Presentation at LES-Singapore Asian Pacific Regional Conference

1. The
Emerging
IP
Deals
and
Opportuni7es
in
Asia:
Emerging
IP
Trends
and
Strategies
in
China
Presented
at
LES
Asia
Pacific
Regional
Conference
In
Singapore
on
November
9,
2011
Prepared
by:
Al
Kwok
Founder,
GD-­‐HK
InternaRonal
Science
Park
Alliance
Ltd.
Founder,
China
InternaRonal
Intellectual
Property
Services
Ltd.
Governor
&
Co-­‐founder,
Savantas
Policy
InsRtute
Former
VP
&
CIPO,
NetLogic
Microsystems
( NETL )
Guangdong-­‐Hong
Kong
(Guangzhou
Nansha)
Science
Park
Investment
Services
Ltd.
1

2. Outline
 Background
of
Speaker
 Global
Trends
 China
SituaRon:
 Challenges
&
OpportuniRes
 Business
Model
and
Process
 Business
Ecosystem
 CIIPS’
Efforts
Guangdong-­‐Hong
Kong
(Guangzhou
Nansha)
Science
Park
Investment
Services
Ltd.
2

3. Author s
IP
Business
Background
 New
paradigm:
IP
are
crown
jewels
for
knowledge-­‐based
companies
 Joined
Quality
Semi.
Inc.
in
1989
as
a
member
of
its
founding
team
licensing
&
transferring
CMOS
technology
&
products
to
Japanese
fab
(Foundry)
partners
 Executed
IP
license
business
model,
transferring
engineering
know-­‐how
to
licensee
partners
and
bringing
up
foundry
capability
&
capacity
within
a
year
 Joined
PMC-­‐Flash
in
1996
(as
VP
&
CIPO)
to
start
the
IP
license
business
 Took
advantages
of
PMOS
flash
for
embedded
NVM
in
SOC
design
 Managed
patent
poraolio
generaRon
for
comprehensive
IP
protecRon
 Secured
license
(&
ODM)
agreements
with
top-­‐Rer
Japanese
firms
(>US$10M)
 Joined
NMI
( NETL )
in
1998
(as
VP
&
CIPO)
to
iniRate
IP
poraolio
dev.
program
 Set
up
a
system
to
ensure
con7nuous
innova7on
&
IP
genera7on
 Set
up
top-­‐management
patent
commieee,
and
patent
generaRon
and
reward
programs
 Promoted
and
implemented
patent
programs
to
all
engineering
staff
 Building
an
impressive
patent
porHolio
since
1998
 In-­‐house
patent
aeorney
to
manage
IP
creaRon/development
 Enabling
conRnuous
cugng-­‐edge
product
developments
including
knowledge-­‐
based
processors
and
NETL7
(Layer
7
switching)
 CreaRng
significant
entry
barriers
against
compeRRons
 Ensuring
NMI’s
long-­‐term
leadership
and
profitability
in
NSE
market
Guangdong-­‐Hong
Kong
(Guangzhou
Nansha)
Science
Park
Investment
Services
Ltd.
3

4. Global
IP
Commercializa7on
Trends
Guangdong-­‐Hong
Kong
(Guangzhou
Nansha)
Science
Park
Investment
Services
Ltd.
4

5. Knowledge-­‐based
Economic
Trend
Evolution of Intangible Assets – U.S. Companies
Guangdong-­‐Hong
Kong
(Guangzhou
Nansha)
Science
Park
Investment
Services
Ltd.
5

6. Global IP Market Trend
 Past:
 TradiRonally
patents
regarded
as
internal
assets
and
parts
of
trade
secrets
 Cross-­‐licensing
as
a
means
to
avoid
infringement
lawsuits
and
speed
up
product/market
development
 Trendsegng:
 In
early
1990s,
IBM
started
patent
licensing
and
selling
 Over
the
years,
the
global
market
for
patent
trading
and
licensing
has
taken
shape
 Now:
 IBM
now
makes
US$1.5B
per
year
from
their
patents
 Patent
trade
is
a
mulR-­‐billion
dollar
market
 Various
IP
transacRons
(incl.
M&A)
at
hundreds
of
billions
 Nortel
for
$4.5B,
NetLogic
for
$3.7B,
Motorola
Mobility
for
$12.5B
Guangdong-­‐Hong
Kong
(Guangzhou
Nansha)
Science
Park
Investment
Services
Ltd.
6

7. Drivers for IP Commercialization
 Semiconductor
(Moore’s
Law)
&
IT
(Metcalfe’s
Law)
RevoluRons
triggered
Business
Model
Changes
 Shortened
Product
Lifecycles
induce
tech
transfers
to
speed
up
R&D
 GlobalizaRon
of
Business
CompeRRon
in
last
50
years
 Time-­‐to-­‐market
–
means
greater
profit
 Customer
demands
for
complete
turn-­‐key
system-­‐level
soluRons
 Increasing
product
complexity
–
IP
acquisiRons
to
fill
know-­‐how
gaps
 Global
CollaboraRve
InnovaRon
–
both
in-­‐house
&
outside
 Open
InnovaRon
Trend
–
a
form
of
CollaboraRve
InnovaRon
 Independent
innovaRon
and
cooperaRon/sourcing
IP
in
parallel.
 Professional
Service
Ecosystem
for
IP
transacRons
becomes
complete
 Patent
applicaRon,
lP
consultancy,
mediaRon
&
liRgaRon,
patent
development
and
planning,
patent
evaluaRon,
patent
monetarizaRon
and
patent
investment.
Guangdong-­‐Hong
Kong
(Guangzhou
Nansha)
Science
Park
Investment
Services
Ltd.
7

8. Raising
Values
of
a
Product
(IP
is
the
Core)
•
=
给 户
=>
Price
=
Values
to
Customers
=
+ 务+IP 权+
( = 给 户 )
• Pre-­‐sale
services
mean
design-­‐win
efforts
providing
soluRons
to
address
customers’
problems
Brand
RecogniRon
• This
is
the
best
sources
of
innovaRon
( 认 ) and
ideas
for
the
next-­‐generaRon
products
• Post-­‐sale
services
mean
reducing
)
Embedded
IP
Licensing
customers’
costs
of
ownership,
(隐 IP 权) extending
the
useful
lifeRme
of
the
product,
generaRng
recurring
sales
Increasing Values (
• Embedded
IP
licensing
means
the
Pre-­‐
&
Post-­‐Sale
Services
customers
can
use
the
product
IP
for
( 务) their
own
product
upliping
&
differenRaRons
-­‐
e.g.,
“Intel
Inside”
• Brand
recogniRon
means
the
Manufacturing
Cost
customers
recognize
the
product
and
( 产 ) its
maker
for
superb
quality,
performance,
reliability
&
services
Guangdong-­‐Hong
Kong
(Guangzhou
Nansha)
Science
Park
Investment
Services
Ltd.
8

9. China
Situa7on:
Challenges
&
Opportuni7es
Guangdong-­‐Hong
Kong
(Guangzhou
Nansha)
Science
Park
Investment
Services
Ltd.
9

10. Stage
of
Enterprise
Development:
China
vs.
US
Human Primary
Stage of Key asset / Domain Scalability
resource capital
development value driver knowledge factor
development sources
Family- Hands-on
Agriculture Farmland Family Copy
recipe training
Factory- Low-cost Task Hands-on Family & Counterfeit &
cluster era labor oriented training friends clone
Industrial Automated Techno- Traditional Industrial
Profit-driven
mass-prod. logical investors, Standards,
era training
technology oriented govt. prog. trade assoc.
Business (Business) On-job VC, Professional
Post-industrial
services/ Process professional Institution Standards, IP
era know-how oriented development & license
investors
Knowledge Open
Business Integrated Learning Knowledge
based source
intelligence system ecosystem sharing
economy platform
On
average,
US
SMEs
are
at
Post-­‐industrial
stage
of
development,
whereas
the
majority
of
China
SMEs
are
at
Factory-­‐cluster
stage
of
development.
Guangdong-­‐Hong
Kong
(Guangzhou
Nansha)
Science
Park
Investment
Services
Ltd.
10

11. IP Deficit Crisis – Case Studies
China
has
made
significant
progress
in
the
past
10
on
IP
development
and
protecRon.
Yet,
it
sRll
has
a
big
gap
to
close.
Case
1:
DVD
players
manufactured
in
China
 Price:
US$32
 Profit
to
the
Chinese
manufacturer:
US$1
 Royalty
paid
to
the
IP
owners:
US$20
 Lack
of
IP
means
making
money
for
others.
Chinese
industry
development
cannot
be
self-­‐determined
Case
2:
An
LED
company
in
Guangdong
 Before
IPO,
patent
infringement
lawsuit
from
abroad.
 Signed
a
license
agreement
to
avoid
bad
publicity
 Went
on
with
the
IPO
 Chinese
investors
are
paying
a
heavy
price
Guangdong-­‐Hong
Kong
(Guangzhou
Nansha)
Science
Park
Investment
Services
Ltd.
11

12. Lacking International IP Strategies
 Products
confiscated
for
IP
infringement
at
exhibiRons
abroad.
 Brand
companies
sued
for
IP
infringement
before
product
launch
abroad
 China’s
enterprises
file
many
domesRc
and
internaRonal
patent
applicaRons
while
lack
strategic
roadmaps
for
product
&
technology
developments
 Lack
proficiency
in
patent
legal
&
claim
structure.
NegaRvely
impact
enforceability
and
value
 New
to
the
internaRonal
IP
market,
lack
appropriate
IP
pooling
as
bargain
chips
 In
a
vulnerable
posiRon
in
negoRaRng
IP
license
fees
or
infringement
seelements
 Overseas
organizaRons
are
vigorously
applying
for
China
patents
and
buying
up
China
patents
at
low
prices,
which
can
greatly
influence
China’s
industry
development
Guangdong-­‐Hong
Kong
(Guangzhou
Nansha)
Science
Park
Investment
Services
Ltd.
12

13. Challenges of IP Commercialization
 China’s
global
enterprises
want
to
strengthen
their
IP
poraolio
by
acquiring
internaRonal
patents
for
global
market
expansion
 Lost
opportuniRes
due
to
lacking
professional
experience,
inadequate
IP
evaluaRon
tools
and
indecisiveness
through
management
layers
in
the
decision-­‐chain
 The
exisRng
domesRc
IP
trading
centers,
focused
on
Chinese
patents
and
lack
supporRng
professional
services.
 Cannot
sustain
the
IP
commercializaRon
profitable
and
unable
to
meet
internaRonal
standard
pracRces
 The
value
of
China’s
enterprises
are
mainly
from
tangible
assets.
The
financial
sector
lacks
an
objecRve,
effecRve
and
internaRonally
accepted
evaluaRon
metrics
and
system
on
intangible
assets
 It’s
difficult
to
realize
the
capitalizaRon
of
intangible
assets
Guangdong-­‐Hong
Kong
(Guangzhou
Nansha)
Science
Park
Investment
Services
Ltd.
13

14. IP
Business
Models,
Processes
&
Ecosystems
Guangdong-­‐Hong
Kong
(Guangzhou
Nansha)
Science
Park
Investment
Services
Ltd.
14

15. Cri7cal
Success
Factors
for
IP
Trading
 Trust
 Buyer/Seller:
Win-­‐win,
bonding
collaboraRon…
 Infrastructure:
Escrow,
3rd-­‐party
facilitators…
 Legal
framework:
Common
Law,
arbitraRon…
 Assurance:
Going
aper
the
infringer,
indemnificaRon…
 Confiden7ality
 Privacy
(non-­‐disclosure)
-­‐
“not
open
bidding”
 Professional
brokerage
–
accountable
SERVICES
 (“Product”)
Quality
 Enforceability,
claim
strength
(scope
&
integrity)
 Enabling
–
can
realize
the
ProducRzaRon
Goals
Guangdong-­‐Hong
Kong
(Guangzhou
Nansha)
Science
Park
Investment
Services
Ltd.
15

16. IP
Commercializa7on
Varie7es
 IP
ProducRzaRon
(产 )
-­‐
construcRve
use
of
IP
 IP
Licensing
( 识产权 权)
 Must
have
adequate
technical
capabiliRes
to
use
the
licensed
IP
effecRvely
 Tech
Transfer
( 术转 )
 IP
Licensing
+
know-­‐how
transfer
 IP
AcquisiRon
( 识产权 购)
 IP
ownership
+
related
intangible
assets
(like
design
work,
schemaRcs,
source
codes…)
 Tech
company
M&A
( 业 购)
 IP
AcquisiRon
+
business
(customers,
products,
tools
&
factory)
+
technical
staff
&
management
team
 Intangible
Asset
as
Loan
Collateral
( 资产 为贷 )
-­‐
construcRve
use
of
IP
 The
lender
will
hold
the
ownership
of
some
qualified
( 认证 )
intangible
asset
as
loan
collateral
-­‐
IP
valuaRon
know-­‐how
is
crucial
 IP
Pooling
( 识产权 )
-­‐
construcRve
use
of
IP
 Pool
IP
poraolios
together
for
knowledge
sharing
to
uplip
the
whole
industry
or
strengthening
the
defense
against
infringement
lawsuits
 IP
purchased
as
an
Investment
(but
not
used
for
product
development)
 To
cash
out
later
for
a
profit
if
the
market
matures
in
favor
of
the
purchased
IP
 CIIPS
is
against
any
selfish
use
of
IP
as
inhibitor
or
blackmail
by
Non-­‐PracRcing
EnRRes
(NPE)
or
patent
trolls
Guangdong-­‐Hong
Kong
(Guangzhou
Nansha)
Science
Park
Investment
Services
Ltd.
16

17. Global IP Market Players
 Enterprises
 Licensors,
licensees,
buyers
and
sellers
 UniversiRes
&
research
insRtutes
 Trading
agents—brokers
 Professional
services
providers
 Legal
consultancy
services,
liRgaRon
law
firms,
patent
evaluaRon
and
sopware
tool
plaaorms
etc.
 IP
Investors:
 Private
equity
companies,
patent
investment
fund
 Non
pracRcing
enRRes
(NPE)
 Engaging
in
patent
trading/licensing
in
order
to
make
profit
by
patent
liRgaRons
Guangdong-­‐Hong
Kong
(Guangzhou
Nansha)
Science
Park
Investment
Services
Ltd.
17

18. Guiding
Principles
for
the
Ecosystem
 Sincere
win-­‐win
proposiRon
between
the
trading
parRes
 Full
disclosure
reduces
risk
for
swip
producRzaRon
of
licensed
IP
 Absolutely
no
conflict
of
interest
 SeparaRon
of
roles
for
rule
segng
(overseer),
execuRon
(trading
parRcipants
and
enablers)
and
arbitraRon
(arbiters)
 No
mixed
roles
(in
a
case)
are
allowed
to
avoid
conflict
of
interest
 Adequate
check
and
balance
 Proper
balance
of
the
interests
of
trading
parRes
 3rd
party
enablers
to
check
for
abiliRes
and
monitor
the
efforts
by
the
trading
parRes
to
honor
the
deal
and
respecRve
obligaRons.
 Transparency
(verificaRon
by
independent
3rd
parRes)
 Full
disclosure
for
IP
lisRng
(like
IPO
prospectus)
by
the
IP
seller
and
full
disclosure
on
IP
protecRon
capability
by
the
IP
buyer
 All
steps
in
the
process
are
auditable
with
supporRng
documents
by
independent
auditors
and/or
the
rule
segng
party.
 Must
add
value
at
each
process
step
 All
3rd
party
enablers
must
create
values
to
the
trading
parRes
and
ensure
quality
outcome
of
the
trading
Guangdong-­‐Hong
Kong
(Guangzhou
Nansha)
Science
Park
Investment
Services
Ltd.
18

19. IP
Trading
PlaHorm/Ecosystem
 Core
ParRcipants:
sellers,
buyers
and
enabling
3rd
parRes
 Value-­‐adding
enabling
3rd
parRes
to
facilitate
win-­‐win
outcomes
to
both
IP
seller
and
buyer
and
reduce
risk
 Instead
of
win-­‐lose
paradigm
without
the
3rd
parRes
 The
plaaorm
should
be
centered
on
risk
reducRon/management
 Full
disclosure
(similar
to
IPO
prospectus)
to
build
trust
and
eliminate
costly
misunderstanding
&
misjudgments
 Fair
assessment
of
the
IP
value
&
potenRal
 Fair
assessment
of
the
risk
and
liability
 Fair
comparison
to
similar/compeRng
IPs
 ImplementaRon
issues
for
the
buyer
to
effecRvely
use
the
IP
 Adequate
supports
from
the
seller
to
the
buyer
to
realize
the
buyer s
ROI
–
producRzaRon
of
the
licensed
IP
for
profit
sharing
 All
3rd
party
enablers
must
add
values
in
the
process
from
start
to
finish
for
the
seller
and
buyer
to
realize
their
respecRve
ROI,
and
collaborate
to
nurture
the
ecosystem
 Legal
agents
for
buyers
and
licensers,
technical
assessors,
IP
protecRon
auditors,
escrow
agents…
Guangdong-­‐Hong
Kong
(Guangzhou
Nansha)
Science
Park
Investment
Services
Ltd.
19

20. Best
IP
Business
Prac7ces
 Up-­‐front
proper
due
diligence
processes
 Government
regulaRon
discovery
process
 E.g.,
export/import
controls
and
restricRons
 Risk
assessment
and
management
 Guiding
technology
transfer
w/
proper
IP
protecRon
 E.g.,
IP
hardening
for
licensee
with
lesser
IP
protecRon
capability
 E.g.,
Trusted
third-­‐party
design
integrator
to
handle
sensiRve
IP
 Good
visibility
on
how
the
licensed
IP
will
be
used
 Technology
transfer
plan
and
milestones
 ProacRve
problem-­‐solving
 Lining
up
3rd-­‐party
enabling
supports
 Escrow
arrangement(s)
 Control
and
manage
legal
costs
(through
arbitraRon)
 Within
10%
of
the
license
cost
 Cap
indemnificaRon
exposure
(up
to
the
license
cost?!)
Guangdong-­‐Hong
Kong
(Guangzhou
Nansha)
Science
Park
Investment
Services
Ltd.
20

21. Technology
Transfer
 IP
transfer
is
like
organ
transplant/arRficial
implant
 Foreign
IP
will
be
embedded
into
the
host
product
like
a
foreign
organ
or
an
arRficial
device
implanted
into
the
recipient's
body
 CompaRbility
is
essenRal
to
avoid
body
rejecRon
 Necessary
proacRve
due
diligence
process,
planning
and
execuRon
to
ensure
success
 Pre-­‐transacRon
(pre-­‐operaRon)
 FuncRonality
(organ
or
device
type),
originality
(source),
quality
(health),
compaRbility
(blood
type,
allergy),
etc.
 The
required
transfer
procedural
review
(operaRon
planning)
 TransacRon
(transplant
or
implant
operaRon)
 Transfer
process
and
procedure
(transplant
the
organ
or
implant
the
device)
 Post-­‐transacRon
(post-­‐operaRon)
–
lasRng
over
2
years
 Field
data
gathering
(outpaRent
monitoring
&
check-­‐up)
Guangdong-­‐Hong
Kong
(Guangzhou
Nansha)
Science
Park
Investment
Services
Ltd.
21

22. CIIPS’
IP
Commercializa7on
Ecosystem-­‐building
Efforts
in
China
Guangdong-­‐Hong
Kong
(Guangzhou
Nansha)
Science
Park
Investment
Services
Ltd.
22

23. Ecosystem
Building
(for
Sustainability)
GD-­‐HKISP
as
the
host
organizaRon
CIIPS providing
Special-­‐
Overseas (Ecosystem policy
1C2S
support
IP Supplies;
Training, Builder)
Certification & Professional
Manpower
Workshops
Training, Supports
IP Demands Certification &
Management
Screened Certified
Enterprises Professional IP Agents
Services (IP Services)
(IP Demands)
Financial,
Legal
&
Technical
Service
CEC/EMCTC as
Provider
New Valued the Training/
Plaaorms
Service Demands cert. Partner
IP Trading Business Model for Scalability & Sustainable Growth
Guangdong-­‐Hong
Kong
(Guangzhou
Nansha)
Science
Park
Investment
Services
Ltd.
23

24. Sustainable
IP
Ecosystem
for
Buyers/Sellers
Users
Trading Platform Training
Patent Trading Strategic
IP Services
Tools Alliance
IP commercialization functionalities
IP resources and know-how’s
Tynax trading
CEC Expert Pool
platform (U.S.)
Other Service
Talent Pool
resources providers
11/2/11 Guangdong-­‐Hong
Kong
(Guangzhou
Nansha)
Science
Park
Investment
Services
Ltd.
CIIPS Confidential 24

25. CIIPS’
4-­‐Pronged
Approach
 IP
Trading
&
Brokerage
(on
Tynax
IP
Trading
Plaaorm)
 IP
Supply-­‐side:
Tynax
IP
Trading
Plaaorm
(>15K
items)
 IP
Demand-­‐side:
CEC’s
corporate
members
(>540,000)
 IP
Training
Programs
for
Registered
IP
Professionals
collaboraRng
with
China
Enterprise
ConfederaRon
(CEC)/
EMCTC
(www.cecedu.com/cwzj.asp?lbid=21)
 Principals:
IP
Manager,
Chief
IP
Officer
 Service
providers:
IP
Trade
Agent,
IP
Analyst…
 Social
network
for
trainees’
conRnuing
professional
developments
 Patent
AnalyRcs
System
(Tools)
 IP
landscape
mapping
 Patent
quality
evaluaRon
 IP
Professional
Services
 Serving
China
enterprise
clients
 Providing
back-­‐office
supports
to
overseas
clients
Guangdong-­‐Hong
Kong
(Guangzhou
Nansha)
Science
Park
Investment
Services
Ltd.
25

26. CIIPS
as
an
IP
Business
PlaHorm
in
GD-­‐HKISP
3
Industrial
value-­‐chain
developments
can
drive
IP
professional
service
business
• LogisRc
&
Supply-­‐chain
Management
Data
Special
• 3D
AnimaRon
ProducRon
&
ExhibiRon
Zone • Intelligent
City
&
Smart
System
Designs
• Professional
ICT
Services
Three
• Environment
Improvements
Industrial
• Low-­‐carbon
Footprint
Management
Eco-­‐Tech • New
Materials
&
Resource
Efficiency
Themes
• New
Business
Models:
Carbon-­‐Trade,
EMC
• Solar
Photovoltaic
New
• Tidal
Power
GeneraRon
Energies • Smart
Grid
&
Power
SCM
• Green
Building
,
Electric
Vehicle…
Strategic
Enabling
Pillar
PlaHorms
(All
Megatrend
Game-­‐Changers)
IP
ProtecRon
Data
Security
&
Carbon
ReducRon
&
Sharing Privacy
ProtecRon
&
Credit
Trade
Guangdong-­‐Hong
Kong
(Guangzhou
Nansha)
Science
Park
Investment
Services
Ltd.
26

27. Addressing
China’s
IP
Prof.
Service
Needs
 IP landscape mapping  Strategic IP pooling
 Innovation/product/technology  World-class international IP legal
roadmaps team
Long-­‐term
 IP acquisition (strategic)  Cross-license negotiation
 Collaborative innovation  Long-term technology roadmap
 Corporate culture for a learning for industrial standardization
organization
 IP protection assessment  Supply-chain IP landscape
 Counter-measures against IP mapping (per industrial sector)
infringement lawsuits Supply-chain IP protection
Immediate

 Patent quality improvement assessment (per sector)
 IP portfolio development  IP licensing/trading
 IP acquisition (tactical)  Defensive IP pooling
 Effective innovation
Individual
Company
Global/Plaaorm
Guangdong-­‐Hong
Kong
(Guangzhou
Nansha)
Science
Park
Investment
Services
Ltd.
27

28. Hong
Kong’s
Role
on
GD-­‐HK
CEPA
IP
PlaHorm
 Provide
Common
Law
plaaorm
for
IP
transacRon
 One-­‐Country-­‐Two-­‐Systems’
“Offshore
Extension”
into
CEPA
Special-­‐policy
Pilot
Zone
at
Nansha,
Guangzhou
 World
recognized
arbitraRon
process
 HKIAC
as
an
example
(www.hkiac.org)
 Awards
enforceable
in
many
(~140)
regions,
including
China
&
Taiwan
 Easy
access
to
enabling
third
parRes
 Local
pool
of
technical
and
legal
experRse
and
efficient
support
services
 Financial
and
IP
Escrow
Services
Guangdong-­‐Hong
Kong
(Guangzhou
Nansha)
Science
Park
Investment
Services
Ltd.
28

29. Thank
You
Very
Much
For
Your
AeenRon!
al.kwok@ns-­‐isp.org
Guangdong-­‐Hong
Kong
(Guangzhou
Nansha)
Science
Park
Investment
Services
Ltd.
29