How can Paul Allen Help a Billion People?

A couple of days ago we were invited to the graduation ceremony of Singularity University (SU), a Google-Autodesk interdisciplinary program operating out of the NASA Ames base in Mountain View, CA (at the heart of Silicon Valley). SU’s mission is:”to educate and inspire leaders to understand and facilitate the development of exponentially advancing technologies in order to address humanity’s grand challenges.”

This is SU’s second year running their summer program, attracting 80 students from 35 different countries. This year’s students spent the majority of the 10 week program dealing with the mission of creating a project that could positively impact the lives of a billion people in 10 years, by leveraging exponentially advancing technologies. Teams presented a host of business plans, in five project areas: Upcycle, Water, Energy, Food and Space. The project resulted in an incredible array of innovative ideas: from a company addressing the world’s hunger problems that would allow you to grow a tomato in your own kitchen overnight, to a company that addressing the world’s recycling problems by “upcycling” materials, in the same way that a nature’s food chain deals with waste. At the heart of all of these ideas lies a powerful concept of harnessing technologies that already exist (or that may be specifically developed in the future) and using them in a new and creative way to improve the lives of a billion people. That was the main and primary goal of each of the ventures created by the graduates.
We came out of that event truly awed and inspired…such a refreshing concept, reminding all of us why technologies are developed in the first place.It was ironic, then, that on the same day, I came home and read a WSJ story about Paul Allen, the billionaire co-founder of Microsoft, suing a host of companies over four patents:

A firm run by Microsoft co-founder Paul Allen is suing Apple, Google and 9 other companies alleging they are violating patents Mr. Allen financed more than a decade ago…The 57-year-old software guru … sued much of Silicon Valley, claiming Internet giants such as Google Inc., Facebook Inc. and eBay Inc. have built their businesses around what he says is his technology. … Mr. Allen, a pioneer of computer software, didn't develop any of the technology himself but owns the patents. The four patents named in the suit were developed at Interval Research Corp., a Palo Alto, Calif., lab and technology incubator Mr. Allen financed with about $100 million during the Internet bubble, but which closed down about a decade ago….

Now, here’s a paragraph that specifically caught my eye in that story:

Mr. Allen's lawyers said a team has been reviewing his patent portfolio for years, seeing what's relevant to the current marketplace and parsing the technicalities necessary to complete the lengthy patent process. During that time, some patents were sold or licensed.

So here is a simple but powerful idea for Mr. Allen – instead of engaging in lengthy, expensive litigation, why don’t you bring your patents into the hands of a venture that could improve the lives of a billion people? One way of doing that would be to engage the same team of lawyers reviewing Interval Research Corp’s patent portfolio, and find the ones that can match some of the ventures that were conceived by the Singularity graduates. The patents could actually be licensed or sold to companies generating a significant amount of money out of them, and so this is not necessarily an act of charity; that being said, you still get the added bonus of helping a billion people eat, drink clean water, recycle their toxic waste and live a better life! Some food for thought…

The IP Valuation Spectrum

This is the first in a series of blogs about IP valuation. We wanted to address this topic because we’ve found it to be one of the most misunderstood topics in the management of intellectual assets. During our 15 years of working as IP consultants, we saw the migration of IP valuation from being a tool for estimating IP damages into more “main stream” applications. In order to understand the process we need to lay out the framework for thinking about IP valuation. Although the first question I always get after presenting myself as an IP valuation expert is: “how do you value patents”? I believe that it is actually the wrong question to ask, or at least, it should not be the first question. There are two fundamental questions that should be asked and answered first, in order to put the valuation into the right framework:

1. Why do you need to value the IP in question?
2. When do you need a valuation expert?

The answer to the first question requires a bit of a history…

With its roots in the IP litigation of the 1980’s and 1990’s, the valuation of IP (primarily patents) was initially limited to damages calculations in legal cases involving claims, such as patent infringement. With the introduction of tax planning involving IP, such as transfer pricing and patent donations, the need for IP valuation increased and the valuation of intangibles became critical in non-litigation circumstances. In tax reporting, companies now had to include the fair market value (FMV) of IP involved in transactions, such as the inter company transfer of IP or the donation of a patent to a university. New accounting rules related to business combinations, introduced in the mid- 2000’s, expanded the need for IP valuation even more, as companies were now required to report the Fair Value (FV) of intangibles that were purchased as part of a target in an M&A deal.

In addition to the above circumstances – tax, accounting, and litigation –, which we refer to as “Compliance” situations, there are other situations where an IP valuation could be beneficial for transactions, commercialization decisions, licensing, or general corporate planning. During the same timeframe, which saw the proliferation of tax and accounting rules mandating the valuation of IP, IP management teams were beginning to gain momentum in US corporations. Large companies with large patent portfolios were becoming increasingly sophisticated in managing their IP portfolios and had the need for IP valuations. The types of transactions they needed a valuation for included: spin-offs, in kind contributions, licensing, patents sales, and other commercialization activities. Since there are no governing regulations (such as IRS, SEC or other agencies) controlling the process, we refer to these IP valuation circumstances as “Non-Compliance”.

With regards to the second question – when do companies need to hire an IP valuation expert – the answer is two fold: when there is a very high degree of scrutiny, and when the opinion needs to be “bullet-proof” with the highest level of accuracy. Most Compliance circumstances fall under this category, and so the recommendation or requirement under these circumstances would be to hire a third party, independent IP valuation expert. The non-compliance situations are more of a “gray” area… the higher the degree of scrutiny of the level of accuracy required, the more likely the valuation cannot be done in house and an expert needs to be brought in.

The chart below displays the IP Valuation Spectrum, the compliance vs. non compliance situations and our recommendation on when as expert may be needed. The Compliance situations are highlighted in a box, with the rest being the Non-Compliance situations:





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