011
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Advanced Workshop on Valuation Issues Under ASC 805 and Business Combinations
November 3, 2011
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