May 26, 2011

Should secondaries be the primary comparison?

In the last couple of months there have been some marvelous IPOs and acquisitions happening in the technology space. Facebook’s likely IPO is the elephant in the room but in the meantime there have been some shockwaves with, for example; LinkedIn and Skype.

Secondaries surging !

This has lead to a surge in the secondary trade (i.e. non-public trade between shareholders) of Groupon, Zynga and Facebook equity. Directly this has lead to discussions of regulations and complaints about “opaque markets”, overvaluation etc. I was also lucky enough to attend a number of talks in London over the last weeks, with VCs discussing these and similar issues. One thing I really embraced was the notion of how scarce this type of equity is and thus might merit a higher price.

So what has this got to do with IP? Well to me the same reasoning rings very true for IP and especially investing in IP. Valuation of IP receives a lot of complaints from many people (accountants and academia to mention some) and is seen as something opaque and in need of regulation. There have been many ( more or less unsuccessful) attempts at making the market transparent (e.g. Ocean Tomo, , IP-X, IPXI, Yet2) but nothing has become a de facto standard.

IP Secondaries surging !?

Regardless of this, a large number of IP transactions take place every year (for example Apple/Freescale, Microsoft/Novell, HTC/ADC or of course the never ending Nortel)showing that even without a primary market, the secondary market will give plenty of exit opportunities. The key, however, is that the assets must be of good quality and/or strategic – just as with the equity mentioned above (or have a missed a surge in secondary trading of Lunarstorm or Friendster?)

Then there’s also a constantly growing number of venture/PE backed IP vechicles being set up (how many of you have heard of Juridica, Digitude, IPGest, ?). And of course also some very large vechicles attracting large sums of venture money like Round Rock and RPX. And if that’s not enough, you should really take a look at IV’s investors , if that’s not the cream of the crop, then I don’t know what is and somehow they were able to be convinced to invest without public prospectuses.

So I guess my point is that comparing IP with something transparent and established like the stock market with extremely liquid trading and instant pricing models might not do IP justice. But instead comparing it to the “mysterious” market of secondary investment, where exits are fewer and larger as well as investments being not for everyone but instead for the seasoned players understanding the market.

Based on this I’m actually very interested in two upcoming workshops at CIP Forum next week, where large portfolio transactions and the possibility of a European IP market will be debated. Maybe they will prove me wrong..

Marcus Malek

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May 23, 2011

Invent With Nokia?

IAM Magazine posted a question on Twitter last week in relation to the new effort by Nokia to invite independent inventors to submit their ideas for consideration, and possibly commercialization, by the Finish telecoms giant. The Invent With Nokia initiative.

The question was:
“Is Nokia's new initiative to attract innovative ideas from customers collaborative or exploitative?”

My short response to the question is that the Invent with Nokia initiative possibly is a bit of both. But that I am seeing this as an interesting step to further open up with the understanding that most of the innovation is not happening within Nokia.

Nokia already has established collaborations with universities around the world, through the Nokia Research Centers. Where a large portion is directed to forefront research in collaboration and sharing of resources with schools like Stanford, ETHZ and MIT.

By sharing resources, leveraging ideas, and tapping each other’s expertise we are able to create vibrant innovation ecosystems, multiply our efforts, enhance innovation speed and efficiency, and derive more value for our organizations and ultimately for our end-customers.

So I see the Invent With Nokia initiative as a natural way to leverage the collaborative and inventive brand even further.

Nokia explains the rational for this step:
With annual revenues of over €40bn and sales in more than 160 countries, we have an unparalleled market presence and geographic reach. In order to grow further, we need new technology, creativity and innovation.

Even though we have thousands of talented people and invest billions of dollars each year in R&D, we are eager to work with external companies who can bring diverse technology and new ideas to our business. Our successful track record of Strategic Alliances has built a strong collaborative spirit within Nokia.

Not only can we provide the infrastructure that could see your inventions in daily use around the world, you will find us straightforward and clear in your interactions with us.

There will likely be quite a lot of inventors submitting ideas to the initiative and some of them might even be really clever stuff. Much like the gains of similar initiatives, such as P&G’s Connect + Develop, the one really good idea might save the cost of the whole initiative.

However, and it is here where IAM Magazine’s question really comes to show, the financial reward for the inventor is likely to be slightly unclear.

Nokia explains
If Nokia notifies you within four months that it is interested in your invention, Nokia will have the right to apply for a patent based on your invention. In return, you will be eligible for a financial reward. Nokia’s business is very diverse, and the inventions we review are similarly broad. Whilst we take a common approach to valuing and rewarding our partners, there will be some variability. In principle you will be eligible for an award if we apply for a patent based on your invention. You may be eligible for a further award depending on the success of the product and the level of award you choose at the patent application stage.

Will this make innovators less likely to submit ideas for consideration? Probably not, but only time will tell.

Sure, innovators should be rewarded for their efforts, but would the invention have had any spread if not adopted by an industry giant. Probably not.

Johan Orneblad
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