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Taming Complex Intellectual Property Compensation Problems. Patent portfolios are increasing in size…. Roy Weinstein. New approach to valuing intellectual property. Substitution of reason for fantasy. Occam’s Razor. Requirements for patentability. Novelty. Nonobvious. Utility.
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Taming Complex Intellectual Property Compensation Problems Patent portfolios are increasing in size… Roy Weinstein
New approach to valuing intellectual property • Substitution of reason for fantasy • Occam’s Razor
Requirements for patentability Novelty Nonobvious Utility
…for storing and transporting a banana carefully. $8.99 on Amazon
…eating receptacle for supporting, rotating, and sculpting a portion of ice cream… $6.99 on Amazon
Number of Worldwide Patents No.of Patents
Apple: 200 patents for the iPhone… …not including patents licensed from others
Toyota: 2,000 patents for the Prius… …not including: • patents licensed from others • patents covering components ..purchased wholesale
Very complex… …veryexpensive
1991 2003 2004 2005 2006 2007 2008 2009 2010 2011
46 years to issue the first 10,000 U.S. Patents 2010: 10,000 patents every 15 days Number of Patents by Year
Number of Patent Grants: 2010 250K 225K No.of Patents 135K 70K 60K 16K 6K Korea Europe India Taiwan China Japan U.S.
Complex compensation problem… …necessary patents owned by more than one entity
Hypothetical Negotiation Patented Technology Patent Owner Licensee Royalty Payment
New approach… Occam’s Razor …the Nash Bargaining Solution.
For “pioneering analysis of equilibria in the theory of non-cooperative games”
Two simple conditions: • No other feasible outcome is better for one side and not worse for the other 2) Neither side is worse off reaching an agreement than if no agreement is reached
NBS requires knowledge of: • Patent owner disagreement profit 2) Licensee disagreement profit 3) Total incremental profits from use of the patent
Profit split from use of the patent 50/50 split is a reasonable and likely starting point
Why 50/50? If no agreement is reached: Patent Owner Licensee
Why 50/50? If an agreement is reached: Patent Owner Licensee
How will the patent compensation world look in 5 years? • 50/50 split of the incremental benefits from patent use • Wider applications of NBS • Greater reliance on reason and good science