TII Innovation Journal

The Helsinki Manifesto

The conference "Networked Business and Government", attended by over 300 research, technology and innovation policy specialists from the EU countries, worried about the status of the implementation Lisbon Strategy, gave out a "Helsinki Manifesto". They say that "in order to improve its global competitive position, Europe needs immediate and strong measures to boost its economic growth through productivity and innovation for job creation in 2007-2013. There is also a nurgent need for institutional, structural and financial changes at Eu, national and regional level to facilitate focused and  innovation-based growth for Europe's global competitiveness". For the implementation of this Manifesto, the actors gathered in Helsinki for the two-day conference have recognized the following priorities:

1. Opening EU-wide procurement of R&D innovation within public services

In Europe the public sector is relativelt bigger than in the U.S. or in Asia. Thus, "the public sector should use its procurement power to leverage innovation and drive the take-up of research into innovative products and services". According to the group, this would require a reallocation of about 2.5 % of the public procurement spending to R&D for innovation.

2. Creation of EU-wide standardized and harmonized banking services

While workable technologies and business models already exist, and despite the statements of the European Commission and the European central Bank of May 2006, there's still big productivity gains to be had from enhanced EU-wide standardization and harmonization in the areas of new better business processes, electronic banking, and financial market operations within the Europe.

3. European network of Living Labs

Living Labs are thought to act as test beds for emerging knowledge intensive services, businesses, markets, technologies or even industries for jobs and growth can be developed, tested and validated. The first phase - already under planning - will consist of 20 such "labs" in 15 member countries.

4. Increasing interoperability and creating EU-wide standards for eServices

The conference also noted that it is "vital to implement existing best practices for public services and SMEs." As an example, the conference noted the authentication services used in banking in Finland and Estonia, and also promoted the possibilities the open standards would offer for innovation.

5. Setting up a strategic task force for the presidencies 2007-2008

The German, Portuguese and Slovenian presidencies would have to promote the innovativeness of Europe even further during their time in the lead. In the Helsinki meeting, a strong-attendance Slovenian team at least gave full support to this idea.

6. A horizontal programme within the 7th framework programme for knowledge-intensive service society development

While the conference agreed that the 7th framework in general was "a move to the right direction", they also felt that a horizontal research programme for knowledge intensive society development would be in order. This programme should cover "the required services, business, and related open technological architecture development, and consequent institutional and structural changes" and be ready for implementation from early 2008.

7. Enabling working environment

The Conference finally stated that the "member states should accelerate their efforts to remove the still-remaining barriers and obstacles" for the ICT uptake across Europe, whether of legal, administrative, economic, or technical nature.

Even if all these objectives in general feel and sound like I couldn't agree more, they also leave a lot of practical value unsaid. I, for one, still do not really see what new value for competitiveness of Europe the Living Labs would provide, nor how (see www.tietoyhteiskuntaohjelma.fi/ajankohtaista/events/en_GB/1147340579176/   for details), and also most of the other points in the Manifesto feel like I would have heard them before. Thus, personally, I agree that the major point here must be point number five: if Europe can get four or five consecutive presidencies to keep the innovativeness item on top of all possible issues they want to be forwarded, then there's still hope. And, as a final point of lighter nature (but, to my opinion, also somewhat telling about the situation of innovation in Europe), a joke I overheard: "What's the definition of 'innovation'? Why, it's 'lnvention' after administration has taken over". Too many organizations and policies, and not enough ideas.

(Press conference in Espoo, 20.11.2006)

Where's the Beef moved

Recently, Ernst Max Nielsen opened a series of articles under the name "Where's the Beef". The series has  now been given its own weblog: Click here to visit and bookmark the Beef Blog and the original articles have been moved.

CUE: Cambridge University Enterprise

  CUE a Master of Commercialization
Cambridge University is an excellent university. Even more excellent in my view is their way of commercializing inventions coming out of CU. Obviously the "Cambridge Phenomenon", first studied by my old friends from now merged Segal Quince Wicksteed (Bill Wicksteed!), the region's history, presence of benevolent angels and so on are important for that success.

Some years ago CU merged all commercialization activities in CUE. Have a look at their recent Annual report and see how an already impressive record  improves by almost 50% over just 5 years. One would assume that the quality of the (basic) research is not very volatile. Such matters take generations to build up and seldom make quantum leaps. I interpret the growth in commercialization successes as a result of the (re-)organization, really good people (look at the CVs of CUE staff: impressive) and then access to own seed funding (and, of course, lots of VCs crowding around CUE). A minor, but perhaps not less important resource is the creation of "Enterprise Champions", faculty staff who advise CUE on different relevant matters.

PS: compare CUE's score with that of all Denmark, one of the most competitive countries and with the highest knowledge management score in the world: CUE (on the basis of 3,500 research FTE) creates almost half the results in terms of management of invention disclosures, patent filing and licensing and spin off more than 5 times the number of new companies (year 2004) - and with half the TO staff of all of Denmark!

Fascinating Story about Taxol invention and Innovation

Frank Stephenson  tells the fantastic story of how Holton invented the anti-cancer blockbuster drug at Florida State University's Tech Transfer Office site: Click Here

The tortured trail of the best-selling cancer drug in history began 40 years ago this summer. A thunder-clap of uncommon science and luck, it's a grand story still in the telling.

Also a story of how collaboration between industry and university may turn foul when big money enters. This is a "must read" for all tech transfer office staff.

Valuation Model

This model explains a simple way to value a start-up company when working with investors. It is provided courtesy of Joe Ollivier of First Capital Development, a private investment and hard money lending firm based in Provo, Utah.

Valuation Model: "Company Valuation Model / Ownership Percentage Offered This model explains a simple way to value a start-up company when working with investors. It is provided courtesy of Joe Ollivier of First Capital Development, a private investment and hard money lending firm based in Provo, Utah. Explanation Example of XYZ.com 1. Assumptions Investors will want somewhere between 50-100% annual return on their investment (ROI). The market will value the company on a P/E basis somewhere between 8-15 times earnings if it was a public company. While some internet companies have outrageous price to earnings ratios, you are better off to use a conservative price to earnings ratio. XYZ.com Assumptions ROI per year Investors want on their investment: 100% The market will value XYZ.com somewhere around 15 time earnings. Third year after tax earnings: $1,650,000 Initial Investment Needed: $1,000,000 2. Valuation Multiply the p/e ratio by the third year after tax expected profit. This number gives yo"

(Via .)

Companies don't survive- do patents?

I have started a discussion on this site about valuation of patents - and oppose econometric models, which assume extrapolation from past to future - without disruption. One condition for such assumptions would be stability over time - that products, markets, technologies are relatively stable. Now, more than ever, nothing is stable, however. To me the consequence is that it makes no sense to extrapolate more than 5 years, let alone 17 years, the lifetime of a patent. I'd even dare the statement that this trend undermines the logic of patenting!

I just made a sample of the Fortune 100 of Danish companies (www.borsen.dk has the list) and compared FY 2004 with FY 2001. 43 of FY 2001 companies are not on the FY 2004 list, as they have been acquired, merged, disappeared (sic!) etc.

The Global Entrepreneurship Monitor and similar Danish surveys show that the average lifetime of a DK company is now 5 years. ifferent innovation surveys show that the lifetime of a product or market is less than that.

This trend was pointed out 20 years ago by management guru Tom Peters, eg. in his  book Liberation Management, or Dee Hock's "Chaordic Age" books (amazon.com would have them).

Check out British Telecom's futurologist, Ian Pearson, and his amazing book Business 2010 http://www.icnet.dk/amazonpearson or his web site http://www.btplc.com/Innovation/News/timeline/index.htm , which gives an eye-opening view of the future. 

Valuation of Patents, Computer based

I have participated in a number of discussions about patent valuation. Here is a novel approach by two US patent attorneys.

GOFFMAN MARTIN (US); NEIFELD RICHARD (US) filed a patent in 2002 and have built a company, web site and software which automates patent valuation.

Here is the Abstract of WO0075851 A computer system implementing a macro economic model based upon macroeconomic data and relative value characteristics data of patents that determines nominal values for (1) goods and services and (2) profits generated by sales that are covered by the rights of a patent, implements an income value theory to value the patent based upon the predicted values of profits or goods and services covered by the patent, determines patent terms from patent filing, publication, and issue dates, determines patent assignees from patent data, and uses the value of a company's patents, the patent issuance data and term date data, to determine trends versus time in: the number of a company's enforceable patents; the number of a company's patents obtained; the nominal value of net earnings and of goods and services sold that are covered by the company's patents; the nominal value of the sum of the company's patents, and provides comparisons of those trends between companies, regions, and economic sectors, providing the results of the analysis to users of the computer system. The computer system employs a user database enabling a novel electronic accounting model enabling payment by affiliates, programmed securities trading, and accrediting of investors.

HERE IS THE TEXT FROM THEIR WEB SITE:

This paragraph provides a SIMPLIFIED explanation of how we value patents and companies. Patents are a right to exclude others from making, using, or selling a product or service covered by the claims of the patent. Patents are awarded by the Federal Government for new and useful products or services. A good deal of the Gross Domestic Product (GDP) of any industrialized country, particularly the US, is covered by claims in patents. Why? Because every company knows that it is important to get patents covering new products to prevent competition, thereby resulting in a large profit margin. We model this situation by assuming a substantial fraction of GDP is covered by all patents, and then estimating the fraction of the GDP covered by each patent using sophisticated data analysis and additional modeling based upon macro economic data and financial data. We model the profit associated with a patent to be the fraction of the GDP covered by the patent (i.e., the nominal sales of product that our model predicts to be covered by the patent) times the profit margin. From that information we obtain the annual profit protected by the patent. Patents are each in force for a term of about 17 years. We calculate the current value of the patent to be value of the annual profit for the estimated remaining term of the patent. Adding up the valuations for patents owned by a company, we arrive at the company's current patent valuation. Based upon trends in the company's patent acquisition, we can extrapolate to their future patent valuations. We can compare a company's patent valuation to its sales to obtain a measure of how much of the company's sales are protected by its patents, - and therefore a measure of how well the company's profit margins are protected. We are or will shortly be able to provide all this information - and more - for all companies that own patents - and for companies that are listed on stock exchanges.

() Where's The Beef) Methods of Calculating Reasonable Royalty Rates

Methods of Calculating Reasonable Royalty Rates: "

A few weeks ago, Stephen of Patent Baristas fame, wrote a very interesting article on calculating reasonable royalty rates called What’s a Reasonable Royalty Rate?. Although the article is in the context of royalty rates for licenses with universities for therapeutic technologies, I believe the objective points regarding calculating royalty rates are worth repeating here at IP Counsel Blog.

Three methods of calculating royalties were described:

1. The Market Method – royalty rate is based on what others have paid as a reasonable royalty for similar technology.

2. The Cost Method – royalty rate is based on the cost of developing or obtaining the technology or intellectual property.

3. Income Method - royalty rate is based on the total revenues the technology is likely to produce.

The article further mentions that a practical way of deriving a reasonable royalty rate is to first develop an economic model that factors in the cost to develop the technology and the overall revenues expected from sales of the technology. The model should also include risk factors, such as expensive processes that may also delay time to market, or any other potential risk factors. For example, sales my start out slow at first for a few years before reaching higher levels of expectations. Lastly, duration of patent terms should be included.

It seems to me that a good starting point would be to develop an economic model that utilizes information from all three methods of calculating royalties. Develop a model that takes into account estimated or realized revenues, cost of development and bringing the technology to market and compare royalty rates for similar technology under similar or related circumstances. From a more inclusive model, you can glean a great deal of information about the technology and what its ultimate value would be to you in order to determine what you are willing to pay and whether you can obtain alternative technology for less.

It is not surprising that a great deal of effort must be used to evaluate a license agreement before negotiating a reasonable royalty rate given the increasing costs and other pressures researchers and manufacturers face when developing new technology.

"

(Via IP Counsel Blog.)