IP Strategy · Patents

How can I exploit a portfolio of patents?

Wolfgang Strigel Partner at Vancouver Expert Coaches

March 29th, 2015

A friend of mine is a university professor and has created about a dozen patents in robotics. For many of them he has built working prototypes in his lab. He he has attracted interest with several large companies. Most of the patents look very promising to me. His problem: he does not have time or inclination to run spin-outs himself. So he asked me to create a holding company (patent rights assigned to it) that would conduct market research and create spin-outs for the most promising ones. I have started and sold several companies myself but never managed this kind of situation.
My questions: is this the best way to exploit an IP portfolio or are there other ways towards commercialization? I assume we would need at least $100k to conduct market studies and get initial traction for a select subset. Would angels/VCs be interested to invest in such a venture?

Brad Bertoglio Attorney and Senior Executive

March 29th, 2015

Wolfang, I work with a company that is doing almost exactly what you are talking about.  It's not easy, but can be done.  It's not a typical investment scenario, especially for VC.  In our case, the founder was able to find a couple of super-angels that believed in the vision and team, to provide some funding at the holding company level.  One was a high net worth person who had just finished a successful career in the relevant industry segment and got excited by the potential for the new technology.  Another was the owner of a successful, established mid-size business with substantial discretionary cash flow and interest in alternative investments.

The holding company operates extremely leanly.  All key players' comp is significantly equity- or success-fee-based.  We use a lot of contractors, so we can carefully apply cash when and where needed.  The general strategy is to develop high-quality prototypes, as inexpensively as possible, while simultaneously building patent portfolios.  We then evaluate multiple monetization strategies, and select one based on the nature of the technology and potential use cases.  Sometimes we spend time on research to identify companies who we know would benefit from the innovation, develop a presentation on the technology, work to find the right people at each company, and offer a partnership or acquisition, where we are providing patents, development work and know-how, and potentially post-transaction engineering support.  This process is not unlike what a business broker might do marketing a business to strategic buyers.  In some circumstances, we might instead spin out a startup and try to drum up investor interest, not unlike any other startup.  And in some circumstances, we evaluate opportunities for pure patent licensing or patent sale, which is a whole other marketplace.  Each strategy has different tradeoffs in terms of necessary time investment, necessary financial investment and potential return.

Arnaud Cottet Senior Projects and Business Development Manager at SATT SE - Open Innovation - Intrapreneurship - Technology Scouting

March 29th, 2015

Hi,

First you need to figure out how strong are your patents. It is the very first thing that potential licensees will check. A quick list :
1) How old are your patents?
2) Where are they delivered ?
3) Are your patent linked together to form a grappe of patents?
4) What do say the search repport?
5) Have you done a research on WIPO to compare your patents with existing ones close to your inventions?

Knowing the landscape of your patents will help you in your market research. Doing a patentability resarch will tell you who are your potential partners or competitors.

Kushal Malhotra Contract Attorney (Patent Litigation) at Strategic Legal Solutions

March 29th, 2015

Wow - it sounds like you have a rich portfolio of potentially exploitable patents.  The first think you should do is get you patents valued - firms like Pellegrino & Associates, Noro IP, Markus Charles are just a few examples of valuation firms.

Then using that expert information, I'd go to robotics companies that you have friendly relations with.  If you don't have relations with any robotics companies, I'd approach patent troll companies and ask if they would be interested in acquiring rights to your patents.

Angels and VC are only interested in investing in big growth potential companies.  Generally they are not interested in investing in patents alone (without businesses behind them). 

Fred Schechter Designer TGiF Design & DS4 Design

March 29th, 2015

You note working prototypes along with the patents. That can be a vastly more valuable collection of assets with existing demonstration units.  As the others above note, valuing them in some way (identifying their status, noting overlap/prior art connections) will be useful.
The other step to think of is productization. Are these consumer product related, process related?  Do they need a direct link to a manufacturer to be truly monetized?  Think through how they would generate money in a method that isn't based in simply handing them off to someone who buys patents. Making a real product (which as you note you have prototypes of) will be a direct route to monetization. If crowdfunding a product from that is a fit, that could be a direction as well. I mainly comes down to what the patents are built to do and how much a of niche they carve out. Valuation will be useful, but actual business sales/use case operations will likely take you to true dollars faster if that is a direction the IP takes you.  

Wolfgang Strigel Partner at Vancouver Expert Coaches

March 29th, 2015

Thanks Fred, Kushal, and Arnaud, I should have mentioned that all of the patents have working prototypes. He has a lab with some 30 Ph.D. Students cranking out prototypes. The products are B2B or process oriented. Some manufacturers, warehouses, etc have already indicated interest. But that is spotty interest and that is why I believe market research is required to identify the best applications and market segments. We do not want to sell patents but spin out companies that productize units for specific markets. Since there are so many, we had the idea of a holding company that would get them to a point where a start-up can have a good business plan and raise money. My issue is how to raise money for the interim step in the holding company.

Kushal Malhotra Contract Attorney (Patent Litigation) at Strategic Legal Solutions

March 29th, 2015

Building prototypes are a great idea to prove proof of concept and begin getting your product off of the ground.

In the robotics field I would imagine that that would be an expensive and protracted process of trial and error with teams of scientists and engineers.  Of course if you have those kinds of reseources, that would be potentially better than valuing pieces of paper (i.e. patents)

 
Kushal Malhotra, Esq.
MS Biochemistry/MBA
(Bar ID: 4387502)
(USPTO Reg. No: 53261)
42 Bank Street, Apt 45
New York, NY 10014

Onikepe Adegbola, MD PhD

March 29th, 2015

I know at least one company that does that although the name escapes me at this time. In academia, there are a number of publications disclosing prototypes which never make it into commercialization for many reasons. Savvy investors in the space are interested in all of the above (value of patent and fto). In "hot" areas the patent field is so crowded it may be impossible to do much. Also how old are the patents? Has it been overtaken by new technology? The other issue you have to address is technical risk. Some prototypes are devices are just not commercializable for technical reasons - inability to manufacture cheaply at scale, for example.
Once you have put together a compelling case for the most promising patents, it should be much easier to raise angel money and you'll need lots of it :)

Arnaud Cottet Senior Projects and Business Development Manager at SATT SE - Open Innovation - Intrapreneurship - Technology Scouting

March 30th, 2015

Dear Wolfgang,

I am surprised that your friend, as a university professor, did not ask the Technology Transfer Office of his university. Maintaining a patent portfolio can be very expensive. Did your friend pay himself to fill the patents or he relied on university funds? 

Richard Pridham Investor, President & CEO at Retina Labs

March 30th, 2015

You can get in touch with the folks at TandemLaunch (www.tandemlaunch.com). They help accelerate commercialization of university initiated IP and research discoveries. 

Chris Carruth VP/Director. Strategy | Business Development | Operations | Product | Solutions

March 30th, 2015

Quick question..I assume the professor has a standing written agreement with the University on commercializing the patents and who actually owns the patents, especially since "free" student help is being used? I had a project requiring development and Universities were not interested as they did not take on products commercially unless they fell into certain sectors...and they retained ownership of any IP.