Portfolio Mining and Analysis

1. Portfolio Mining and Analysis Frank S. Farrell F.S. Farrell, LLC 7101 York Avenue South Suite 305 Edina, MN 55435 Phone: 952-921-3260 Fax: 952-216-0106 Email: frank@fsfarrell.com

2. Portfolio Mining • A systematic process of organizing and classifying an intellectual property portfolio with an eye to extracting value Presented by Frank S. Farrell

3. Today’s Situation • Disconnect between technology roadmap and patenting • Patents become way to document product development, not innovation • Disconnect between IP development and revenue generation • Patents obtained but sit unused Presented by Frank S. Farrell

4. Original Assumptions - No Longer Valid • Patents are a defensive tool • Licensing your patents to others is expensive • Licensing will make your competitors mad • The returns aren’t worth the risk • We’ll look greedy or opportunistic Presented by Frank S. Farrell

5. How Did We Get Here? • U.S. R&D spending continues to rise (R&D spending in 1999 was $244B, 44% of total worldwide R&D) • Non-governmental (NG) R&D is 75% of total R&D • License fee revenue is 10-15% of NG R&D dollars (Arora et al., Markets for Technology (2002)) • R&D expenditures have fueled explosive IP growth • 103,703 patents were applied for in 1983, with 59,400 filed by U.S. Applicants – 57,000 were granted • 326,000 patents were applied for in 2001, with 173,000 filed by U.S. Applicants – 166,039 were granted Presented by Frank S. Farrell

6. Presented by Frank S. Farrell

7. Presented by Frank S. Farrell

8. Extracting Value From Existing IP Portfolios • How to recognize value in your Portfolio • How to capitalize on that value • How to use that knowledge to craft your IP strategy Presented by Frank S. Farrell

9. How to Recognize Value in Your IP Portfolio • Organizing your Portfolio • Classifying the IP • Identifying revenue producing opportunities Presented by Frank S. Farrell

10. Organizing Your Portfolio • Organize by Technology Area • Easy, often can do automatically based on patent class • Map Patents on Products • More difficult, requiring participation by product designers, but also more revealing Presented by Frank S. Farrell

11. Classifying Your IP –Core or Non-Core? Presented by Frank S. Farrell

12. Classifying Your IP -Product or Potential Product? Presented by Frank S. Farrell

13. Identifying Revenue Producing Opportunities • Are there infringers? • Are there any new business opportunities? Presented by Frank S. Farrell

14. Identifying Revenue Producing Opportunities • How: • Competitive Technology Intelligence • Patent Mining of Competitors • Technology Forecasting • Engineers and Marketing • Assessment of Competitors • Brainstorming on alternative uses of patented technology Presented by Frank S. Farrell

15. Capitalizing on the Value In Your IP Portfolio • Transfer the IP by Sale or Donation • Low risk, guaranteed reward • Borrow against your IP Portfolio • Pro: Make use of an otherwise nonperforming asset (esp. M&A) • Con: Maintenance fees/annuities, interest Presented by Frank S. Farrell

16. Capitalizing on the Value In Your IP Portfolio • License your IP • Pro: Potential for greater returns • Con: Maintenance fees/annuities, retain risks of invalidity and unenforceability • Transfer IP to a Joint Venture • Pro: Potential for greater returns than above • Con: Risks of failure of any new business Presented by Frank S. Farrell

17. Capitalizing on the Value In Your IP Portfolio • Enforce your IP • Pro: Potential for greatest returns • Con: Maintenance fees/annuities, retain risks of invalidity and unenforceability, high costs of litigation (if necessary) Presented by Frank S. Farrell

18. Adopt a Portfolio Management Strategy • Decide whether you will license core technologies to competitors • Decide whether you are going to pursue infringers to generate revenue or to keep them out of particular product areas • Develop strategy for aligning patent acquisition with existing and planned products and services Presented by Frank S. Farrell

19. IP Revenue Methodologies –Core or Non-Core? Presented by Frank S. Farrell

20. IP Revenue Methodologies –Product or Potential Product? Presented by Frank S. Farrell

21. IP Revenue Methodologies –Comp. vs. Noncomp. Value? Presented by Frank S. Farrell

22. Crafting Your IP Strategy to Enhance Value • Patenting to enhance revenue producing opportunities • Pruning your portfolio • Charting future development and patent strategies Presented by Frank S. Farrell

23. Patenting to Enhance Revenue-Producing Opportunities • Patent to instantiate R&D dollars • Track patents to research and development goals • Identify areas of patent weakness • Spend R&D $$ in core areas of technology where patent protection weak • Identify areas where technology is moving • Catch ideas outside of product lines Presented by Frank S. Farrell

24. Pruning Your Portfolio • The cost of maintaining a patent increases nonlinearly as the patent ages • Review patent portfolio annually to determine if patents should be allowed to lapse, or should be sold or donated • Decision based on licensing potential/ revenue vs cost of maintaining Presented by Frank S. Farrell

25. Charting Future Development and Patent Strategies • Patent to complement your biz strategy • Track patents to research and development goals • Patent in areas where competitors have to move • Emphasize and invest in core areas of technology where patent protection weak • Identify and exploit patent weakness on the part of competitors • License or purchase patents that do above Presented by Frank S. Farrell

26. Conclusion • Recognizing Value in Your IP • Capitalizing on that value • Using that knowledge to craft your IP strategy both in reducing expense and increasing value Presented by Frank S. Farrell

27. Recommendations • Organize your IP portfolio to identify revenue opportunities • Pursue the revenue opportunities • Prune your portfolio • Patent to complement your biz strategy • Track patents to research and development goals • Patent in areas where competitors have to move • Emphasize and invest in core areas of technology where patent protection weak Presented by Frank S. Farrell