Transcript The IP Secondary Market Initiative

Taskforce Summit
on
IP Value Extraction &
Corporate Valuation
(Part 2)
Highlights
from the
Taskforce Work Session
to Develop the Standards & Protocols
for the
IP Secondary Market
Ford Global Technologies, Inc.
May 22-23,2003
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Property Management Taskforce
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CONTENTS
 This is a four part tutorial. The executive summary is
repeated on the first 3 slides in each presentation. You
may want to skip to page 6 to begin the new part.
PART 1: IP & Corporate Valuation – Defines how IP and
other intangibles affect corporate value.
PART 2: The IP Secondary Market Initiative – Defines how
the Taskforce is developing the means to bring IP into America’s
Capital Markets
PART 3: Taskforce Accelerated Licensing Program –
Describes How to get Cash for IP with two corporate analyses
PART 4: Overcoming the Obstacles – Defines Ways to
Overcome Objections by Your Corporate Colleagues
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Executive Summary
 The Taskforce Accelerated Licensing Transactions provide a
reliable vehicle to generate IP based revenues, profits and cash.
 The IP Secondary Market will create ready demand for IP and
stimulate improvements in the innovation process.
 The IP Secondary Market will establish & stabilize the valuation
process for IP.
 The obstacles to corporate use of IP backed transactions is the
internal capabilities and functioning among the various disciplines
within the enterprise…. And the apprehensions regarding the post
Sarbanes – Oxley environment ….. Something this Summit
expressly addressed and converted to meet IRS
concerns.
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Property Management Taskforce
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Executive Summary p2
 The ability to develop a set of commonly acceptable
standards for the valuation of IP and other intangible
assets becomes the foundation for defining corporate
and shareholder value.
 The SEC and FASB are looking to the Taskforce for help with
identifying key measures and metrics that link intangible assets
with performance.
 America and its companies must address the reporting
implications of the transition to a knowledge economy.
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The Linkages Among IP Backed
Transactions, Demand for IP and a
Secondary Market
1) The sale of selected portions of the IP Portfolio creates a supply of new product
for Wall Street investors who recognize the growing importance of value
extraction in the knowledge economy
2) The ability to repackage and resell these packets of IP based on risk and reward
creates a more specialized capability to manage and extract value from the IP.
3) The reliability of value standards and ratings of IP quality and credit worthiness
provide a framework for continuing demand for IP that can be openly traded in
America’s Capital Markets
Hence the need to begin trading IP in a safe arena-the Taskforce arena.
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PART 2 - Taskforce IP Secondary
Market Initiative
Putting IP into
America’s Capital
Markets
Discussion & Agenda
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Property Management Taskforce
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The IP2 Market Agenda
1) Define needs and interests of the Taskforce Member (IP Owners)
2) Provide guidance & protocols for IP based transactions
3) Develop qualification criteria and valuation standards
4) Support member IP backed transactions and secondary
transactions
5) Establish an open market for IP backed securities and trading
6) Put IP & intangible assets into the mainstream economy
7) Provide valuation methodologies to transactions, trading & capital
market growth
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Goal & Strategy Tactics
Goal:
Create a secondary market for IP backed assets
Strategy:
 Bring Corporate interest to using IP to create cash
 Bring Wall Street interest into understanding that
IP (with appropriate valuation standards) is as solid
as real property backed assets
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Tactics
1) Focus on cash deals
2) Develop internal enterprise capabilities
3) Develop external relationships to support deals
4) Develop valuation standards
5) Educate the regulatory community
6) Educate the market
7) Support governmental efforts to improve
measures and metrics in oversight policies
8) Help internal managers be more effective in using
IP & IA management practices
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Taskforce IP Secondary Market Initiative
Taskforce Work
Session
on the
IP Secondary Market
Program
Moderated by
William J. Coughlin
President, Ford Global Technologies
&
Taskforce Honorary Chair
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The Work Session
Problem: We have many sellers and few buyers. We
have no viable market place and little incentive to
buy.
Solution? Is a secondary market a viable solution for
this situation?
Definition: We are defining the secondary market as
converting cash flows from IP to a marketable
security.
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Key Questions
Framework for Discussion
1) What ways can the IP Secondary Market
add value?
2) Who are the players and what are their
roles?
3) What is the framework/structure?
4) What steps are needed to establish the
market?
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Addressing the Questions
1) Ways the IP2 Market Adds value
1) Distributes & transfers technologies
2) Bundles technologies for synergistic value
3) Manages litigation risk
4) Improves corporate liquidity
5) Improves internal management of IP &
innovation practices
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Addressing the Questions
2) Who are the Players?
1) Patent miners/Licensing execs
2) Standard Setters
3) Venture capital companies
4) Investment bankers
5) IP Owners/originators
6) Government regulators
7) Insurance companies
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Addressing the Questions
3) What is the Structure?
1) Market Need: Readiness and capability of the financial
community to engage in these transactions
2) Acceptable Standards for the Valuation
Process: Does this require GAAP Principles to be adopted
by FASB?
3) Definition of Underwriting Requirements
a) Claims management
b) File History Data Base
c) Quality Assurance/Regulatory Function
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Addressing the Questions
4) What are the Next Steps?
1) Define the Products
2) Educate the Market
3) Do Deals
4) Help Government Develop Pro Business
Policy
4) Recruit Influence Leaders to Help Implement
5) Strengthen the Value Proposition to the
Buyer
6) Build Support in the R & D Community
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Dr. Henning’s 4 Keys :
The IP Secondary Market Summary
1) The IP Secondary Market is viable and the Taskforce
support of IP backed transactions will help accelerate the
development of the market.
2) The Tax Issue has been defined so the Taskforce defined
transactions can be acceptable to IRS by emphasizing the
validity of the business purpose. Emphasize:
a)
b)
c)
d)
Real sale transactions (transfer of title & rights)
Patent validity
Contractual protections
Keep subsequent obligations clean & discrete
3) Keep IP commercial objectives at the center of the
transaction (This will create and sustain the secondary market.)
4) Work to develop Wall Street leaders to step up as market
makers.
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Contact Information
For more information, Please contact the Center for
Advanced Technologies 214/800-8810 or e-mail
[email protected]
The Center for Advanced Technologies is a non-profit
corporation committed to economic growth and
innovation through improved management processes,
technological innovation, executive education and
organization development.
The Center established the Taskforce in 1998 and serves as its
managing partner.
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