0ZK00 Intellectual Property Rights for New Ventures Lecture 1 PDF

0ZK00: Intellectual Property Rights for New Ventures Lecture 1: Introduction Emilio Raiteri Eindhoven University of Technology September 2nd, 2024 Outline 1 Introduction Type of education What’s this course ab...

0ZK00: Intellectual Property Rights for New Ventures Lecture 1: Introduction Emilio Raiteri Eindhoven University of Technology September 2nd, 2024 Outline 1 Introduction Type of education What’s this course about? Why are IPRs important? Learning objectives 2 Practical Information Assessment Group assignment 3 Introduction to Intellectual Property Rights 4 What’s IP? Different types of IPR 5 Why do we need IP? Market failures Emilio Raiteri (TU/e) 0ZK00–IPR for new ventures September 2nd, 2024 2 / 42  Introduction Dr. Emilio Raiteri Assistant Professor, TIS group Ph.D. Economics, University of Turin Email: [email protected] Office: Atlas, 8.409 ⇒ Main research interests: Economics of Innovation and IPR Emilio Raiteri (TU/e) 0ZK00–IPR for new ventures September 2nd, 2024 3 / 42  Introduction Type of education Setup University policy: On-Campus education This course is offered exclusively on Campus: → No streaming or recording of the lectures will be made available unless the policy changes → Final presentations, and final exam on Campus Two types of meetings: - Lectures (Monday) - Tutorials (Wednesday) Emilio Raiteri (TU/e) 0ZK00–IPR for new ventures September 2nd, 2024 4 / 42  Introduction Type of education Lectures 2 hours: Weekly basis on Monday afternoon (7-8 hours) It is a standard lecture It is important for you to attend all the lectures as several skills and insights come from attending Date (15:30-17.15) Topic September 2nd L1: Introduction to IPRs September 9th L2: Introduction to patents September 16th L3: Introduction to trade secrets September 23rd L4: Introduction to other forms of IPR September 30th L5: IPR strategies 1 October 7th L6: IPR strategies 2 October 14th L7: IPRs and societal impact October 25th Q&A Emilio Raiteri (TU/e) 0ZK00–IPR for new ventures September 2nd, 2024 5 / 42  Introduction Type of education Tutorials Weekly basis on Wednesday morning (3-4 hours) First hour: tutorial about topics and tools needed for the assignment Second hour: possibility to work on the assignment under supervision and Q&A Date, 10:45-12:30 Topic September 4th Ideas and Startup creation September 11th Patent and prior art search (1) September 18th Patent and prior art search (2) September 25th Group meeting October 2nd Search for other IPR October 9th IPR strategies October 16th or 21st Final presentations Groups can have additional consultation meetings with the instructors Each group should schedule a meeting with one of the teachers in week 4 Emilio Raiteri (TU/e) 0ZK00–IPR for new ventures September 2nd, 2024 6 / 42  Introduction What’s this course about? What’s this course about? An introduction to the nature and use of intellectual property rights Point of view: management, economics, technology entrepreneurship, law and technology The first part of the course provides you with knowledge of the main characteristics of different intellectual property rights (IPR) - Patents - Copyright - Trade secrets - Trademarks and design rights The second part of the course will then specifically focus on the perspective of the entrepreneur - Protection of ideas, freedom to use, appropriate IPR strategy - Focus on start-ups and other young technology-based companies Emilio Raiteri (TU/e) 0ZK00–IPR for new ventures September 2nd, 2024 7 / 42  Introduction Why are IPRs important? Why is IP important? 1. It’s ubiquitous! Almost every product that you can buy is protected by some kind of IPR Consider the ballpoint pen you are using to take notes... Emilio Raiteri (TU/e) 0ZK00–IPR for new ventures September 2nd, 2024 8 / 42  Introduction Why are IPRs important? 2. It is growing! IPRs are an essential asset in an economy that is more and more dominated by technology and knowledge Worldwide patent applications Worldwide trademark applications - 2021: 2.4 mln patent applications, 15.2 mln trademarks (World Bank, 2024) - The number of patents in force worldwide rose from 6.1 mln in 2006 to 17.3 mln in 2022 (WIPO, 2024) → IPRs determine the development, adoption and use of technology Emilio Raiteri (TU/e) 0ZK00–IPR for new ventures September 2nd, 2024 9 / 42  Introduction Why are IPRs important? 3. It is valuable! The ownership or/and knowledge of IPR is key for the performance of established firms and startups. It makes the winners and losers Forbes (2014): Non-tangible assets as IPRs are 70-80% of the average value of a typical company - When it comes to startups, the number is even higher - Using IPRs to raise capital, attract investors, or sell the business 2016: Softbank bought ARM Hldg for $32 bln - ARM only develops technology and licenses it - ARM owned 4,5K patents → $7 mln per patent - 2024: Market capitalization of $130 billion 2012: Google bought Motorola Mob.ty for $12.5 bln - Larry Page said that it was to strengthen Google’s patent portfolio - Motorola owned 17K patents → $735K per patent Emilio Raiteri (TU/e) 0ZK00–IPR for new ventures September 2nd, 2024 10 / 42  Introduction Why are IPRs important? 4. It’s a pillar of the local economy 25-30% of all Dutch spending on R&D is carried out in the Brainport Eindhoven region (brainporteindhoven.com) The Brainport Eindhoven Region registers the most patents in Europe → Most inventor intensive km2 in the Netherlands Your future career may have something to do with patents and IP! Emilio Raiteri (TU/e) 0ZK00–IPR for new ventures September 2nd, 2024 11 / 42  Introduction Why are IPRs important? 5. Ignorance is not bliss! IPR.. only for law students? Entrepreneurs, engineers, developers, and scientists need to be able to identify and assess the value of IP Often entrepreneurs, researchers, and managers know little about IPR and IPR strategies A study (Gubby, 2015) conducted in the Netherlands and UK by interviewing IPR professionals and entrepreneurs showed that: - Entrepreneurs very often lack proper, formal training in IPR - Entrepreneurs and managers learn about IPR by making mistakes Ignorance could lead to costly mistakes that may kill a business → Especially relevant for new ventures or potential new ventures Emilio Raiteri (TU/e) 0ZK00–IPR for new ventures September 2nd, 2024 12 / 42  Introduction Why are IPRs important? Failing to profit from your discoveries Gordon Gould (1920 – 2005) Physicist from the United States Gould invented the laser in 1957 during his activity as a doctoral student at Columbia He wanted to get a patent for his invention but thought (incorrectly!) that he needed to build a working model → ignorance about IPR system → Gould filed a patent application for the laser only 1959 → Schawlow and Townes, researchers at Columbia, re-discovered the laser and filed a patent in 1958. Townes even gets the Nobel prize → Gould’s patent application was rejected! 30 years of legal battles with the patent office, the U.S. government, and the laser industry → Became rich eventually... Emilio Raiteri (TU/e) 0ZK00–IPR for new ventures September 2nd, 2024 13 / 42  Introduction Why are IPRs important? Having your ideas stolen... 2003: Cameron and Tyler Winklevoss were looking for a web developer to build HarvardConnection, a social network for Harvard students They supposedly ended up hiring a Mark Zuckerberg - No official contracts about who owned the ideas - Agreements as dorm-room chit-chat In February 2004 thefacebook.com was launched → Lawsuit: Facebook agreed to a settlement valued at $65 million Emilio Raiteri (TU/e) 0ZK00–IPR for new ventures September 2nd, 2024 14 / 42  Introduction Why are IPRs important? Becoming your own enemy! 2000: Klopfenstein and Brent filed a patent application for a method to lower cholesterol 1998: Presented their discovery on a poster displayed at the American Association of Cereal Chemists meeting - No printed handouts - Poster displayed for 3 days - Not indexed in any publication USPTO rejected the patent application because the discovery had already been disclosed to the public - Not by a competitor, by the researchers themselves on their poster Emilio Raiteri (TU/e) 0ZK00–IPR for new ventures September 2nd, 2024 15 / 42  Introduction Why are IPRs important? Also Pros go wrong! Large corporations have specialized legal offices in charge of IPR issues... BUT they can also do costly mistakes 2017: Irish company Supermac’s restaurant chain filed a request for revocation of one of the McDonalds’ trademarks: the BIG MAC registered mark → Demanded revocation of the mark as it had not been put to genuine use in the European Union The burden of proof rested with the proprietor of the mark: McDonald’s → McDonald’s had failed to prove the extent of the use of the Mark → The Big Mac trademark was actually revoked Emilio Raiteri (TU/e) 0ZK00–IPR for new ventures September 2nd, 2024 16 / 42  Introduction Learning objectives Learning objectives Have good awareness of the various dimensions relevant for patents, and other IPR’s such as design rights, copyrights, trademarks, used in conjunction with patents Differentiate the different roles and meaning of the patent system for various types of stakeholders Familiarize with uses of IPRs as tool for protecting innovative activities especially in the case of starting a business; Be able to apply above knowledge in the context of an entrepreneurial venture, in terms of: a Performing patent searches to identify relevant patents and to determine possible prior art b Determining the patent landscape in the relevant technical field c Developing a strategy to deal with intellectual property owned by others (for freedom-of-use) d Developing an optimal IPR strategy to protect the know-how of the (prospective) venture Emilio Raiteri (TU/e) 0ZK00–IPR for new ventures September 2nd, 2024 17 / 42  Practical Information Assessment Assessment Written exam (70%), Assignment (30%) → The exam will take place on Campus - 3 hours, no time pressure For each of the topics the exam has: a Two multiple choice questions b One single line question c One open question Important dates: → October 2: Draft of chapters 1-4 → October 16/21: Final presentation → October 23: Final report → October 30: Final exam Emilio Raiteri (TU/e) 0ZK00–IPR for new ventures September 2nd, 2024 18 / 42  Practical Information Group assignment Group assignment Group formation A group is composed of 5 people → Groups were formed randomly and composition is available on Canvas → Please get in touch with your group mates to start working on the group assignment → If you fail to get in touch with one of the members of your group, let me know ASAP Assignment (more on it on Wed, 1st tutorial) Funding of a new entrepreneurial venture, a mock startup Identify an original technological idea that could be brought to the market and reflect on the business model Assess the novelty of your idea Design an IPR strategy to protect your business model Emilio Raiteri (TU/e) 0ZK00–IPR for new ventures September 2nd, 2024 19 / 42  Practical Information Group assignment Group Assignment Deliverables a Final Report (Due date: October 23rd) - 18 pages (excluding title page, references, and figures) - That should have the following structure: 1 The Startup 2 Competitor analysis 3 Prior art and patent search 4 Patentability of the technological idea 5 Other Intellectual Property Rights 6 Competitors’ IPR strategy 7 IPR strategy b Drafts of the report: - Draft of chapter 1-4 to be handed in on October 2nd - The drafts are not graded but are mandatory and need to be sufficient c Project presentations - Group-instructor meetings - Final presentation: covering the full report (10-15 min) Emilio Raiteri (TU/e) 0ZK00–IPR for new ventures September 2nd, 2024 20 / 42  Practical Information Group assignment Material 1 Handbook: - WIPO (2004). Intellectual Property Handbook. Publication No. 489(E); Second edition 2004, reprinted 2008. Geneva: WIPO. Available from Link - Please refer to Canvas for specific mandatory and optional chapters per meeting 2 Slides and notes of the lectures - Slides deck uploaded on CANVAS weekly 3 Scientific articles - Please refer to the STUDY GUIDE for specific mandatory and optional literature per meeting Emilio Raiteri (TU/e) 0ZK00–IPR for new ventures September 2nd, 2024 21 / 42  Practical Information Group assignment QUESTIONS Emilio Raiteri (TU/e) 0ZK00–IPR for new ventures September 2nd, 2024 22 / 42 Introduction to Intellectual Property Rights Emilio Raiteri Eindhoven University of Technology September 2nd, 2024  What’s IP? What’s Intellectual Property? Private Property The concept of property is well understood in Western societies - EU Charter of Fundamental Rights (Title II, Art. 17) Ownership of physical things → a house, a car, your bike Private property gives the owner the right to exclude others from using a tangible property Intangible assets and private property rights Is the property of an idea any different from the property of a house? Ideas/knowledge/information are goods that have peculiar characteristics - There is no danger of fighting over who gets to use an idea - Hard to exclude others IP rights give the creators of intellectual goods the exclusive legal rights to control the use made of those productions Emilio Raiteri (TU/e) Introduction to Intellectual Property Rights September 2nd, 2024 24 / 42  What’s IP? What can be protected? WIPO convention 1967: - Inventions in all fields of human endeavor - Scientific discoveries and industrial designs - Know-how, undisclosed information - Literary, artistic and scientific works - Performances of performing artists, phonograms and broadcasts - Trademarks, service marks - Commercial names and designations - Symbols, logos, phrases Emilio Raiteri (TU/e) Introduction to Intellectual Property Rights September 2nd, 2024 25 / 42  What’s IP? Different types of IPR Different types of IPR Different types of IPR differ in: - Subject matter: what can be protected? - Scope of protection: what kind of right is given to the owner? - Length of protection: how long the protection last? - Standard for protection: What requirements? - Procedure to obtain the right: How to obtain a right? - Cost of protection: How much does it cost? Complementarity of IPR: Many firms see these rights as complementary Products or services have the potential to be protected by more than one type of right Large high-tech companies use every type of IPR Emilio Raiteri (TU/e) Introduction to Intellectual Property Rights September 2nd, 2024 26 / 42  What’s IP? Different types of IPR One product, many IP rights Source: EPO Emilio Raiteri (TU/e) Introduction to Intellectual Property Rights September 2nd, 2024 27 / 42  What’s IP? Different types of IPR One product, many IP rights Source: EPO Emilio Raiteri (TU/e) Introduction to Intellectual Property Rights September 2nd, 2024 28 / 42  What’s IP? Different types of IPR Different types of IP Rights Legal right Subject Scope Duration Procedure Cost matter Patents New Exclusive right 20 years Application Fees inventions to make, use and Legal costs sell examination Utility New Exclusive right 6-15 years Application Fees models inventions to make, use, and sell registration Trade Valuable Protection Until Reasonable Security secrets information against public effort to misappropriation keep secret Copyright Original Right to display Life of the Exists None creative or perform, author automatic.ly artistic forms reproduce, etc. +70 years Trademarks Distinctive Exclusive right Perpetual Registration Fees identification subject to of products abandon. Industrial External Exclusive right 15-25 years Registration Fees design appearance to make, use, Legal costs sell Emilio Raiteri (TU/e) Introduction to Intellectual Property Rights September 2nd, 2024 29 / 42  What’s IP? Different types of IPR IPR, State and the territoriality principle IPR are legal rights: validity and enforcement are grounded in the laws of a given State Almost all IPR have a national character Territoriality principle: protection is only in a given jurisdiction, i.e. a given State Sometimes common application and/or examination, but almost always national rights - Exception: Europe’s new EPO Unitary Patent These national systems have smaller or larger differences - Many features are harmonized by international treaties → TRIPS (1995), PCT (1978), Paris Convention (1870) In this class, we will speak of the ‘average’ or ‘typical’ national IPR systems Emilio Raiteri (TU/e) Introduction to Intellectual Property Rights September 2nd, 2024 30 / 42  Why do we need IP? Why do we need IP? 1. The philosophical view John Locke, Two treaties on Government (1698) Reward for work done (getting the apple from the tree) Reward from an intellectual idea or product that is the offspring from the intellect 2. The Utilitarian view: the dominant paradigm Strong relationship between productivity and economic growth Strong correlation between technical change, knowledge production and productivity growth Governments promote innovation and the generation of new and improved works, technological or expressive Awarding IPR is a way to promote innovation Emilio Raiteri (TU/e) Introduction to Intellectual Property Rights September 2nd, 2024 31 / 42  Why do we need IP? Government intervention and market failure Market failure→ The market system, guided by the independent actions of private entities, will not lead to the optimal outcome IPR can be used to complement market forces Economic definition of private good Private goods have the following properties: 1 Rival consumption: if a good is used by one person it cannot be used by another 2 Excludability: individuals can be excluded from enjoying a good unless they are willing to pay for it Emilio Raiteri (TU/e) Introduction to Intellectual Property Rights September 2nd, 2024 32 / 42  Why do we need IP? Economic definition of a public good A public good is a good that is both non-excludable and non-rivalrous - Individuals cannot be effectively excluded from use - Use by one individual does not reduce availability to others Textbook example: A lighthouse → It is not possible to exclude specific boats from seeing the lighthouse → A boat seeing the lighthouse does not reduce the ability of other boats to see it Public goods and market failure Risk of free-riding → why should I pay for a public good? The competitive market will not provide the optimal amount of the public good, i.e., not enough lighthouses Who will provide the public good? - The government needs to take care of that Emilio Raiteri (TU/e) Introduction to Intellectual Property Rights September 2nd, 2024 33 / 42  Why do we need IP? Knowledge/Information as a public good Knowledge is a non-rival and (in many cases) a non-excludable good Non-rival: the use of existing knowledge by one person does not preclude use by any other and does not cost additional resources - Mathematical theorem, law of physics, etc... Non-excludable: the key issue is how easily it can be accessed - Even in the days of paper and print, knowledge reproduction was easy - Internet and digitalization → diffusion is hard to suppress Knowledge continuously escapes from the entities producing it, and can be used by rivals at no cost ⇒ free-riding But producing knowledge is very costly Who’s going to produce new knowledge? Emilio Raiteri (TU/e) Introduction to Intellectual Property Rights September 2nd, 2024 34 / 42  Why do we need IP? Market failures Market failure (1): Insufficient production of knowledge Any information obtained... should, from a welfare point of view, be available free of charge This ensures optimal utilization of the informa- tion, but of course provides no incentive for in- vestment in research. Kenneth Arrow (1962), Nobel Prize in Economics The innovator cannot obtain (appropriate) the full value of its innovation from potential users Invest less resources in the production of new knowledge - For instance, a firm will invest less in R&D Less knowledge and innovation for the society as a whole Less diffusion of knowledge, fewer incentive to disclose new ideas Emilio Raiteri (TU/e) Introduction to Intellectual Property Rights September 2nd, 2024 35 / 42  Why do we need IP? Market failures Market failure (1b): the Information Paradox Imagine that you made a brilliant discovery - Theoretical foundation for a machine able to transform CO2 into Oxygen → chemical reaction, of a few lines You do not have the resources to build the machine and you would like to sell me your idea How would you go about it? What price would you ask for it? Problem: I can assess the value of your discovery only if you disclose it to me Once you have disclosed your discovery, I have basically already acquired it; why should I pay you any money? Disclosure paradox ⇒ difficult to create a market for ideas Emilio Raiteri (TU/e) Introduction to Intellectual Property Rights September 2nd, 2024 36 / 42  Why do we need IP? Market failures Market failure (2): Insufficient investment in quality George Akerlof (1970), Nobel Prize in Economics Markets may fail if there are information asymmetries between buyers and sellers - Disparity of information that each party has in a transaction The Market for Lemons ⇒ no market for good cars - Asymmetric information can lead lower quality producers to benefit from consumer confusion → Sell lower quality imitations using the name of high quality products - Higher quality producers have less incentive to invest for developing products of higher quality - Fewer or no high-quality good on the market Emilio Raiteri (TU/e) Introduction to Intellectual Property Rights September 2nd, 2024 37 / 42  Why do we need IP? Market failures Rationale for an IP solution Market failure 1 - Insufficient production of knowledge Patents, industrial designs, utility models, copyright confer an exclusive legal right to creators to control the knowledge they have produced - A patented technology could be used or sold only by the patent owner or through a license IPRs owners have monopoly power and can charge higher prices for products and services embodying their inventions IPRs owner can directly trade the knowledge they have produced - Sell the legal right to use an idea → CO2 machine example IPRs encourages inventors to pursue their creative efforts Creators can recoup the initial investment in generating new knowledge → Market failure (1) is solved Emilio Raiteri (TU/e) Introduction to Intellectual Property Rights September 2nd, 2024 38 / 42  Why do we need IP? Market failures Market failure 2 - Insufficient investment in quality Trademarks are concise and unequivocal indicators of the source and nature of goods Trademarks allows the consumer to distinguish a product sold under it from the goods of other enterprises TM offer an incentive to invest in reputation and superior quality → ’Institutionalisation of reputation’: TMs embody reputation in that they signal a certain level of quality TM ensure the integrity of the market place → Market failure (2) is solved Emilio Raiteri (TU/e) Introduction to Intellectual Property Rights September 2nd, 2024 39 / 42  Why do we need IP? Market failures Wrapping up Market failure 1 Market failure 2 Insufficient investment in Insufficient investment in knowledge production quality IPR Solutions Exclusive rights on Clear indication of intellectual creation source and nature Rationale Stimulate innovative Address information and creative work asymmetries IPR types Patents Copyright Trademarks Utility models Industrial design Geographical indication Trade secrets Emilio Raiteri (TU/e) Introduction to Intellectual Property Rights September 2nd, 2024 40 / 42 QUESTIONS  Why do we need IP? Market failures See you on Wednesday! Contact: [email protected] Emilio Raiteri (TU/e) Introduction to Intellectual Property Rights September 2nd, 2024 42 / 42