the evolving ip market an inventors walk down wall street n.
Download
Skip this Video
Loading SlideShow in 5 Seconds..
The Evolving IP Market An Inventors Walk Down Wall Street PowerPoint Presentation
Download Presentation
The Evolving IP Market An Inventors Walk Down Wall Street

Loading in 2 Seconds...

play fullscreen
1 / 46

The Evolving IP Market An Inventors Walk Down Wall Street - PowerPoint PPT Presentation


  • 140 Views
  • Uploaded on

The Evolving IP Market An Inventors Walk Down Wall Street. James E. Malackowski April 2013.

loader
I am the owner, or an agent authorized to act on behalf of the owner, of the copyrighted work described.
capcha
Download Presentation

PowerPoint Slideshow about 'The Evolving IP Market An Inventors Walk Down Wall Street' - jud


An Image/Link below is provided (as is) to download presentation

Download Policy: Content on the Website is provided to you AS IS for your information and personal use and may not be sold / licensed / shared on other websites without getting consent from its author.While downloading, if for some reason you are not able to download a presentation, the publisher may have deleted the file from their server.


- - - - - - - - - - - - - - - - - - - - - - - - - - E N D - - - - - - - - - - - - - - - - - - - - - - - - - -
Presentation Transcript
slide2

DISCLAIMER: THIS PRESENTATION WAS PREPARED BY REQUEST FOR EDUCATIONAL DISCUSSION PURPOSES ONLY AND DOES NOT NECESSARILY REPRESENT THE VIEWS OF OCEAN TOMO, LLC, ITS AFFILIATES, CLIENTS, EMPLOYEES OR EXECUTIVES.

USE IS BY PERMISSION OF THE AUTHOR ONLY. SELECTIVE DATA OR IMAGES TAKEN OUT OF CONTEXT MAY BE MISLEADING TO A SUBSEQUENT AUDIENCE OR TRIER OF FACT.

opportunity behind the headlines nortel
Opportunity Behind The Headlines -- Nortel

Nortel Auction Generates 3x Expected Price, Bonds Get Par + Accrued

Subs Turn Out to be an Even Better Bet

  • Ocean Tomo valued the senior bonds when they were trading in the 70’s
  • Based on Ocean Tomo’s valuation, hedge fund clients generated significant returns on both the seniors and the subs
alu ip collateralized debt liquid
ALU IP Collateralized Debt (Liquid)

ALU IP Portfolio

(# patents and Average IPQ Score)

private equity venture capital investing
Private Equity / Venture Capital Investing

Private Companies With Strong IP Are More Likely to Get Additional Funding

And Less Likely To Go Bankrupt

Thomson VentureXpert database for the 1976-2005 period. See Cao, Jerry X. and Hsu, Po Hsuan (2010), Patent Signaling, Entrepreneurial Performance, and Venture Capital Financing, forthcoming, 31.

slide10

Shareholder Activism - AOL

  • Starboard is an activist who became one of the largest shareholders of AOL
  • On Feb 24, 2012, Starboard publicly wrote the Board:
    • AOL owned a robust portfolio of extremely valuable patents that had gone unrecognized and underutilized
    • Starboard believed that AOL’s patent portfolio could produce in excess of $1 billion of licensing income if appropriately harvested and monetized
    • AOL’s inaction … was alarming … the Company’s most valuable patents would expire worthless
  • On March 13, 2012, CEO Tim Armstrong stated at an investor conference that: “... AOL’s patent portfolio, it’s beachfront property…it’s basically extremely valuable.”
  • On Apr 9, 2012, AOL announced the sale of its patent portfolio to Microsoft for $1.056 billion in cash.
slide11

Shareholder Activism - AOL

We cannot find one instance prior to our February 2012 letter in which Mr. Armstrong had ever publicly made reference to, or commented on, AOL’s valuable patent portfolio.

– Starboard Value L.P., May 25, 2012.

fundamental long short trades
Fundamental Long/Short Trades

Tesla (TSLA) / Ford (F) / General Motors (GM) – IP data helped identify proprietary battery technology as the key to first mover advantage and safety advantage. The trade was long TSLA/ short F/GM and a basket of auto suppliers to hedge out Beta. Generated 100% relative returns; initiated 5/11.

slide14

U.S. Equities – OTP v. SPX

  • The graph at left shows the five year performance of a portfolio of 300 stocks picked using quantitative IP valuation tools v. the S&P 500
  • The portfolio is composed of stocks representing all market caps and styles and, therefore, does not exhibit those biases
  • As the IP index has consistently outperformed the S&P 500
  • Capturing that outperformance or “alpha” across a family of investment strategies results in superior risk-adjusted and absolute returns relative to the market.
slide15

U.S. / China 200™ Patent Index

  • The graph at left shows the five year performance of a portfolio comprised of the top 100 companies that own the most valuable US patents relative to their book value and 100 companies that have the most valuable Chinese patents.
  • The portfolio is composed of stocks representing all market caps and styles and, therefore, does not exhibit those biases
  • Over the five-years of back testing, the U.S. / China 200™ Patent Index has outperformed its’ benchmark the MSCI World Index by 2922 basis points.
ip historical evolution

Royalty Licensing

Defensive Cross Licensing

Competitive Litigation

IP Historical Evolution

High

Market Development

Period of Feudal Lords

Congress

Low

1st Generation

ip historical evolution1

Contingent Counsel

Royalty Licensing

Public Auctions

Defensive Cross Licensing

Bowie Bonds

Patent Pools

Web Portals

Competitive Litigation

IP Historical Evolution

High

Market Development

Period of Feudal Lords

Rise of the Intermediary

Congress

Low

1st Generation 2nd Generation

ip historical evolution2

Privateers

Activists

Contingent Counsel

Royalty Licensing

Public Auctions

IP Event Trading

Defensive Cross Licensing

Bowie Bonds

Patent Pools

Web Portals

Competitive Litigation

Going Private

IP Historical Evolution

High

Equity Indexes

Market Development

Period of Feudal Lords

Rise of the Intermediary

Age of the Golden Rule

Congress

Low

1st Generation 2nd Generation 3rd Generation (Part 1)

ip evolution continued

Changing Numbers

(Accounting, Reporting and Damages)

Regional Centers

Traded Exchange

(IPXI)

Risk Management

IP Evolution Continued

High

“Taxation Economy”

Market Development

Sovereign Funding

Low

3rd Generation (Part 2)

ip evolution continued1

Changing Numbers

(Accounting, Reporting and Damages)

Regional Centers

Traded Exchange

(IPXI)

Risk Management

IP Evolution Continued

High

“Taxation Economy”

Market Development

Sovereign Funding

Low

3rd Generation (Part 2)

risks
Risks
  • Single-sided corporate attitude to monetization
  • Exhaustive “wait and see” attitude
  • Unchecked shareholder activism and litigation
  • Failure of risk markets to develop
  • Failure to attract liquidity providers
  • Public failures due to false expectations
  • Unintended secondary consequences of legislative or judicial reform; one-way judicial ratchet
  • Continued dilution of “power to exclude” (e.g. ebay; ITC; essential patents)
  • Concentrated foreign sovereign ownership and management of IP rights; lacking U.S. policy
  • Misconceived financial reporting requirements
risks1
Risks
  • Single-sided corporate attitude to monetization
  • Exhaustive “wait and see” attitude
  • Unchecked shareholder activism and litigation
  • Failure of risk markets to develop
  • Failure to attract liquidity providers
  • Public failures due to false expectations
  • Unintended secondary consequences of legislative or judicial reform; one-way judicial ratchet
  • Continued dilution of “power to exclude” (e.g. ebay; ITC; essential patents)
  • Concentrated foreign sovereign ownership and management of IP rights; lacking U.S. policy
  • Misconceived financial reporting requirements
kodak
Kodak
  • Jan. 18, 2012 – Kodak valued its patent portfolio at $2.2 to $2.6 billion in motion filed by Kodak
  • Notwithstanding EK’s declared intent to sell 1,100 patents on July 22nd, stock has continued downward
risk management patent royalty trust
Risk Management - Patent Royalty Trust™

Select Products / Technology Areas

Fairness Opinion

Insurance

Establish Trust

“Interpleader” Notice (optional)

License Execution and Payment

ip evolution continued2

Changing Numbers

(Accounting, Reporting and Damages)

Regional Centers

Traded Exchange

(IPXI)

Risk Management

IP Evolution Continued

High

“Taxation Economy”

Market Development

Sovereign Funding

Low

3rd Generation (Part 2)

sovereign funding
Sovereign Funding
  • Impact
  • P-LEC defense
  • Manufacturing cost advantage
  • Recycled and managed primary research funding
  • Protect domestic industry
  • Export judicial burden
  • Next generation “cartel”
  • Activity
  • Europe Fund (France Brevets) designed to create new economy infrastructure which favors inventions (EU 50 million)
  • Taiwanese Fund to acquire IP to assist local companies
  • Japan Fund targeted investments in life-science IP
  • Korea Fund to promote local IP rights (USD 403 million reported)
  • LESI Global Technology Impact Forum received Delegations from Turkey, China, Singapore, the Philippines, UAE and Hong Kong
ip evolution continued3

Changing Numbers

(Accounting, Reporting and Damages)

Regional Centers

Traded Exchange

(IPXI)

Risk Management

IP Evolution Continued

High

“Taxation Economy”

Market Development

Sovereign Funding

Low

3rd Generation (Part 2)

regionalization
Regionalization

Regional Service Center

Regional Service Center

Regional Service Center

Regional Service Center

U.S.

IP

Central

Market

Regional Service Center

PAN-ASIA

EUROPE

ip evolution continued4

Changing Numbers

(Accounting, Reporting and Damages)

Regional Centers

Traded Exchange

(IPXI)

Risk Management

IP Evolution Continued

High

“Taxation Economy”

Market Development

Sovereign Funding

Low

3rd Generation (Part 2)

changing numbers
Changing Numbers
  • FASB 141/142
  • IP to fill the “GAAP” now in U.S. and Germany at a minimum
  • IP reporting in Hong Kong (HKSE Feb 2012 Guidance)
  • Changing damages accounting / Daubert patchwork quilt
  • Expanding efforts towards global ratings now in U.S., Europe and across Asia
taxation economy
Taxation Economy
  • Growing expectation / consent to pay IP “tax”
  • Low per unit effect across all products
  • Catalyst to greater IP based reporting
  • Consistent with planned IP exchange models
  • Decomposition of cross licenses
  • True Governmental taxation starting with cross border affiliate entities
ip evolution continued5

Changing Numbers

(Accounting, Reporting and Damages)

Regional Centers

Traded Exchange

(IPXI)

Risk Management

IP Evolution Continued

High

“Taxation Economy”

Market Development

Sovereign Funding

Low

3rd Generation (Part 2)

slide37

IP Exchange – U.S. Efforts Accelerating

The Intellectual Property Exchange International (IPXI) is the world’s first financial exchange that facilitates non-exclusive licensing and trading of intellectual property (IP) rights with market-based pricing and standardized terms. The result is an exchange that operates under two core principles: transparency and efficiency. IPXI invites all IP market participants to consider membership.

ipxi unit license right contracts
IPXI – Unit License Right™ Contracts

USP X,XXX,137 A / B / C

GENERAL DESCRIPTION: USP X,XXX,137 A / B / C Valve Seat Insert

PATENT(S):  USP X,XXX,137 and continuations, continuations-in-part and foreign counterparts.

FIELD OF USE:  All

RESTRICTIONS: All secondary sales through IPXI

ISSUER RIGHT TO USE:  Yes including all subsidiaries

UNIT BASIS:  Each ULR covers one automotive or light truck engine

TOTAL OFFERED QTY:  50 million license units offered in 10 unit lots

OPENING: Dutch Auction (50% minimum quantity and price)

OFFERING TERM:  3 years

TERM OF LICENSE:  Until consumed

IPXI PRICE BANDING: + / - 20%

INITIAL OFFERING (TRANCHES)

U137A: 10 million ULRs $0.50 per unit

U137B: 10 million ULRs $0.75 per unit

U137C:  30 million ULRs $1 per unit

FOLLOW-ON OFFERINGS

Unlimited 50 million ULRs Deemed Market Price

slide41

The Evolving IP Market:

  • A 30 year overnight success (more or less).
slide46

James E. Malackowski

200 West Madison, 37th Floor

Chicago, IL 60606

(312) 327-4410 Ph

jmalackowski@oceantomo.com