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Intellectual Property Rights

Group 10 (2012-14) Ruchi Singh PGDM IB (51) Sahil Sinha PGDM IB (52) Saurabh Suman PGDM M (152) Priyanka Singh PGDM M (150) Kushal Tiwari PGDM M (155) Krutika Jhaveri PGDM RM

Introduction Trends in IPR IPR and VC

Case Study

Intellectual Property Rights

Intellectual property rights are the rights given to persons over the creations of their minds. They usually give the creator an exclusive right over the use of his/her creation for a certain period of time. Under intellectual property law, owners are granted certain exclusive rights to a variety of intangible assets Modern usage of the term intellectual property goes back at least as far as 1867 with the founding of the North German Confederation The World Intellectual Property Organization (WIPO) is one of the 17 specialized agencies of the United Nations which currently has 186 member states, administers 26 international treaties

Why IPR?

Financial Incentives

Economic Growth


Patent or Utility Model - A patent grants an inventor exclusive rights to make, use, sell, and import an invention for a limited period of time Copyright - A copyright gives the creator exclusive rights to a wide range of creative, intellectual, or artistic forms, or "works Industrial Design Rights - An industrial design consists of the creation of a shape, configuration or composition of pattern or color, or combination of pattern and color in three dimensional form containing aesthetic value Trademark - A trademark is a recognizable sign, design or expression which identifies products or services of a particular source from those of others. Trade Dress - Trade dress is a legal term of art that generally refers to characteristics of the visual appearance of a product or its packaging (or even the design of a building) that signify the source of the product to consumers.

Global trends in IPR

Each year, WIPO ( World Intellectual Property Org. ) conducts a survey of approximately 150 national and regional intellectual property (IP) offices around the globe to collect statistics on filing activity for trademarks, patents, industrial designs and utility models

Applications based on geography

Application based on Income Levels

IP and VC
Two important aspects related to any technological innovation Evaluation of the technology of the start up company IP which refers to how much the technology is legally protected . Importance of the IP assets

IP assets are the only significant legal assets possessed by early stage companies . These assets provide tools to mitigate business risks to future growth and in, some cases to, create future business opportunities. e.g. :The exclusive rights provided by patent address the business risk of third parties (i.e. the competition) commercializing the technology under development The business plans presented to VC firms investing in high technology areas frequently contain a section entirely dedicated to Intellectual Property.

IP Due Diligence
VC firms typically engage an IP professional to conduct the IP evaluation of a start-up, an effort commonly referred to as IP due diligence. The analysis consists of two stages : First Tier Analyses 1) Evaluating Product Potential 2) Evaluating Market Potential 3) Evaluating management and other personnel for leadership and other skills Second Tier Analyses : IP Evaluation Before incurring the costs associated with IP due diligence, usually theVC firm has previously conducted the first-tier analyses. The start-up will have generally passed those tests to move on to the next stage

IP Due Diligence
More of a qualitative analysis ,including instead assessments of how much the start ups IP will help or hinder the execution of the business plan To determine the potential for any IP related disputes or conflicts ,which may also impede progress under the business plan

Three major areas of IP due diligence IP Agreements :Scrutiny of the business terms of each agreement like license agreements ,employment and consulting agreements . IP Filings :VC firms also want to look at distinct steps taken or will be taken to protect the IP through legal filings e.g. filing patent applications, registering trademarks IP Disputes : The goal is to confirm the absence of any blocking patents i.e the patents that would be infringed by the start up .

IP Disconnect
An IP disconnect between first tier and second tier analysis may impair the VC firms ability to screen for unwise investments

Potential for IP disconnect in the three areas IP agreement disconnect IP Filing disconnect IP disputes disconnect

The IP Agreement Disconnect

What IP the license covers ? Description of the scope in terms of X or Y technology Which products are covered under that IP ?

May result in incorrect royalty calculations. the start-up may have multiple products, not all of which require a royalty payment. The disconnect then leads the VC firm to overestimate the future royalty obligations.

IP Filing Disconnect
Should not be restricted to mechanistic procedure of checking whether the company has dutifully followed patent office procedures
The claims of each patent need to be analyzed with all of the product information gathered by to understand and assess the value of the IP filings. Analysis to find out if the patents are directed to inventions relevant to the product development plan.

IP Dispute Disconnect
The objective of the VC firm to hear that no blocking patent is found that prevents the execution of the business plan. But often what IP Professionals provide are conclusions relating to patentability of the start ups core technology . Why? The individual performing the search is typically the same person performing other aspects of the IP due diligence such as evaluating the patent portfolio .As a result the individual becomes well versed in the technology .But the core technology is only one of many things that product will use. Other aspects of the product should be analyzed to identify for the disputes.

Common IPR Mistakes during VC Due Diligence

Too late to start filing patent applications Too narrow legal scope of claiming patentable inventions Internally mismanaged patent infringement willfulness' exposure Inadvertently tainting IPR with 3rd party co-ownership rights

Underestimating the importance of trade secrets & confidentiality

Higher % of venture capitalists back companies that have patent portfolios as opposed to those who have no IPR assets IP position may not guarantee a start-up co. to be successful but it is going to find it a whole lot harder to succeed if it does not have one

Intellectual Property is becoming the new venture capital Patents have evolved from being a form of legal redress into a business model E.g. Kodaks attempts to emerge from bankruptcy by selling its large and rich patent portfolio which is considered core to digital photography