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New Study Reinforces Value of Patents in Venture Capital Investment

Regular readers of the IP Asset Maximizer Blog will know that I am a strong advocate of the use of IP analytics by venture capital investors, as well as others.  Clearly, VC's need better ways to gauge the appropriateness of an investment when more than 50% of venture investment is a loss. My point of view is based on personal experience with various clients, as well as external review of a few investments that I thought signaled that a review of the IP landscape should have been conducted prior to completing the deal.  So, I was glad to see my opinions backed up by real data.  Specifically, my friends at IP Vision, a patent landscaping and data company originally out of MIT, conducted an extensive study of 9,000 venture backed firms.  The study was done with investors, corporate executives and members of the faculty at MIT Sloan

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How to Improve the Performance of M&A: Determine Whether the Target Really Provides Durable Competitive Advantage

Recently, I was asked to speak to a Georgia Tech MBA class about IP Strategy--specifically about the inter-play of IP in M&A.  A significant portion of my talk addressed how poorly existing due diligence and IP metric methodologies traditionally perform to predict the financial success of M&A transactions.  There is no question that improvements are needed in this regard.  For example, in 2006, Inc.com reported that 60-70 % of acquisitions fail and more than 90 % of acquired businesses lose value. These somewhat dismal results leave no doubt that acquiring companies need better sources of information to properly vet and select acquisition targets. Having been involved in M&A transactions as a legal and business advisor over the years, I have developed unique insights on the the due diligence and IP metric processes from both sides of deals.  In these deals, the highest (and presumably most expensive) advice of investment

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Guest Blogger: How Patent Vulnerability Impacts Valuation by David Wanetick of IncreMental Advantage

(This week, David Wanetick, Managing Director of IncreMental Advantage provides readers if the IP Asset Maximizer Blog with an excellent overview of the various factors that he believes affect patent valuation.  Please let me know if you would like to be a Guest Blogger.)

How Patent Vulnerability Impacts Valuation by David Wanetick of IncreMental Advantage As I often tell business leaders who attend my course on Valuing Early-Stage Technologies, valuing patents isn’t rocket science. It is much more difficult. Or to paraphrase Winston Churchill, valuing patents is a riddle, wrapped in a mystery, inside an enigma. Measuring even a well-delineated permanent entity is much more difficult than may be imagined. As Neil deGrasse Tyson (a renowned astrophysicist) and Benoit Mandelbrot (the father of fractal geometry) have discussed, no one really knows what the circumference of the coastline of the United Kingdom is. The tides will cause varying

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IP Quality Must be a Key Feature in Any Financial Product Based on IP Assets

Neil Wilkof of the great IP Finance blog brought up a couple of interesting issues in his latest blog post entitled Securitization of IP: Urban Legend, or Playing Soon in a Theatre Near You? Specifically, he wonders if the desire for innovative (and not discredited) financial products today will result in the emergence of IP securitization as a model for raising capital and, if so, if the there will be a place for IP professionals in the process of valuing such IP.  I recommend Neil's post to anyone who is interested in how IP assets might be leveraged to create opportunities outside of the usual protection of the IP owner's products and technology. Moreover, I agree with Neil's view that if IP is going to be a recognized as a means to raise capital, improvements have to be made in the way finance and IP professionals interact. Put simply,

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Proposal for a Reality-Based Methodology for Measurement of Corporate Intangible Asset Value

In recent years, financial analysts came to believe that intangible asset value forms an increasing aspect of overall corporate value. These experts generally agreed that intangible asset value made up at least 70 % of the total market cap of the average corporation, an increase of an estimated 20 % in 1975. Not surprisingly, however, the recent global economic downturn has resulted in a steep decline in the amount of market cap attributed to intangible assets. Experts now say that the current (market adjusted) corporate value attributable to intangible assets is "less than 50 %." To someone who has toiled in the trenches of intangible asset protection at both the law firm and corporate levels, the at least 70 % generalization always possessed a sense of being pulled out of the air, as does the new

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Think Business Cannot Predict the Future? Patent Landscape Analytics May Prove You Wrong

Regular readers of the IP Asset Maximizer Blog will recognize my previous post which provided an illustration of the predictive nature of patent landscaping to improve business decisions using Cox Enterprise's $300 Million acquisition of Adify as an example. I wanted to follow up on that post because a recent announcement by Yahoo may demonstrate that, at least in some situations, patent landscaping analytics are so good at predicting future competititve activity that they can operate as a business crystal ball. In that post, I predicted that Cox would likely experience substantial competition in the vertical advertising space as it seeks to capitalize on its purchase of Adify, and supported this assertion by providing a picture of third party commercial intentions by looking at patent filing data. This prediction was bolstered by recent a Google announcement that it was partnering with NBC-Universal to deliver targeted ads through cable. This

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Using Patent Landscaping Analytics to Improve the Quality of M & A Decisions: A Review of Cox Enterprises’ $300 Million Purchase of Adify

Many companies today enter new product or technology markets through acquisition. However, this is far from a sure-fire plan for business success. For example, in 2006, Inc.com reported that 60-70 % of acquisitions fail and more than 90 % of acquired businesses lose value. These somewhat dismal results leave no doubt that acquiring companies need better sources of information to properly vet and select acquisition targets. Of course, companies typically conduct extensive pre-deal research to identify good acquisition targets and use the M & A due diligence process decide whether to consummate the deal. However, such efforts are inherently limited because much about the target will remain unknown until the acquisition is completed. There can nonetheless be no doubt that more sources of relevant information will improve the probability that the acquiring company will make a better decision about completing the deal. Since the degree of competition to

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The Problem with Patent Due Diligence in Mergers and Acquisitions and How to Fix It

As a business or investment professional involved in mergers and acquisitions ("M & A"), are you conducting patent due diligence according to the standard practices of your M & A attorneys and investment bankers? When patents form a significant aspect of the value of the transaction, you are probably getting incorrect advice about how to conduct due diligence. The due diligence process must take into consideration the competitive patent landscape. If competitive patents are not included in your vetting process, you may be significantly overvaluing the target company. In my many years of intellectual property and patent experience (more info here: http://www.jackiehutter.com/), I have been involved in a number of M & A transactions where patents formed a significant portion of the underlying value of the deal. As the patent specialist on these transactions, I took direction from highly compensated M & A attorneys and investment bankers who were acknowledged