Reinforcing the Business CaseReinforcing the Business CaseReinforcing the Business Case Reinforcing the Business Case for Intellectual Propertyfor Intellectual Propertyyy

Mary FullerChief IP Counsel

Phil PettiChief IP Counsel

Maxim Integrated USG Corporation

USG Corporation

Worldwide Leader In Wall, Substrate, and Ceilings Systems, and Building Material Distribution

Maxim Integrated Maxim Integrated TMTM

Maxim Integrated puts semiconductor analog solutions g p gtogether in a way that sets our customers apart

Inventor and Businessman: Inventor and Businessman: Th Al EdiTh Al EdiThomas Alva EdisonThomas Alva Edison

Fourth most prolific inventor in history:Fourth most prolific inventor in history: ◦ 1,093 US patentsHis inventions contributed to mass

i ti d i ti lcommunications and, in particular, telecommunications Edison founded 14 companies with the lastEdison founded 14 companies, with the last being GEEdison is credited with founding the first two g“research labs”◦ In these labs, Edison’s approach was to require

sustained and methodical effortsustained and methodical effort ◦ Not a “flash of genius”

Our Favorite Thomas Edison Our Favorite Thomas Edison Q C i iQ C i iQuotes, Comprising: Quotes, Comprising: 1. “The three great essentials to achieve

anything worth while are: Hard work, Stick-to-itiveness, and Common sense.”

2. “Opportunity is missed by most people because it is dressed in overalls and looks like work.”

3. “If we did all the things we are capable of, we would literally astound ourselves.”

4. “Everything comes to him who hustles while he waits.”

It’ll Be Astounding: Common It’ll Be Astounding: Common ggSense, Hard Work, and Tenacity!!!Sense, Hard Work, and Tenacity!!!

“A Patent is an asset that presents an option on a future revenue stream” p◦ Suzanne S. Harrison

Strategic Patent Development and Strategic Patent Development and Pl i I t th B tt LiPl i I t th B tt LiPlanning Impacts the Bottom LinePlanning Impacts the Bottom Line

Defensive -- Increase Sales: ◦ Using patents to prevent

others from making andothers from making and selling a product embodying the same invention

Integratedt e sa e e t o

Cost Center – Building and Controlling Costs

Profit Center

Controlling Costs◦Well executed strategies

save $$$

Cost Center

save $$$Substantially Leveraged from Edison in the Boardroom, and Edison in the Boardroom Revisited, by Susan Harrison and Patrick Sullivan

Defensive

Strategic Patent Development and Strategic Patent Development and Planning Impacts the Bottom Line Planning Impacts the Bottom Line g pg p(Cont) (Cont)

Profit Center – Creating Value $$Profit Center Creating Value $$◦ Licensing Programs ◦ Selling◦ Selling ◦ Using IP to balance IP assertions

C LiIntegrated

Cross LicenseIntegrated – Embedded Phil h

Profit Center

PhilosophyVisionary – Rare Indeed

Cost Center

Substantially Leveraged from Edison in the Boardroom, and Edison in the Boardroom Revisited, by Susan Harrison and Patrick Sullivan

Defensive

From Main Street To Wall Street, Patents From Main Street To Wall Street, Patents Are Viewed As Increasingly Important AssetsAre Viewed As Increasingly Important AssetsAre Viewed As Increasingly Important AssetsAre Viewed As Increasingly Important Assets

January 3, 2011, ON Semiconductor paid $522M to acquire Sanyo Electronics, which came with over 6000 semiconductor patents, pJuly 19, 2011, Apple, Microsoft, and RIM joined forces to pay $4.5B for 6000 Nortel patents in the High Speed Network Devices SpaceJ l 30 2011 G l h d th 1000 t t f IBMJuly 30, 2011, Google purchased more than 1000 patents from IBM, all targeted to protect AndroidAugust 15, 2011, Google paid $12.5B for 24,000 World Wide patents, including 6,500 US patents and applications from Motorola MobilityJanuary, 2012, Acacia Research paid Adaptix $100M for 230 patents relating to 4G technologyrelating to 4G technologyApril, 2012, Facebook paid Microsoft $550M for 650 patents relating to mobile, Web, and instant messagingApril, 2012, Microsoft paid $1.05B to AOL for 925 patents relating to Internet technology

OceanTomoOceanTomo 300® Patent Index300® Patent Index

For the past 8 years, OceanTomo and Business Week have considered the 1000 largest companies’ patent portfolios and given each an index numberindex numberFrom that, OceanTomo created its 300® Patent IndexIndex◦ Index is based on the value of intellectual property

and represents a diversified portfolio of 300 p pcompanies that own the most valuable IP relative to their book valueUSG Corp is on the list!◦ USG Corp is on the list!

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According to According to OceanTomoOceanTomo, Intangible Assets , Intangible Assets Account for 80% of a Company’s ValueAccount for 80% of a Company’s ValueAccount for 80% of a Company s ValueAccount for 80% of a Company s Value

The chart below shows that, in 1975, more than 80% of corporate value reflected in the S&P® 500 was tangible

t hil i t ibl t i d l thassets, while intangible assets comprised less than 20% of market capitalization

By 2010 the ratio of tangible to intangible assets hadBy 2010, the ratio of tangible to intangible assets had inverted so that nearly 80% of corporate value resided in intangible assets, such as IP

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Rolling with the ChangesRolling with the ChangesIn September 2011, Obama Signed the America Invents Act

In March 2013, the first to file provision went into full swing

◦ The America Invents Act harmonized America’s Patent Laws with the rest of the world

p g

◦ Under the Act, the first company to file a patent winsFirst to file makes it increasingly important to file patent applications before competitors (or even customers)applications before competitors (or even customers)

◦ Companies who sit on their inventions and wait to see what may or may not be profitable will lose

The company who invents first but files second will lose

◦ Patent budgets are often tight, so how to decide?

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Managing A Patent PortfolioManaging A Patent PortfolioManaging A Patent Portfolio Managing A Patent Portfolio To It’s Highest And Best UseTo It’s Highest And Best Use

Evaluate each patent in your portfolio◦ It’s not an easy task◦ It s not an easy task◦ It takes time and elbow grease

At least three classes: 1 Aggressively Invest and Protect1. Aggressively Invest and Protect2. Protect and License3. Divest or License3. Divest or License

1. Aggressively Invest And Protect1. Aggressively Invest And Protect1. Aggressively Invest And Protect1. Aggressively Invest And Protect

This IP:This IP:◦ Differentiates your products/ processes from

competitors and what came beforecompetitors and what came before. ◦ Consider growing and protecting it.How to communicate value:How to communicate value:◦ Measurable market reaction?◦ Effect if allowed to copy?◦ Effect if allowed to copy?◦ Message to market and investors?

Aggressively Invest and Protect (Cont)Aggressively Invest and Protect (Cont)

Disproportionately spend your IP dollars on your company’s key invest technologies◦ Do you know what they are?◦ Work with your CEO/ CTO or Marketing

organizations to align IP spend and company ffocus

How to communicate value:◦ Key decision makers part of the process◦ Regular reporting on strategy◦ Regular report on strategy successes

Aggressively Invest and Protect (Cont)Aggressively Invest and Protect (Cont)

Grow it protect itGrow it, protect it◦ Actively use this IP in marketing pitches, at

customer visits, and in your literaturecustomer visits, and in your literature◦ Monitor competitors◦ Understand your company’s appetite for conflictUnderstand your company s appetite for conflict

Could you advise your customer that a competitor’s product appears to be using your IP?Could you discuss infringement directly with a competitor?

2. Protect and License2. Protect and License2. Protect and License2. Protect and LicenseThis IP is:◦ Used in your products/ processes, but in

steady state products, in crowded arts or in standards and may be used by othersstandards, and may be used by others.◦ Consider licensing it, or using it to gain

another business advantage.another business advantage.How to communicate value:◦ What would a licensed market look like?What would a licensed market look like?◦ Are there unserved markets?◦ Leverage for acquisition, joint business, g q j

exchange?

Protect and License (Cont)Protect and License (Cont)Protect and License (Cont)Protect and License (Cont)Are your standard products in mature y part areas where you see your IP being used by many competitors?used by many competitors?◦ Did your company spend tens of millions

of dollars developing IP that is now usedof dollars developing IP that is now used by everyone?Y h ill d i t th◦ Your company has or will depreciate the R&D investment.

Protect and License (Cont)Protect and License (Cont)

Be open to licensing it, or gaining another b i d tbusiness advantage◦ Consider whether it is possible to level the

l i fi ld b ki tit tplaying field by asking your competitors to pay a “tax,” or royaltyConsider whether there is an advantage to◦ Consider whether there is an advantage to your company by cross licensing your mature IP with another company even if it is aIP with another company, even if it is a competitor

Google and Cisco recently entered aGoogle and Cisco recently entered a ground breaking cross license

3. Divest or License3. Divest or LicenseThis IP is: ◦ Not used in your products at all, or only in legacy

products in diminimus quantities/ ways.◦ Consider either selling or licensing it◦ Consider either selling or licensing it

Pluses and minuses to each.

How to communicate value:How to communicate value:◦ Is there a market for the asset?◦ Useful in unserved markets?Useful in unserved markets?◦ Leverage for acquisition, joint business, exchange?◦ Is keeping a license back valuable?Is keeping a license back valuable?

Divest or License (Cont)Divest or License (Cont)Divest or License (Cont)Divest or License (Cont)

If you don’t use it, do you need to keep it?◦ By divesting your company of unused IP, you

bring in some cash on the barrel head, and ◦ Save money you’d otherwise pay out in

i t fmaintenance fees

Divest or License (Cont)Divest or License (Cont)

Y ld li it

( )( )

You could license it◦ Some companies, like LSI, for example,

f ll ff li t IP th lpurposefully offer licenses to IP they no longer use◦ If licensing is successful it’s a revenue stream◦ If licensing is successful, it s a revenue stream◦ Make no mistake, it takes money, man power,

and time to make moneyand time to make money

Weed and FeedWeed and Feed

Regularly review your portfolio to weed t d ti IPout unproductive IP

◦ Short term cost saving◦ Long term benefits How to communicate value:◦ Make key decision makers part of the process◦ Promote strong stewardship over budget◦ Promote proactive matching of resources and

business needs

Your ThoughtsYour ThoughtsYour Thoughts Your Thoughts and Questions?and Questions?and Questions?and Questions?

E dE dEndEnd