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LES-Singapore Presentation 11 11-09(f)
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