NEW ECONOMICS OF INVENTION AND INTELLECTUAL PROPERTY PART I A RADICAL DISRUPTION European Commission 17 th October 2013 Patrick Terroir, general manager, CDC Propriété Intellectuelle Email : pterroir@noos.fr patrick.terroir@caissedesdepots.fr Internet : www.innovation-economie.com
CONTEXT : THE KNOWLEDGE TRANSFER STRATEGIC PARTNERSHIP Signed in Rome - 16 June 2010 • • Creation of joint Working Group between: EIF/EIB • Caisse des Dépôts et Consignations (CDC – France) • Cassa depositi et Prestiti (CDP – Italy) • Centro para el Desarrollo Tecnológico e Industrial (CDTI - Spain) • • Innovationsbron (Sweden) • KfW-Bankengruppe (Germany) • Veraventures (Finland) • AWS (Austria) • Scottish entreprises • Aim of like-minded Partners with Long Term perspective is to: Support the emergence of European and national Knowledge Transfer Infrastructures • Accelerate transfer of European research and technology to the market • • Facilitate a well functioning Knowledge Transfer and Intellectual Property economy • Encourage more open and transparent marketplaces for Intellectual Property • Exchange best practices and potentially to analyse investment opportunities jointly
WHY CDC ? Caisse des dépôts (CDC) is a public-owned holding company that makes long-term investments in pursuit of public policy objectives, economic general interest and to foster economic development e.g. CDC invest mostly in economic and social infrastructures. Since 2000 CDC take several initiatives to support competitiveness and innovation: venture capital fund of funds, digital infrastructure, industrial competitive cluster, alternative energy… Creation of two patent economy subsidiaries in 2010 : France Brevets, CDC PI
THE PROBLEMATIC The aim of patent system is to reconcile private interest with collective interest by accepting privatization of knowledge (IPR) to reward and encourage innovation which in turn benefits the whole society, in particular through diffusion of knowledge. But many evidences show that it this delicate balance is threaten by the transformation of invention landscape and by the absence of a new system of IPR framework adapted to this transformation, but also by some misuses of IPR. So the question now asked to the world community is how to put in place a renewed legal and economic infrastructure for invention diffusion that match the challenge of the economy of knowledge for the 21 st century.
THE CHALLENGE : TRANSFORMATION OF PATENT FRAMEWORK From a protection net and a legal redress Toward a technology transfer instrument and a valuation and transaction asset
AGENDA • Necessity for a real market for patents and licensing is no longer challenged • What must be the goals to be reached ? • Projects and experiments are surging but in narrow territories • Proposal for a new framework and new tools : EPLF • Introducing the new system : the constraint of a pilot project, the eventuality of European initiative and support
THE NEEDS FOR DIFFUSION AND EXCHANGE IN INVENTION PLANET • Explosion of inventive capacities all over the world • Innovations are now the result of aggregation of inventions (the Key Enabling Technologies) • Innovation applications of an invention could be diverse and enterprises don’t develop all inventions they produce • H igh volume of “ unused patents ” meaning exchange potential are obvious reasons to diffuse inventions in the whole economy, offer possibility to match supply and demand of inventions, facilitate the acquisition and licensing of IPR.
CITATIONS : “ Knowledge has become the most important factor in economic life. It is the chief ingredient of what we buy and sell, the raw material with which we work. Intellectual capital – not natural resources, machinery or even financial capital – has become the one indispensable asset of corporations,” “Intellectual capital is useful knowledge that is packaged for others. » « Structural capital is knowledge that doesn’t go home at night”. (T.A. Stewart, Intellectual capital, The wealth of konwledge) “Facilitating the mobilisation, sharing, or exchange of patents is increasingly important to promote innovation in this globalised and well-networked world, where the circulation of ideas and technologies is essential to innovation. In the context of open innovation, patents are expected to play a role as a means for transferring ideas and technologies from one entity to another”( Guellec, Yanagishawa, OCDE, 2009)
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TRANSFORMATION OF INNOVATION PROCESS “ Technology has become so complex that it is impossible for a single business to be the source of every invention that comprises a single product” (THE EVOLVING IPMARKET PLACE, Federal Trade Commission report,2011)
INNOVATIONS RESULTS OF COMBINATION OF KEY TECHNOLOGIES INVENTIONS Source : HLG report on KETs, EC
PATENT COMMERCE IS BOOMING • Patent licensing is officially raising • Different surveys shows that the patent commerce increase • Spectacular transactions have also modified the vision the value of patents • But this « market » is reserved or for cross licensing or for big companies – or for doubtful operations
INCREASING PATENT LICENSING
In WIPO 2011, report
SOME SPECTACULAR TRANSACTIONS : THE PIT OF THE ICEBERG 4,5 Bn$, : Acquisition of Nortel – bankrupted- patent portfolio by a consortium of IT firms June 2011 12,6 Bn$ : acquisition of a Motorola patent portfolio by Google September 2011 Expert : “The secondary marketplace for patent sales is likely to grow at a compounded rate of 20% to 30% or more a year for the next few years »
BUT ESSENTIAL ECONOMIC FUNCTIONS ARE MISSING • The market for patents is fragmented and still forming. No systematic information is available, • Generally speaking, it is not possible to know if a patent is up for sale or opened to being licensed, • Understanding under what procedures and under what conditions a patent can be acquired or licensed is difficult, • Information on actual patent possession does not exist because patent transfer are not required to be registered. Thus it is impossible to know who holds a patent at any given point in time, • Similarly, there is neither a register for patent licenses granted nor on the conditions for these licenses .
UNCERTAINTY AND INSECURITY PREVAIL • There is no recognized valid method for the assessment of patent “quality,” both from a legal perspective as well as in regards to industrial use. The assessment rests strictly on individual expertise that generally does not give any commitment on its validity. Valid patents are not easily identifiable, since patents are only filed in certain countries and it is difficult to know for sure if the maintenance payments have been made • The exact content of the transferred rights when transferring or licensing is ambiguous. This is because it is nearly impossible for a seller to guarantee the absolute validity of the patent (especially since the transfer of patents often happens on portfolios or groups of patents), the absence of litigation, or the nature of the encumbrances on the patents – notably when the patents were the subject of a previous transaction, and when the seller is not the first owner). • The matter of representations and warranties (given and received) is thus an essential concern of every transaction concerning patents. The lack of standardized and valid contractual clauses, the high costs of legal counsel, and the fragmented nature of the procedural aspects makes each transaction a very long and costly process that is only accessible to the largest actors.
SOME PARADOXES OF KNOWLEDGE ECONOMY • In a knowledge economy all innovative ideas are supposed to be treated according to their utility, but the situation is in fact rather unequal and depend on the financial means of companies, a variable that has no link with innovation . • The private monopoly conferred on the filer by a patent had its counterpart in the publication of information and diffusion through license of the invention. In practice buyers and sellers of intellectual property rights (sale or licensing) must conduct lengthy and uncertain appraisals, engage in difficult research, and pursue lengthy negotiations, all of which are very costly. • Despite the organizational systems implemented by every country, intellectual property rights, that have been subject to long assessments by patent offices, turned out in fact to be very fragile and of little use.
THE INEFFICIENT PATENT MARKET, AS DEMONSTRATED BY THE AVERAGE BROKERAGE COMMISSIONS (US) SOURCES: ITG, REAL TRENDS, CDC GROUP 100,0% 25% 10,0% 5,3% 1,0% 0,19% 0,1% 0,06% 0,0% Large cap Small cap Residential real Patents equities equities estate
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