Ways to recognise your
investable ideas
Gabriela Kennedy
Partner, Intellectual Property Group
Hong Kong
21 November 2006
What
What does
does
this
this mean?
mean?
How
How can
can
they
they be
be
sold
sold to
to
investors?
investors?
Investable
Investable
Ideas
Ideas
How
How can
can
they
they be
be
valued?
valued?
How
How can
can
they
they be
be
identified?
identified?
ª
=
Investable
Idea
Idea
Commercial
value
Investable Ideas Æ Commercial Benefits
Auto
Auto Cleaning
Cleaning
System
System
Commerical
Commerical
Value
Value
Technological
Technological
Value
Value
Prolong
Prolong life
life
of
of air-conditioner
air-conditioner
Potential
Potential application
application
in
in other
other electrical
electrical
appliances
appliances
Develop
Develop new
new appliances
appliances
or
or
licence
licence to
to others
others
Investable Ideas Æ Intellectual Asset
Idea + Commercial Value +
Æ
Legal Protection
Intellectual Asset
Intellectual Assets typically include:
• Patents
• Trade Marks
• Registered Designs
• Copyright
• Trade Secrets
Intellectual Property
• Increases the value of
investable ideas, if
protection is obtained
Income
Stream
Benefits
of IPRs
Monopoly
Bargaining
Power
Intellectual Property
• iVoice, Inc.
– Patent - speech-enabled name dialer for Microsoft
Outlook
– Estimated value: Assuming 5% of Microsoft Outlook
users (exceeding 100 million) buy it at retail price of
US$29.95 per user, revenues generated would
exceed US$145 million
Identifying Investable Ideas
New idea or
Invention with:
Technological
and commercial
significance
Capability of
developing into
a real product
Reasonable
manufacturing
costs
Acceptable
price
How can the potential intellect asset be
valued?
What is its marketability?
• New product for
existing and growing
market
– More certainty that the
product will sell
• The market is there
– Value will be relatively
higher
• New product for new
market
VS
– Product potential is
higher
– Risk is higher as well
• Market is not there
yet
• Difficult to assess
whether the product
will sell
How can the potential intellectual asset
be valued?
•
Dolly’s Cloning Patent
– Patent was obtained by PPL Therapeutics (Scottish biotech company)
to protect the know-how which allowed the production of Dolly in 1996
– Made world headlines
– The technology used to clone Dolly never helped to develop a
marketable product and generated no commercial benefit.
– PPL was forced to sell the patent to Exeter Life Sciences (a US
company) - for US $1.8 million !
How can the potential intellectual asset
be valued?
• What is the likely return generated from…
– existing licenses and other agreements
• Anticipated royalties
– application of the ideas to other fields / industries
– future licensing
• Check all legal agreements
–
–
–
–
License
Employment/consulting
Non-disclosure
Commercial
How can the potential intellectual asset
be valued?
• Manage Legal Risks by
checking…
• Similar third party IPRs
covering the same idea
• Potential disputes or
litigation
• Risky intellectual assets
• Asset value in numerical
terms
– Income approach: sale of
products and licensing
– Cost approach: research
and development costs
– Market approach: review
historical transactions of
similar product/patent, then
estimate the value
How should your investable ideas be
packaged to attract investors?
Show
commercial
significance and
feasibility
Strategic
IPR filing and
management
Provide
full support
to potential
investors
Strategic IPR filing and management:
Scenario 1
• Small car maker
• All design, research and manufacturing done by car
maker
• Finished with 1st car and thinking of selling in China
What are the IPRs at issue?
• Trademark Registration
• Copyright Registration
– Design drawings; engineering drawings; on-board
computer software
• What are the features which attract customers?
– Appearance Æ Design Registration
– Functions of car Æ Patent Registration
• Patent : full patent / short term patent
• Car / car parts / service
Trademark registration
• Choose the right trademark
– House brand / sub-brand
– Defensive Trademark
– Language: English / Chinese and others
• Choose the right class
– Class 12: automobiles; automobile bodies; engines; chassis;
tires; brakes; bumpers; windscreens; mirrors; indicators; air bags
– Class 9: on-board computers; vehicle radios; break down
warning triangle
–
–
–
Class 11: vehicle air-conditioners; lights for vehicles
Class 17: connecting hose for vehicle radiation
Class 27: automobile carpets
Trademark registration
• Service mark
– Class 37: Maintenance service; repair service; car washing
service; lubricating service; service station
– Class 39: rental service; towing service
How should third party rights be dealt
with?
Third Party Rights
Be Pre-emptive
Register more
rights than
you currently
need
Monitor gazettes,
e.g. watch
services
Cancellation Actions
3rd party rights should
be dealt with straight
away. Do not wait until
problem arises
Keep evidence
to support
cancellations
Buying Back
Not preferred,
but sometimes
necessary
Prepare for the worst case! Have a crisis management plan!
Other IPR issues?
• New trademark registrations
• Ownership of design rights
• Ownership of copyright
• Control of Chinese
sub-contrator/licensee
• Ownership of new inventions
• IP issues relating
to exportation
Ownership of new designs
• Design patent
– Ensure company retains all rights to apply for design
patents
• Copyright
– ownership vested in the author/creator of the
copyright work (engineering drawings)
– But ownership belongs to company if copyright work
created in the course of employment
– Ensure assignment of copyright
Ownership of new designs
Co-author
Joint-Ownership
Agreement to
retrain all IP
rights in
co-authored
works
Commissioned
works
Short of prior
arrangement,
copyright
belongs to the
commissioned
party
Agreement to
retain copyright
in commissioned
works
Ownership of new inventions
VS
Employee
Company
Who owns the invention?
• Ensure company has all rights to apply for invention
patents created in the course of employment
Practical tips
• Conduct IP audits regularly
• Regular monitoring of
official gazettes
• All contracts/arrangements
should be reduced to writing
• Have documents signed and
where appropriate, stamped
with company chop
• Date all documents
• Keep documents safe
Provide support to potential investors
Actual
demonstration
Provision of
all market
information
Access to
know-how
Support
your
investors
Provision of
all technical
material
Legal
documentation
Assistance
in the actual
technology
transfer
Provide support to potential investors
REMEMBER!
• Investors want to buy
your invention instead of
developing it in-house
because they want to
save time and costs!
• If you are worried about
premature disclosure…
– Sign a non-disclosure
agreement to restrict
unauthorized used of trade
secret or confidential
information
– If necessary, withhold
information on some of the
major elements of the
invention
THANK YOU!
Gabriela Kennedy
Partner
Lovells, Hong Kong
[email protected]