MAN 568 Entrepreneurship & Innovation

Management

WEEK-6, NOV. 5, 2021

INTELLECTUAL PROPERTY & PATENTS

Case: NORTEL (Northern Telecom)

 Course Schedule
Week Topic Case Speaker
Sept 24 Introduction, Basics -  
Oct 1 Sustaining vs. Disruptive Technologies Computing Industry  
Oct 8 Scope of Innovation Global Innovation
Oct 15 Product Development Automotive Industry
Oct 22 Innovation Ecosystem Silicon Valley
Nov 5 Intellectual Property & Patents NORTEL (Northern Telecom)
Nov 12 Financing of Innovation Google
Nov 19 Government Policy for Innovation Israel, the Start-up Nation
Nov 26 Science vs. Industry Nanotechnology & MEMS
Dec 3 Innovation in Telecommunications Nokia
Dec 10 Innovation in Pharma Biotechnology
Dec 17 Innovation in Aerospace & Defence General Atomics
Dec 24 Innovation in Business Formats Uber, AirBnb, PayPal, Pegasus
Business Case Presentations -  
Dec 29
 Case Study Groups
1 Surname Name 1st Case 2nd Case 3rd Case
1 Şenyiğit Berk Nov. 12 Google Dec. 24 Uber, Airbnb, Paypal, Pegasus
2 Alparslan Berk Nov. 12 Google Dec. 24 Uber, Airbnb, Paypal, Pegasus
3 Özkanlı İpek Nov. 12 Google Dec. 24 Uber, Airbnb, Paypal, Pegasus
2
4 Bademci Tuğçe Oct. 15 Automotive Industry Dec. 3 Nokia
5 Yamuk Onur Oct. 15 Automotive Industry Dec. 3 Nokia
6 Akay Sena Oct. 15 Automotive Industry Dec. 3 Nokia
3
7 Altıntepe Büşra Oct. 8 Global Innovation Nov. 5 Nortel
8 Ün Mert Oct. 8 Global Innovation Nov. 5 Nortel
9 Sipahi Bora Oct. 8 Global Innovation Nov. 5 Nortel
10 Yıldız Utku Oct. 8 Global Innovation Nov. 5 Nortel
4
11 Bostancı Burak Oct. 22 Silicon Valley Nov. 19 Israel the Startup Nation
12 Özköylü Beyza Oct. 22 Silicon Valley Nov. 19 Israel the Startup Nation
13 Uyanık Oğuzhan Oct. 22 Silicon Valley Nov. 19 Israel the Startup Nation
5
14 Akbulut Kaan Dec. 4 Biotechnology Dec. 11 General Atomics
15 İcik Elçin Dec. 4 Biotechnology Dec. 11 General Atomics
16 Pekel Ege Dec. 4 Biotechnology Dec. 11 General Atomics
This Week’s Case: NORTEL (Patents)
Key Questions
• Describe the company history of Northern Telecom.
• What caused the bankruptcy of Nortel?
• How did Nortel accumulate its patent portfolio?
• What is the significance of patents in the telecommunications
industry? What are the market dynamics of patents?
• What happened to the patent portfolio of NORTEL after bankruptcy?
• Which firms are best known for managing their patent portfolio for
financial gain? Quantify income from patents for these firms.
What is a Patent?*
• A patent grants the patent holder the exclusive right to exclude others from making, using, importing, and selling the
patented innovation for a limited period of time
• A design patent protects an article's design --its unique external appearance-- while a utility patent protects the article's
function. Utility patents also cover processes and chemical compounds. In some cases, an invention may qualify for
both design and utility patent protection
• The categories for patentable subject matter are broadly defined as any process, machine, manufacture, or composition
of matter, or improvement
• The five primary requirements for patentability are:
1. Patentable subject matter 2. Utility 3. Novelty 4. Nonobviousness 5. Enablement (i.e. specification)
• The laws of nature, physical phenomena, and abstract ideas are not patentable
• The term of protection for utility patents is twenty years from the date of filing, with extensions of up to five years
permitted for drugs, medical devices, and additives.  For design patents it is fourteen years
• Granting exclusive rights to the inventor is intended to encourage the investment of time and resources into the
development of new and useful discoveries.  Once the term of protection has ended, the patented innovation enters
the public domain
• Patents are a form of intellectual property. Like any other property right, it may be sold, licensed, assigned or
transferred
* Legal Information Institute, Cornell University Law School.
What is a Utility Model?*
• A utility model is an exclusive right granted for an invention, which allows the right
holder to prevent others from commercially using the protected invention, without his
authorization, for a limited period of time.
• A utility model is similar to a patent. They are sometimes referred to as «petty patents»
or «innovation patents.»
• Utility models are considered particularly suited for SMEs that make «minor»
improvements to , and adaptations of, existing products.
• Main differences from patents:
• The requirements for acquiring a utility model are less stringent.
• The term of protection is shorter and varies from country to country (usually between 7 and 10
years without the possibility of extension or renewal).
• Registration process is often significantly simpler and faster.
• Utility models are much cheaper to obtain and to maintain.

* World Intellectual Property Organization (WIPO).

What is not a Patent?
• Copyright: Copyright is a form of protection provided to the authors
of "original works of authorship" including literary, dramatic, musical,
artistic, and certain other intellectual works, both published and
unpublished.
• Trademark: A trademark is a word, name, symbol or device which is
used in trade with goods to indicate the source of the goods and to
distinguish them from the goods of others.
How is a Patent Protected?*
• A patent is a set of exclusive rights granted by a sovereign state.
• Patent protection is territorially limited.
• Patent application can be made on a «national» or «international» basis.
• In order to have multi-country patent protection:
• Direct Route: File separate patent applications in all of the countries that you want protection
• PCT Route: File an application under Patent Cooperation Treaty
• Once a patent has been issued, the patent owner may bring a lawsuit against
anyone accused of infringing the patent.
• The exhaustion doctrine entitles a patentee to a single royalty per patented device.
It prevents bringing an action against a third party purchaser after having already
received a royalty payment from the initial sale.

* World Intellectual Property Organization (WIPO).

Standard-Essential Patents (SEP)*
• Standards play a key role in many industries, primarily for safety,
efficiency and interoperability
• Standard Setting Organizations lead the development of standards in
their respective industries (e.g. ISO, ITU, ETSI, IEEE, …)
• Intellectual property (IP) owners seek to have their patents
incorporated into standards, to collect royalty revenues or to develop
a competitive edge through their familiarity with the technology
• To limit the monopoly power that they create, most SSOs require the
owners of patents covered by the standard to grant licenses on fair,
reasonable and nondiscriminatory (FRAND) terms to competitors
* Standard Essential Patents, Nov. 5, 2013, Josh Lerner, Jean Tirole, Harvard Business School Working Paper.
Cross Licensing
• Cross-licensing agreement is an agreement pursuant to which two or more license holders exchange licenses
so that each party may benefit from the other’s patent
• Generally, the patents that each party owns cover different essential aspects of a given commercial product.
Therefore, by cross licensing, each party maintains their freedom to bring the commercial product to market
• Pursuant to cross licensing, the party whose SEP portfolio contributes less value to the relevant standards
will pay the net-balancing royalty
• From the news wire:
• Waterloo, Ontario and San Jose, CA, June 23, 2015 – BlackBerry and Cisco today announced that they have entered into a
long-term patent cross-licensing agreement covering their respective products and technologies. As part of the cross-
licensing agreement, BlackBerry will receive a license fee from Cisco.
• Espoo, Finland, July 13, 2016 - Nokia and Samsung have agreed terms to expand their patent cross license agreement to
cover certain additional patent portfolios of both parties
• Cambridge, UK, October 13, 2016 - Kymab Limited, a leading human monoclonal antibody biopharmaceutical company,
and EpimAb Biotherapeutics, Inc., an emerging biopharmaceutical company specialising in bispecific antibodies,
announced a cross-licensing and development agreement to develop bispecific therapeutic antibodies against multiple
targets
Case Against Patents
• Basic idea behind the patent system is to protect and encourage
innovation
• However, according to a study* that termed the Patent Puzzle:
• There is no empirical evidence that they serve to increase innovation and
productivity
• Number of patents awarded has no correlation with productivity
• Instead patents may have negative consequences
• Competition and first-mover advantage are the main drivers of innovation
• Large innovations leading to a new industry seldom born out of patent
protection
• Instead, mature industries turn toward the legal protection
* The Case Against Patents, Federal Reserve of Bank of St. Louis, Michele Boldrin and David K. Levine.
Pros and Cons

Pros Cons
Legal right Disclosure requirements
Tradeable Costly to enforce
Buys time to build complementary assets Can be invented around
Provides temporary monopoly Could be too short
Slows competitors down Not everything can be patented
False sense of security
 Annual Global Patent Applications

Internet* & China

* The restrictions on carrying commercial traffic on Internet ended on April 30, 1995.
Total # of Patent Grants by Subject
(2013)*

* World Intellectual Property Organization (WIPO).

Fastest Growing # of Patents by
Technology (2003 – 2013)*
4x
5x

3.5x

3x

* World Intellectual Property Organization (WIPO).

Top US Patent Granted Companies
(2014)*

* Intellectual Property Owners Association (IPO).

Famous Patent Litigations Typical
Smartphone has
250,000 patented
features

Year Claimant Defender Infringement Subject Award / Settlement

1988 Apple Microsoft Graphic User Interface Dismissed
1988 Xerox Apple Graphic User Interface Dismissed
2003 SCO IBM & others UNIX code in LINUX Dismissed
2004 Integraph Intel Microchip Technology $300M + $225M
2006 NTP Blackberry Wireless Patents $615M + $53M
2007 Alcalel-Lucent Microsoft MP3 and MPEG $1.53B (reversed)
2007 i4i Microsoft XML Feature in MS Word $290M
2012 Apple vs. Samsung 50 Lawsuits Ongoing
2015 Wisconsin University Apple Computer Processing $234M
 Smartphone Technology Value Chain
Standards and technology Standard-developing Mobile operating system and
contributors (Qualcomm, Nokia, organizations (Bluetooth, Wi- software suppliers (iOS,
Ericsson, Huawei, ARM, MediaTek...) Fi, 3GPP, 4G LTE, H264, IEEE...) Android, Microsoft, Alphabet...)

Licensing of cellular
Lead firm / Smartphone brand Licensing of operating
technology or other
(Samsung, Apple, Huawei...) system and related patents
technology patents

Assembly contract or original design

Component suppliers Distributors - Retailers
manufacturer (Flex, Foxconn...)

Black Lines: Flow of parts and components.

Blue Lines: Licensing of technology and IP.
Cost of Patents in a Smartphone
Materials
Display 15-20%
Cost Build Processors 10-20%
Materials 20-25% Storage 5%
Distribution & Retail 15-20% Memory 5-10%
Other 20-25% Casing 10%
OEM Value Capture 35-45% Others 15-20%
Assembly 2%
Patent
10-20%
Licenses
Next Week’s Case: Google (Financing)
Key Questions
• Describe the company history of Google.
• What were the key stages of financing in the development of Google since the
early establishment?
• How did the financing stages and methods enable the growth of Google?
• At what stages and how did the early investors of Google exited their
investments?
• Discuss the role of employee stock options in the growth of Google.
• What is the value created by Google in market terms?
• What is the financing strategy that Google is following today?
Speaker: Prof. Erdem Başçı, TED
University
• Erdem Başçı has graduated from the Electrical and Electronics Engineering Department of the Middle East
Technical University in 1987 with high honours. He completed the M.B.A. program at Bilkent University
by ranking the first (1989). Having obtained his M.A. in Economics from Bilkent University (1990), Dr.
Başçı received his second M.A. degree in Economics from Johns Hopkins University (1993). He obtained
his Ph.D. in Economics from Bilkent University in 1995. 
• Between 1995 and 2003, he worked at Bilkent University, Economics Department, as an Assistant
Professor. He was promoted to the rank of Associate Professor in 1999 by the Higher Education
Council. Dr. Başçı has lectured at the University of York, UK as an honorary visiting fellow in 1999. 
• Dr. Başçı's academic papers have been published in many peer-reviewed journals including Oxford
Economic Papers, Journal of Banking and Finance, Journal of Economic Dynamics and Control, and
Journal of Mathematical Economics. He has co-authored various chapters in books published by Springer-
Verlag and Palgrave. Besides his theoretical contributions to the economic literature, Dr. Başçı has
academic publications on the Turkish economy as well. 
• Erdem Başçı has been appointed as Deputy Governor of the Central Bank of the Republic of Turkey on 9
October 2003.  He served as the Governor of the Central Bank from 19 April 2011 to 19 April 2016. Erdem
Başçı has also served as the Ambassador and Permanent Representative of Turkey to the OECD between
May 2016 and March 2021. 
• Following his eighteen years career at the Central Bank and the Turkish Ministry of Foreign Affairs, he was
appointed as full Professor of Economics by TED University in 2021. Monetary economics, financial
economics, macroeconomic theory, mathematical economics and sustainable development are his research
and teaching areas.