From Assets to Profits

Bruce Berman (New York NY) is CEO of Brody Berman Associates in New York, a communications and management consulting firm focusing on innovative companies, assets and investors. Mr. Berman works closely with IP-rich companies, consultants and lawyers, as well as private equity firms and their clients to enhance patent value and facilitate transactions. In addition to this book, Berman is responsible for Making Innovation Pay: People Who Turn IP Into Shareholder Value (Wiley 2005). He also edited and contributed to From Ideas to Assets: Investing Wisely in Intellectual Property (Wiley 2002), a widely acclaimed book about the business of IP. His articles, reviews and chapters have appeared in many periodicals, including Nature Biotechnology, The National Law Journal and The Book of Investing Rules (Financial Times Prentice Hall, 2003), which The Motley Fool called one of ten all-time best investment books.

• About the Editor xixIntroduction xxiPart one IP Business Models 1Chapter 1 Out of Alignment —Getting IP and Business Strategies Back in Sync 3By Dan McCurdyPerspective 3The CEO’s Dilema 4The Emergence of Patent Trolls and Their Impact on IP Licensing 7In A Changing IP and Business Environment, What is the Correct IP Strategy? 8The Need to Tie Intellectual Property Strategy to Overall Business Strategy 10Using the Company’s Intellectual Property to Improve Business Performance 13Not Magic —Just Hard Work 16Chapter 2 Evolution of the Technology Firm: IP Rights and the Business of Licensing 19By Bryan P. LordPerspective 19Introduction 20The Past: The Integrated Industrial Economy 21The Present: The Disaggregated Modern Economy 24The Future? The Interrelated “Open” Economy 36Conclusion 41Chapter 3 Reengineering the IP Ecosystem 45By Kevin RivettePerspective 45Strategy Before Tactics 46Ecosystem Reengineering—What Is It? 47Profit Pool Positioning: “Show Me the Money” 47Advantaged Networks: “Whom Do I Want to Play With?” 50Collaborative Innovation: “How to Avoid Looking Over Your R&D Shoulder” 54Chapter 4 IP Investing: Catalyst for Return or Recipe for Pain? 57By Bruce BermanPerspective 57Agreeing to Disagree 58IP Comes in Many Shapes and Sizes, So Does IP Value 61Fewer than 5% of Patents Are Assets 63Diverse Patent Holder Motives and Expectations 68IP in Context: Toward a Broader Interpretation of ROIP 72The CEO Challenge: Recognizing and Maximizing IP Assets 75Chapter 5 Making Sense of Recent Trends, Court Decisions, and Attempts at Patent Reform 81By Irving RappaportPerspective 81Too Much Litigation, Too Many Big Awards 82Patent Competition 82Myths Fostered by Those Claiming the Patent System Must Change 85Emerging New IP-Based Business Models 86Recent Supreme Court Decisions’ Impact on Business 93Patent Reform Legislation 93Conclusions 98Part two IP Performance 103Chapter 6 Patent Valuation Contexts: Navigating Murky Waters 105By James D. WoodsPerspective 105Sounding the Shoals, Plumbing the Depths 106Valuation Techniques 108Sources of Value 113Practical Application 121Chapter 7 Measuring and Conveying IP Value in the Global Enterprise 125By Joe BeyersPerspective 125Introduction 126Strategic Intent of IP—A Changing Role 127Structuring for Success—It Sounds Good but How Do You Get Everyone on Board? 129Leveraging IP for Increased Value—but What Kind of Value? 130IP Cash/Value—Who Gets the Benefit? 132Revenue Recognition—So You Get the Cash, but Can You Count It? 132Specific Business Models—What Are Reasonable Financial Goals? 135Tradeoffs—Setting the Goals and Measures of Success 137Summary 139Chapter 8 Strategic Patents and Return On Investment 141By Willy ShihPerspective 141With Patents, Cash is Not Necessarily King 142Valuing a Patent versus Valuing a Technology 142Strategic Use of Patent Portfolios 149Is R&D Solely for the Purpose of Generating Patents a Sustainable Business Model? 151Thinking Strategically about Patents 152How Does a Firm Know if Its Patent Strategy Is Successful? 157Chapter 9 Patent Litigation: The Changing Economics of Risk & Return 161By Ronald J. SchutzPerspective 161The Only Constant is Change 162The Rules of the Game Have Changed 163The Rules May Change More 164Risk/Reward Analysis 165Patent Litigation Is More Expensive 165Risk/Reward from The Patent Owner’s Perspective 166Risk/Reward Analysis from The Alleged Infringer’s Perspective 169Other Factors that All Parties Need to Consider 170A Report from The Trenches 171Conclusion 173Chapter 10 Making Reputation Pay: Intellectual Assets’ Impact on Shareholder Value 175By Jonathan LowPerspective 175The Reemergence of Reputation 176Intellectual Property as a Global Differentiator 179Intangibly Denominated Objectives 180Refining Techniques for Quantifying Reputation 181Keeping Brand Promises 183New Measurement Rigor 184Making Informed Decisions 188Part three IP Transactions 191Chapter 11 IP Asset Sales, Still A Work in Progress 193By James E. MalackowskiPerspective 193From Technology Transfer to Title Transfer 194A Tradition of Patent Licensing 196Emergence of New IP Marketplaces 197IP Assets: Tomorrow’s Currency 203Conclusion 211Chapter 12 The Evolving Role of IP in M&A: From Deal-Breaker to Deal-Maker 215By Ron LauriePerspective 215Not Just a Bundle of Rights 216First Generation M&A Mindset: IP as a Deal-Breaker 217Second Generation M&A Mindset—Seeing IP as a Deal Driver 221Remaining Impediments to Fully integrating IP Value Analysis into M&A Transactions—And Possible Solutions 223The Role of the CIPO in Early-Stage M&A Activity 226The Role of the IP Investment Banker in Extracting Maximum Value from Transactions 227Conclusion 231Chapter 13 Patents-as-Hedge: Wall Street’s Emerging Monetization Model 233By John A. SquiresPerspective 233Valuing Risk Management 234Attributes of Patents Wall Street Seeks to Procure 238Innovation for Consortia and Joint Ventures in Market Structures 244Role of Patents in Market Structure Joint Ventures 249Patent Valuation and Implications for Use of Patents Moving Forward 250Chapter 14 Financing IP Assets—What Lenders and Investors are Missing 255By Keith BergeltPerspective 255Financial Capital Available to IP Holders 256Putting the Subprime Credit Crisis into an 257IP PerspectiveIP Finance 261IP Finance Landscape 266Conclusion 271Chapter 15 Assets, Property and Capital in a Globalized Intellectual Value Chain 275By Ulf Petrusson and Bowman J. HeidenPerspective 275(Re)defining Intellectual Assets, Property, and Capital 276The Transformation of Industry to Knowledge- Based Business 280Knowledge-Based Business Models 283The Road Ahead 290Index 293

"From Assets to Profits is the latest offering from the fertile and enthusiastic brain of Bruce Berman…Bruce--who has both edited and contributed to this volume--need little introduction or explanation in his field of expertise." (Ipfinance.blogspot, February 9th, 2009) "…the book provides a detailed look at how IP assets work and what professionals need to know about them to succeed in today's competitive business environment." (ipreview.com, 2008)"This book looks at how intellectual property assets work, what professionals need to know about them-and how recent developments are forcing businesses to re-examine their approach to innovation and performance." (Inventique, December 2008)