Fairfield Resources International Inc. 2000 LICENSING AS A BUSINESS Emmett J. Murtha President & CEO Fairfield Resources International FR I Venture Association

Fairfield Resources International Inc. 2000

LICENSING AS A BUSINESS

Emmett J. MurthaPresident & CEO

Fairfield Resources International

F RI

Venture Associationof

New Jersey

March 21, 2000



LICENSE THE CROWN JEWELS?

ARE YOU CRAZY?

F RI

Emmett J. Murtha President & CEO


AGENDA THE VALUE OF INTELLECTUAL PROPERTY WHAT ARE THE ALTERNATIVES TO LICENSING? CASE STUDY: LONGHORN TECHNOLOGY CASE STUDY: IBM CORPORATION

– Assets– Objectives– Results– Key Factors

LESSONS LEARNED

LICENSE THE CROWN JEWELS?


Is Intellectual Property Always Valuable? ( Or Just Expensive?)

A PATENT IS A RIGHT

– Granted By A National Government

– To Stop Someone From Doing Something

A PATENT IS VALUABLE ONLY

– If Someone Wants To Use The Patented Invention


YOU MUST MAKE CHOICES

– Protect Your IP - Or Lose It

– Enforce Your IP Rights - Or Lose Them

– License Your IP Rights - And Prosper

INTELLECTUAL PROPERTY


LICENSING THE CROWN JEWELS

ENFORCEMENT OR LICENSING?

THESE ARE THE ONLY CHOICES


PRACTICE THE MONOPOLY

– 3M, Pfizer, Biotechs, Startups, Niche Players

SELECTIVE LICENSING

– Intel, Motorola, Kodak, Texaco


– Lucent, General Electric, Texas Instruments & IBM

WHAT ARE THE ALTERNATIVES TO LICENSING YOUR PATENTS?


LONGHORN TECHOLOGY



Longhorn Technology Has Thousands of Patents

They Get Over 500 New U.S. Patents A Year

Some Longhorn Patents Are Not Available For License

– Particularly New Ones, Which Protect Future Technologies Or Products

However, Longhorn Has Made Licensing A Profitable Business

– Licensing An Outstanding Collection of Patents Covering Its Main Business To Its Competitors

» For Hundreds Of Millions Of Dollars Annually

LONGHORN TECHNOLOGY(A HYPOTHETICAL LICENSOR)


COULD THEY NOT DO BETTER BY REFUSING TO LICENSE THEIR COMPETITORS?

PROBABLY NOT, FOR THE FOLLOWING REASONS:

– IT’S IMPORTANT THAT CERTAIN TECHNOLOGIES BE “PROVEN” BY WIDESPEAD USE

– CUSTOMERS LIKE TO HAVE MORE THAN A SINGLE SOURCE

» PARTICULARLY FOR COMMODITY PRODUCTS LIKE COMPUTER MEMORY CHIPS, MOTOR OIL, EVEN PERSONAL COMPUTERS!

– LITIGATING TO ENFORCE A PATENT MONOPOLY IS VERY EXPENSIVE

» IT IS OFTEN REFERRED TO AS “THE SPORT OF KINGS”

LONGHORN TECHNOLOGY


IBM CORPORATION



APPROXIMATELY 33,000 PATENTS WORLDWIDE

– Leader in US Patents Issued Since 1994

VAST PORTFOLIO OF TECHNOLOGY AND SOFTWARE

ALL INTELLECTUAL PROPERTY CONTROLLED BY HQ

CENTRALIZED LICENSING MANAGEMENT

– Licensing Activity Run As A Business

– Multinational Staff

OVER 1300 ACTIVE PATENT LICENSE AGREEMENTS

– Half Non-US

IBM’S IP ASSETS


MAXIMIZE RETURN ON INTELLECTUAL PROPERY

– IP IS LIKE ANY OTHER ASSET, EXCEPT:

» Highly Profitable Return

» Short Shelf Life

SECURE FREEDOM OF ACTION THROUGH CROSS-LICENSING

– Assure Developers Not Blocked

PROMOTE OPEN SYSTEMS AND GREATER USE OF IBM TECHNOLOGY

– Facilitate Industry Standards

– Assure Widespread Software Availability For Customers

GAIN ACCESS TO OTHER TECHNOLOGIES

SUPPORT VENDOR & MANUFACTURING RELATIONSHIPS

IBM’SLICENSING OBJECTIVES


1988 REVIEW CONCLUDED:

– Others Were Capitalizing On IBM’s R&D

– Royalty Rate Of 1% Sales Was Too Low

INCREASED RATES

LAUNCHED MAJOR LICENSING CAMPAIGN

– Modest Staff Increase

– Major Involvement of Business Units

» ANALYSIS, INFRINGEMENT PROOF, PATENT REVIEW, INCREASED FILING

RESULT:

– Revenue Grew Over From Tens Of Millions to $1.3 Billion in 10 Years

– All Income Credited To Divisions

– Minimal Litigation

IBM LICENSING


IBM’s Licensing Income

1988 1989 1990 1991 1992 1993 1994 1995 1996 1997 1998

Income


RESOURCE REQUIRED– GOOD PATENT PORTFOLIO

– EXCELLENT PATENT STRATEGY & MANAGEMENT

– ANALYTICAL

– LEGAL

– NEGOTIATION

– ADMINSTRATION

A COHERENT LICENSING PROGRAM

– TERMS & CONDITIONS PERCEIVED AS REASONABLE

– CONSISTENT & FAIR APPROACH

– A SUCCESSFUL TRACK RECORD

KEY FACTORS TO LICENSING SUCESSS


INTERNAL CONSENSUS– CONVINCING INTERNAL “ OWNERS”

– LICENSING COMPETITORS

– SELLING SENIOR MANAGEMENT

– CALMING THE LAWYERS

RISK OF LITIGATION– DECLARATORY JUDGEMENT ACTIONS

– NEED TO ENFORCE

EXPOSURE TO RETALIATION

KEY FACTORS


THE CROWN JEWELS ARE OFTEN UNDER VALUED

While Growing In Value,

IP Can Produce a Steady Stream of Profits

LICENSING AS A BUSINESS CAN YIELD SURPRISING RESULTS

Your Revenues = Competitors Expenses

LESSONS LEARNED


WHO’S CRAZY NOW?


Documents

Fairfield Resources International Inc. 2000 LICENSING AS A BUSINESS Emmett J. Murtha President & CEO Fairfield Resources International FR I Venture Association