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PatentEng-Berkeley-Lavian Week 3: Patents & Corporations 1
Patent EngineeringIEOR 190G
CET: Center for Entrepreneurship &Technology
Week 3
Dr. Tal Lavian(408) 209-9112
321 HavilandMondays 4:00-6:00
PatentEng-Berkeley-Lavian Week 3: Patents & Corporations 2
Some administrations • Sign up for your presentation date• Subject line on your emails to me:
• “IEOR 190G” – your subject line• Dyslexia
PatentEng-Berkeley-Lavian Week 3: Patents & Corporations 3
Today’s Student’s Presentations
Recognizing Intellectual Property10,000 foot view
Patents Invention that is new and useful Trademarks Logos & symbols Copyrights Right to reproduce an idea or information Includes software Trade Secrets Non-disclosed information that is valuable
PatentEng-Berkeley-Lavian 4Week 3: Patents & Corporations
REVIEW
PatentEng-Berkeley-Lavian Week 3: Patents & Corporations 5
Example of a patent
• Cover page• Diagrams• Writing description• Claims
How Patents Are Used
Corporate Product protection Corporate Value Defensive portfolio Licensing
Consultant Entrepreneurial Professional credibility
PatentEng-Berkeley-Lavian 6Week 3: Patents & Corporations
How Patents Are Used by Corporations Product protection
Traditional use for patents Blocks competitors from using invention
Corporate Value Part of the “book value” of a company Return on R&D investment Some small companies are acquired just to get the patents.
Defensive portfolio (war chest) Have patents to “trade” if a competitor accuses company of
infringing their patents. Licensing
License to customers or for non-competitive applications
PatentEng-Berkeley-Lavian 7Week 3: Patents & Corporations
PatentEng-Berkeley-Lavian 8
Promote Innovation• Strengthen corporate community by focusing
upon internal networking and information sharing• Augment sources of innovation by promoting an
environment of creativity– Create a simple and supportive environment that builds
on ideas heard from any employee and encouragement/mentorship by subject matter experts
• Supplement corporate strategy - what exists beyond Transformation - by discovering ideas to invest in now for the future
Week 3: Patents & Corporations
PatentEng-Berkeley-Lavian 9
How Can A Patent Provide Business Value?
• Can exclude others from using Company innovations• Can be licensed for income• Can be utilized for other business value (e.g. cross-
licensing, if appropriate)• Can be used defensively to avoid or deter litigation• Can enable “freedom to operate”• Demonstrates technology leadership
• Business Value/Return on R&D Investment
Week 3: Patents & Corporations
Offensive patent strategy
• Small portfolio of pioneering patents– Market leadership & advantage– Licensing– Deal & merger leverage
• Small to medium size companies• Reasonable cost• Market monitoring
PatentEng-Berkeley-Lavian 10Week 3: Patents & Corporations
Defensive patent strategy
• Large portfolio of patents of various scope– Protect products from copying– Cause competitors to design around– Reduce risk of patent infringement suit by
competitors = mutually assured destruction– Cross licensing - market entry
• Medium to large size companies• High cost
PatentEng-Berkeley-Lavian 11Week 3: Patents & Corporations
International patent strategy
• International patent protection is very
expensive
• Cost / benefit analysis
• Strategically select countries and patents to
maximize value
PatentEng-Berkeley-Lavian 12Week 3: Patents & Corporations
PatentEng-Berkeley-Lavian Week 3: Patents & Corporations 13
Recent Patent Verdicts & SettlementsOr – Why it is really important?
• Alcatel/ Lucent v. Microsoft. - (2007) - $1.5 Billion • NTP – Settled with RIM for $612M (plus $53M litigation plus verdict)• Intergraph – over $880M in settlement from patent litigation with Intel, HP
and others• Eolas v. Microsoft (2003). $506M Jury verdict• Immersion v. Sony (2004). $82M jury verdict plus royalties
– increased (2007) to $150M– vibration game controller - Microsoft settlement on $26
• Freedom Wireless v. BCGI (2005) $128 jury verdict• Finisar v DirectTV (2006). 103M (79+24)Jury verdict plus injunction • Tivo v. EchoStar (2006). $74M jury verdict plus injunction • Acacia - $60M in licensing revenue (2004-2—6)• Forgent - $100M in licensing revenue 2004-2006
Licensing Company: A company with no products and little infrastructure that amass patents with the intention of prosecuting offending companies
NTP is considered by many to be a patent troll
Co-founded by a Chicago Engineer and his patent attorney in 1990 to protect his inventions. Main attraction was a system to send emails
between computers and wireless devices
NTP
PatentEng-Berkeley-Lavian 14Week 3: Patents & Corporations
Late 90’s, RIM hit the market with the BlackBerry
Had around $850 worth of sales that was considered to infringe upon NTP’s patents
NTP contacted RIM and offered to license their patent, RIM didn’t respond
NTP and RIM at first agreed to settle for around $450 million, but the agreement disintegrates over the summer
The NTP Case
PatentEng-Berkeley-Lavian 15Week 3: Patents & Corporations
US Patent Trade Office decides to reexamine the patents that NTP held after RIM presents evidence of prior art.
After dragging their feet in court, RIM agrees to a settlement of around $650 million, and to license the technology from NTP.
Agreement is that the money will not be returned even if the US PTO finds the patents held by NTP to be invalid
RIM was losing customers and companies and law firms were delaying Blackberry upgrades until the case was resolved, so it was in their best interest to resolve it quickly.
The Case
PatentEng-Berkeley-Lavian 16Week 3: Patents & Corporations
Bell Labs Case - The Technology
Late 1980’s, Inventors James Johnston and Joseph Hall (Bell Labs, division of AT&T)
Quantizing noise – approximation of continuous range by values by relatively small set of discrete values.
Invented method and apparatus to produce quantized audio signal using interpolated scale factor.
Advantage - Data compression – Same or similarsignal can be represented with less data
PatentEng-Berkeley-Lavian 17Week 3: Patents & Corporations
Bell Labs Patents
• Filed: Dec 1988 • Assignee: Bell Laboratories• U.S. Patent No. 5,341,457, Perceptual
Coding of Audio Signals, to Joseph L. Hall and James D. Johnston (Dec 1988)
• U.S. Reissue Patent No. RE39,080, Rate loop processor for perceptual encoder/decoder, to James D. Johnston (Dec 1988, Reissued Sep 1994)
PatentEng-Berkeley-Lavian 18Week 3: Patents & Corporations
Bell Labs Patents
PatentEng-Berkeley-Lavian 19Week 3: Patents & Corporations
Bell Labs MS Case
• In 2003, Lucent files suit against Gateway, Dell, and eventually Microsoft in U.S. District Court, San Diego, CA.
• Claim: Infringed two patents developed by Bell Labs in MP3 compression and playback within Microsoft Windows Media Player
• Sought 0.5% royalty of total Windows computers sold
PatentEng-Berkeley-Lavian 20Week 3: Patents & Corporations
The Case
• Microsoft claims:• Received license for MP3 technology from
Fraunhofer Institute (Bell Lab’s parent research organization) for flat $17 million.
• Loop processor not applicable for WMP application.
• 0.5% rate exorbitant! “Only one of 10,000 features”
.
PatentEng-Berkeley-Lavian 21Week 3: Patents & Corporations
The Results• Ruling agreed that patents were developed by
Bell Labs before joining with Fraunhofer to create MP3
• Rights to patents exceeded value of $17 million paid for license
• February 22, 2007, Alcatel-Lucent awarded record $1.5 billion in damages from Microsoft. Jury unable to find ‘willful’ infringement for $4.5 billion damages.
• August 6, 2007, Microsoft granted retrial. Verdict overturned based on insufficient evidence by Judge Rudi Brewster.
PatentEng-Berkeley-Lavian 22Week 3: Patents & Corporations