PATENT LICENSING STRATEGIES

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PATENT LICENSINGSTRATEGIES
ROBERT P. COGAN Nath Associates LES San Diego
Chapter January 27, 2004
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OVERVIEW

• Historical Perspective where we are today
• Tools for Extracting Value from IP
• Basic Licensing Models
• Special Licensing Models
• Licensing Strategies
• Fees and Royalties
• Patents v. Applications
• The IP Audit

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THE HISTORICAL PERSPECTIVE

• The pendulum has swung on societys view on
  property.
• Creation of the Court of Appeals for the Federal
  Circuit has resulted in more patents being
  upheld. 
• The 1995 DOJ-FTC guidelines allow greater
  latitude in licensing.
• Congress has encouraged technology transfer.

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Licensing Income Today

• IBM's licensing income
• 1990 - 30 million
• 2000 - 1 billion
• 2002 - 2 billion
• The Harvard Business Journal puts patent
  licensing income 110 billion worldwide and
  growing.

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Tools for Extracting Value from Intellectual
Property

• New Venture
• Acquisition
• Joint Venture
• Strategic Alliance
• Licensing

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Assets v. Technology
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The Basic Licensing Models

• Exclusive or Nonexclusive
• Field of Use or Unrestricted
• Express or Implied
• Common Law Shopright or Statutory Under the
  Federal Acquisition Regulation

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Special License Models

• Grant back
• Allows use of improvements made by licensee.
• Reach through
• Attempts to cover results of use of platform
  technologies.
• Cross License
• Parties trade licenses.

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Key Terms

• Recitals/Definitions
• Field of Use
• Performance Requirements Minimum Payments
• Assignability
• Infringement, Infringers

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Fees and Royalties

• Licensing fees, down payments
• Does the royalty make sense?
• Is the cost of the product negligible compared to
  its revenue?
• You may charge based on use.

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Nominal Royalty Levels

• The knee jerk number is always 5.
• Mechanical and electronic products - ½ to 12
  .
• A pharmaceutical with clinical trials - 3-4 .
• A proven drug with FDA approval - 5-7.
• A drug with market share, such as one pharma
  distributing through another - 8-10.

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Licensing Pending Applications vs. Licensing
Issued Patents

• Pending applications can be and are often
  licensed.
• Set different royalty rate and term if patent
  doesnt issue.

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Additional Elements of a Licensing Package

• Know-how
• Trademarks
• Technical Assistance

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The Intellectual Property Audit

• Identify all the companys U.S. and foreign
  patents.
• Review assignment records.
• Examine your strengths, weaknesses.
• Compile intelligence on competitors IP holdings.

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THANK YOU !
ROBERT P. COGAN 11455 El Camino Real San Diego CA
92130-2008 [phone] rcogan_at_nathlaw.com