Third WIPO/INSME International Training Program

1

Third WIPO/INSME International Training
Program Financing your business with Intellectual
Property
Topic 2 Acquiring your Intellectual Capital The
relevance of an IP audit in your business strategy
Bob Hodgson Zernike (UK) Limited
Geneva December 2010
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First some simple definitions

• Technology is how we do things now
• Knowledge is what we already know
• Innovation is doing things differently
• Science is one of the main drivers of
  innovation
• Development is how we apply science to do
  useful things
• Research is what we do to find out what we
  currently do not know

Bob Hodgson
Geneva 2010
3
National competitive strategies and SMEs

• Natural resource based
• seen as second order
• but crucial to jobs and dependence
• Labour surplus
• productivity still an issue
• quality standards in products
• Systems integration
• rapid adoption and adaption
• source of innovation
• Advanced technology
• RD driven leading edge
• commercialisation emphasis

Bob Hodgson
Geneva 2010
4
Alternate business strategies and intellectual
capital

• Lowest cost efficiency savings for cost edge
• Value performance upgrading at acceptable cost
• Most advanced best performance driver
• Greenest lowest accredited footprint
• Service /- product speed and responsiveness

All rely on knowledge and for some innovation is
central
Bob Hodgson
Geneva 2010
5
Mismatches at different levels

• National imperative - upgrading productivity and
  promoting innovation essential
• Business level success is continuing to do right
  what you have always done change is risky!
• Competitiveness challenge
• reconcile the two positions
• grow new higher value businesses
• improve existing businesses

Bob Hodgson
Geneva 2010
6
Real Economy innovation engines

• ARM Advanced RISC Machines
• IP generator
• income from Licences and Royalties
• market cap - billions
• Generics Group Plc technology solutions
  provider
• IP accumulator
• and commercialiser spinning out companies
• massive P/E ratio on flotation hope value
• Supported by specialist service providers

Bob Hodgson
Geneva 2010
7
The starting point has it potential value

• Who will buy or already buys my product/service?
• What will they pay?
• How many potential customers are there?
• What will any innovation replace?
• Will it work and how much will it cost to make?
• Is it likely to be profitable?

Bob Hodgson
Geneva 2010
8
Communicating potential investment readiness

• Business plan
• Market data and evidence
• Communications skills
• Differentiating the investment pitch
• Cultivation of the risk takers

Bob Hodgson
Geneva 2010
9
Recognising what is there and what to be added

• An IP audit to codify present technology
• Identification and packaging
• An IP search
• Negotiation and acquisition

Bob Hodgson
Geneva 2010
10
Personnel and Intellectual Capital

• Skilled people are the capital of the knowledge
  economy
• Codified v tacit knowledge
• Methods of protection
• formal registration
• contract of employment
• equity share
• Restrictions of trade?

Bob Hodgson
Geneva 2010
11
What are your Intellectual Capital Assets

• Advanced technology the archetypal IP candidate
  
• Market credibility trade marks and brand
  reputation
• Production expertise control and quality
  oriented
• Product performance incremental advances or
  radical changes

Bob Hodgson
Geneva 2010
12
Sources of technical and business innovation

• Clients or customers 70
• Competitors
• Internal sources
• Associations
• Technical standards 50
• Conferences/trade press
• Scientific journals
• Consultants
• Universities
• Government labs 20

Bob Hodgson
Geneva 2010
13
Supply side perspectives

• The inventor
• the idea that will change the world huge hope
  value
• and make me rich
• The research institution
• an output in its own right
• with weak commercial perspective
• The commercial licence provider
• revenue generating expectations
• tempered with restriction of own potential
  action
• Alignment of risks and rewards
• clarity and competence of owners
• capacity to pay and to exploit
• position in market

Bob Hodgson
Geneva 2010
14
Valuation the unresolved challenge

• Easy when there is a revenue stream
• But even then worries about sustainability
• Before the revenue stream it is much more
  uncertain
• And is characterised by information asymmetries
• inventor knows the technology
• entrepreneur knows the market
• investor needs to independently evaluate both
• and then to reach a deal!

Bob Hodgson
Geneva 2010
15
Some additional limitations

• IP system is not always applicable
• advanced engineering around F1 racing
• accumulated tacit knowledge
• Commercial perspectives can cripple business
• Pro fit and its American licensee
• defence costs can overwhelm revenues
• all but a few USA universities spend more on IP
  than they receive

Bob Hodgson
Geneva 2010
16
Making the market work

• Stimulating the supply side
• Stimulating interest among MSMEs
• Training brokers and agents
• Educating fund managers
• Ensuring quality implementation
• Building the history

Bob Hodgson
Geneva 2010
17
Thank You
BOB HODGSON ZERNIKE (UK) Ltd The Grove High
Street Sawston Cambridge UK CB2 4HJ 0(044)1223
526980 bhodgson_at_zernikeuk.com

Bob Hodgson
Geneva 2010