Intel (INTC) announced early on Thursday, August 19th, that is purchasing security firm McAfee (MFE) for $7.68 billion in a cash transaction.
This represents a 60% premium to McAfee's closing share price on August 18th and fundamentally changes the information security landscape.
MIT's Technology Review magazine and IPVision recently issued a report Patent Perspectives: On Security providing information on patent holdings in the security field -- including a focus on McAfee's portfolio. The original report is available for download with a supplemental update planned.
Additional information on this subject is also available in the IPVisions article of June 22nd, including patent portfolio demographics and assessments of 20 firms identified by Technology Review editors.
On August 12, 2010, Oracle America, Inc. (Oracle) filed suit against Google, Inc. in the Northern District of California claiming that Google's Android operating system infringes 7 "Java" patents owned by Oracle America, a subsidiary of Oracle Corporation. These Java patents are owned by Sun Microsystems which was acquired by Oracle in January 2010.
Oracle's Patent Infringement Filing
According to the Complaint "Google’s Android competes with Oracle's Java, acquired with Sun Microsystems, as an operating system software platform for cellular telephones and other mobile devices. The Android operating system software “stack” consists of Java applications running on a Java-based object-oriented application framework, and core libraries running on a “Dalvik” virtual machine (VM) that features just-in-time (JIT) compilation Google actively distributes Android (including without limitation the Dalvik VM and the Android software development kit) and promotes its use by manufacturers of products and applications."
IPVision Patent Map of the Java Patents
This IPVision Patent Landscape Map shows these 7 Java Patents (center of the "fans"), the 75 patents they cite (Backward Citation Patents) and the 210 patents (Forward Citation Patents) that cite the 7 Java Patents. Microsoft owns 44 Forward Citation Patents and IBM owns 40. View a Live Interactive Version of this Map on the See-the-Forest.com patent analysis website.
The large "fan" is US Patent 5,966,702 "Method and apparatus for pre-processing and packaging class files". It has been cited by 124 other patents, including 32 patents owned by Oracle and 16 owned by Sun Microsystems/Oracle.
The patents are also available for download by right-clicking on them in the patent map.
Learn More About Reading IPVision Patent Maps.
Oracle Has Abundant Patent Ammunition for This Fight
The inventors on the 7 Java Patents have 120 other issued U.S. patents that are owned by Sun Microsystems/Oracle . Although Oracle chose to assert only 7 of the 127 patents, the other 120 may prove to be valuable ammunition in the negotiations around this suit and the emerging smartphone hand held device industry.
This IPVision Patent Interconnection Map shows the 127 issued U.S. Patents by the same inventors that are on the 7 Java Patents in the Google Suit. The 7 Java Patents are highlighted in yellow on this Map.
A Patent Interconnection Map shows the patent citation relationships among a group of patents. Multiple patents citing each other are a "patent citation cluster" and usually represent a strategic patenting process to protect a product or business. On an Interconnection Map a crossing pattern of lines connecting the patent boxes is a visual representation of a citation cluster. Three of the 7 Java Patents are located in the cross-citation cluster of patents at the top of the Map.
This lawsuit also illustrates how companies, such as Google, should proactively monitor changes in their patent landscape. As we have written about before, patent risks change and evolve as companies organically grow their patent positions and, as in this instance, acquire patent rights through M&A.
This perspective is further illustrated by the perspective shared by Silicon Valley litigator Edward Reines in Reuters initial article on the lawsuit: "Sun's corporate philosophy was obviously very different from Oracle's in terms of enforcing the Java patents."
Last week peHUBwire reported on the biggest U.S. IPO of the year, digital whiteboard maker Smart Technologies Inc (SMT). The Calgary, Alberta-based company sold 38.83 million shares for $17 each raising about $660.11 million. Pre-IPO shareholders include funds associated with Apax Partners, chipmaker Intel Corp and IFF Holdings Inc.
Bolstering Your Position Prior to an IPO
The Smart Technologies prospectus contains a number of interesting comments on patents and their relationship to Smart Technologies' business. "Our commercial success depends to a significant degree upon our ability to develop new or improved technologies and products, and to obtain patents or other intellectual property rights or statutory protection for these technologies and products in Canada, the United States and other countries. We seek to patent concepts, components, processes, designs and methods, and other inventions and technologies that we consider to have commercial value or that will likely give us a technological advantage. We own rights in patents and patent applications for technologies relating to interactive whiteboards and other complementary products in Canada, the United States and other countries."
Although Smart Technologies had a reasonable size portfolio:
- 63 utility patents (46 U.S. and 17 foreign)
- 315 pending utility patent applications (103 U.S. and 212 foreign)
- 46 design patents and 59 design patent applications pending
it recognized that its existing patent portfolio was aging and that it needed both new technology and patents to advance its business: "Seven of our patents, which relate to non-orthogonal misalignment, a technological element in our interactive whiteboards, expire in 2011. Some of our products are based on DViT technology, for which we have 46 utility patents issued worldwide, including 31 in the United States. The DViT patents filed by us will begin to expire in 2020." This aging of the portfolio can be seen in the IPVision patent map shown below.
IPVision Patent Map and Patent Portfolio Rating
This IPVision Patent Interconnection Map shows the U.S. patents in the Smart Technologies Patent Portfolio, including those recently acquired NextWindow patents (see discussion below). Note: Click on the Patent Map Image to View an Interactive Patent Portfolio Map.
The Smart Technologies portfolio received a 3.9 (out of 5) rating by IPVision using the techniques described in our article "IP in Early Stage Commercial and Investment Success" in IAM Magazine where we showed a strong correlation between IPVision ratings and investment success in venture capital portfolios.
NextWindow Acquisition
Smart Technologies response to this technology and patent portfolio aging was the acquisition of NextWindows: "On April 21, 2010, we acquired all the share capital of NextWindow, which designs and manufactures components for optical touch screens for integration into electronic displays, including PC displays.....We believe that NextWindow's patent portfolio, which includes seven patents and approximately 82 patents pending for optical touch technologies, will complement and strengthen our existing patent portfolio and help us maintain our leadership in technology innovation in this area."
The NextWindow acquisition is a good example of a business driven patent strategy as Smart Technologies acquired key intellectual property to bolster and expand its revenue sources. This allowed NextWindow to assert in its SEC prospectus:
“Portfolio of Innovative Solutions". We have more than 20 years of innovation experience and have independently introduced five major generations of SMART Board interactive whiteboards, released five major versions of our SMART Notebook software and have developed, and acquired a company that has developed, several generations of proprietary optical touch technologies and solutions. In addition to our interactive whiteboards, we also offer a range of hardware, software and content designed to integrate seamlessly with our interactive whiteboards. Our commitment to innovation and technological advancement has resulted in 59 patents issued in the United States, 57 patents issued in other countries and approximately 456 patent applications pending worldwide.”
IPVision Merger and Acquisition Support Services
IPVision has helped companies develop and execute on a merger and acquisition strategy to bolster their revenues by extending their technologies and patent positions. Our Patent Analytics and Portfolio Ratings are used to screen acquisition candidates developed through traditional M&A search activities. We have also identified other M&A candidates that can bolster a patent strategy when entering an new technology segment. Contact Us for more information.
Author: Joseph G. Hadzima, Jr. | Senior Lecturer, MIT Sloan School of Management | President of IPVision, Inc.
M86Security has filed a patent lawsuit in Delaware against McAfee, Symantec, Webroot Software, Websense and Sophos alledging infringement of two "hostile downloadables" patents owned by Finjan Software. Representing M86Security is Philip A. Rovner of Potter Anderson and Corroon LLP and Paul J. Andre of King and Spaulding. Finjan was acquired by M86Security in November 2009. M86Security describes itself as "... the largest provider of Secure Web Gateways and the largest independent provider of Web and e-mail content security in the world. Four leading technology companies have merged to become a full-service, single source provider of Web and e-mail gateway security, encryption and DLP solutions."
For information about key patent positions by McAfee, Symantec and other information security companies, see our Patent Perspectives: On Security supplement to the July / August Technology Review magazine briefing on information security.
IPVision Patent Map
The two U.S. patents asserted by M86Security are U.S. 6,092,194 "System and method for protecting a computer and a network from hostile downloadables" which has been cited by 194 other U.S. patents and U.S. 6,480,962 "System and method for protecting a client during runtime from hostile downloadables" which has been cited by 31 other U.S. patents. These patents are shown on this IPVision Patent Landscape Map (the top "fan" is the '194 patent). Note: Click on Patent Map Image to View an Interactive Patent Landscape Map.
The defendant companies have the following number of patents that cite these Finjan patents as prior patent art: Symantec (19 patents), McAfee (7 patents), Webroot Software (7 patents). Neither Websense nor Sophos have patents that cite these Finjan patents. Other major patent holders that cite Finjan include IBM (17 patents) and Sun (12 patents, which actually is 16 if you include those patents held by HP).
Prior Finjan Patent Litigation and Licensing
Patent claims analysis is now in focus issuance of the Bilski opinion by the U.S. Supreme Court.
Looking back a few years, few business executives would think that "patent claims" would be an issue that they read about in the popular press. Thanks to business method patents, the Bilkski case and the ongoing software patent debate, this issue is now front and center as a question for corporate patent counsel.
Unfortunately, few know where to begin planning their reaction to questions about the impact (if any) of this decision and others certain to follow.
The traditional approach of reading each patent (and each patent's multiple independent claims) will generally not work. In other words, having spent millions of dollars in legal expenses and fee to build a portfolio of patents, and having a full roster of ongoing patent work, how will your legal department find time, staff and money to invest in this high-cost, yet necessary review?
A better process is to ask your attorneys to obtain a focused review of your patents and claims that meet key criteria and to utilize available tools to prioritize and assist in their effort.
Start with a bench-mark assessment of your portfolio for breadth and construction - a typical patent portfolio claims analysis driven by IPVision's expert system developed with leading Fortune 100 corporate patent departments, enables answers within 2-3 days, with consistent, repeatable results.
With this understanding, ask your counsel to look at your most important patents - namely, those patents that are most important to your current and future revenue streams, those that are important to your competitive position (i.e., provide leverage over competitors), and those that are not already weakened given other concerns
Finally, combined with other analysis, integrate this review with a broader patent portfolio assessment with a view to ‘pruning' out legacy patents that are no longer worth funding.
With many clients, the current and ongoing savings can be quite significant and in some industries firms may find alternative tactics to monetize strong, yet non-strategic / non-core patents through sale or licensing.
Note, however, despite press focusing on patent monetization as a key driver for corporate executives, we caution that patent monetization is generally a longer-term effort and initiative.
Generally, focus first on asking the right questions about your patent position and how your patent portfolio protects and enables your business strategy.
With those answers in hand, you are then well-positioned to focus on work on patent monetization or patent related initiatives.
Given the Bilski opinion, and the certain to result press and legal discussion, now is a good time to consider how much you know about your own portfolio.
As with many treatments, invest a small amount now (in this example, obtain a portfolio claims assessment) and receive sizable returns and efficiencies by focusing your company's legal review and efforts.
UPDATE: $7.7 Billion Update to Patent Perspectives Report (Intel Acquires McAfee)
MIT's Technology Review's July - August issue includes anin-depth briefing on information security. In working with Technology Review, we assessed over 20 companies identified by Technology Review's editors across a spectrum of activities to support this briefing and to provide a supplemental report on key patent drivers and on patent positions in the industry.
Download a copy of the Patent Perspectives: On Security briefing
As information and infrastructure security continues to increase in personal, commercial and public importance, it is informative to understand how leaders in the field drive continuous innovations and derive value from the many strategic options available to them.
The supplemental report to Technology Review's Security Briefing reports key financial and patent metrics, including our Patent Portfolio Assessment ratings, for the following publicly listed companies ranging from broad-based software firms such as Microsoft to focused firms such as Symantec and McAfee:
This analysis was extended to include ratings of venture capital funded companies, ranging from such well-known firms as Facebook to Verdasys, WhiteHat, and Panda Security:
As you read the report, we encourage you to consider the available key insights into questions such as:
• What U.S. patents do these 20 Companies own in the security space?
• What is the relative strength of their respective portfolios?
• How are these patent portfolios positioned in the broader patent landscape?
And, perhaps most importantly, consider the initial insights into how effectively management may be at utilizing intellectual property in their corporate strategy and in delivering financial returns.
In addition, to a focus on select companies, the supplemental report concludes with a direct comparison of the patent positions of two critically positioned companies: Symantec and McAfee.
There are many lessons that legal, R&D, and corporate leadership can garner from the forces shaping the security industry. Hopefully, you find the Security Briefing Technology Review and IPVision supplemental report useful your efforts.
On a closing note, to respect confidentiality and respect commercial interests, we relied exclusively upon Technology Review's identification of companies, topics, and public data in preparing this report. Please let us know if you have specific questions or if we can provide additional analysis based upon your more focused objectives.
Fresh from a post about the 9-digit VirnetX Microsoft patent litigation settlement by IPVision executive and Sloan School of Management faculty member Joe Hadzima, VirnetX announced that they are moving from microcap status to inclusion in the broader Russell 3000 index. In addition, VirnetX is issuing a special dividend of $.50 per share for shareholders of record on July 1.
This Russell inclusion moves VirnetX from speculative or litigation pure-play status into several ETF holdings, increased investment exposure and eligibility for certain fund managers. In recent trading, VirnetX's stock climbed well over market performance (image credit: MarketWatch) with VirnetX's returns significantly greater than S&P performance:
Needless to say, this is a significant shift from VirnetX's recent pre-revenue (low or no-revenue) status to increased and expected future contracted cashflows from Microsoft and other supposed patent infringers.The VirnetX example provides additional support for corporate executives to proactively manage patent risk and to integrate patent analysis into corporate strategy processes.
As shepherds of stakeholder value, management and board members should contemplate the business processes and measurements in place to assure that this critical lever is not overlooked -- whether extracting residual value from a non-revenue producing innovation effort or from mitigating patent risks to and protecting successful commercial enterprises.
Contemplate the core drivers of your strategy, the IP assets supporting them, and ask whether you have the business processes, budgets and insights to properly manage them.
The phrase "patent landscape" has become quite popular amongst the patent specialists and patent expert set. Their gravitation to the term is well-founded given the importance of IP rights to corporate success.
Unfortunately, most persons focusing upon "patent landscapes" look to laborious (or labor arbitrage driven) studies of technical disciplines.
Focus upon the core issues facing technology company executives, management and investors.
And, perhaps most importantly, do we have a sound patent strategy and method to exploit other IP rights that we own?
Upon reflection, a better strategic approach to this process exists:
- Look at known patents and research leaders
- Analyze others use of those innovators' terms of art and key words
- Assess activity trends and investment concentrations
- Use proven evidence-based techniques to identify the core players, trends, and investment clusters within the technology landscape
Some of these answers are relatively easy to obtain, and cost-effective:
- Free or low-cost resources exist, including our own See-The-Forest patent analysis software
- When required, more extensive patent insights can be gained quickly and cost effectively from patent analytics reports or focused projects. Although budget and time investments are required, the returns are significant.
For example, consider how IPVision patent landscape analysis supports SBIR phase II grant applicants to the
National Science Foundation understand key patent considerations related to technology commercialization.
At the end of the day it is important to respect your own expertise and understanding of your firm's market dynamics.Focus on obtaining patent information in context.
You know that successful leadership is demonstrated by explicitly managing your decision process and all available insights and information -- not by blindly delegating decisions to others inside or outside of your organization.
In the strategy context, we previously discussed the role of patent analytics in corporate strategy and how leading executives and investors take command of questions related to patent risk, market entry, and acquisition decisions grounded in IP rights.
Ask that your experts take evidence-based factors and a broader perspective into their patent analysis.
You might be pleasantly surprised by the business and strategic insights that your patent counsel can provide you after traditional patent risk management blinders and lenses are removed.
The Lemelson-MIT Awards Committee today announced that Carolyn Bertozzi of the UC-Berkeley Department of Chemistry is the 2010 Winner of the $500,000 Lemelson-MIT Prize.
According to The Lemelson-MIT Program the Prize "recognizes individuals who translate their ideas into inventions and innovations that improve the world in which we live....Dubbed the "Oscar for Inventors," the Lemelson-MIT Prize is awarded to outstanding mid-career inventors, who have developed a patented product or process of significant value to society, which has been adopted for practical use, or has a high probability of being adopted."
Professor Bertozzi's group "studies cell surface interactions that contribute to human health and disease with specific projects in the areas of cancer, inflammation and bacterial infection. We use the techniques of organic synthesis, genetics and biochemistry as tools to study and manipulate complex cellular processes."
Patent Landscape Map of Bertozzi patents
Professor Bertozzi has 32 issued U.S. patents and 17 published pending U.S. patent applications.
This IPVision Patent Map shows the U.S. patents and applications of Carolyn Bertozzi and the patent landscape around them -i.e., the patents cited by the Bertozzi patents and the 46 subsequently issued patents that cite Bertozzi as prior art. Note: Click on Patent Map Image to View an Interactive Patent Landscape Map.
The Bertozzi patents have been cited by 9 patents owned by Toyo Suisan Kaisha, Ltd, a food products company and 8 patents owned by Enzon, a cancer drug company.
IPVision Report Provided to Lemelson-MIT Prize Committee
IPVision provided the Lemelson-MIT Prize Committee with patent analysis reports on each of the semi-finalist and finalist nominees for the 2010 Lemelson-MIT Prize. Obtain a free copy of the IPVision Patent Analysis Report on Carolyn Bertozzi.
Author: Joseph G. Hadzima, Jr. | Senior Lecturer, MIT Sloan School of Management | President of IPVision, Inc.
As companies continue to face pressures to maintain (or revitalize) growth rates, a common tactic is to reassess their market focus and seek entry into new markets.
Whether this growth is organic R&D (build), open innovation (build and buy), or acquisition, including the business perspective of patents and IP rights provides an important strategic lens. The value of this lens is greatest when incorporated early into the process to help guide understandings of a market's dynamics.
First, let's outline the traditional role of IP in the acquisition process of many multi-billion dollar companies: (we will discuss other processes separately)
- We are looking at buying firm X to help establish our next high growth market
- They are a market leader with key customers and strong cash flow
- Does the firm have IP? (Yes, great, let's verify that the fees were paid -- maybe we can get our attorneys to help us review the patents at the last minute too)
Questions unasked:
- Are there other patent risks that we should be concerned about?
- What other companies may be developing technologies that compliment / leapfrog our acquisition candidate?
- Are there past efforts / trends that we can learn from / adopt given our present or unique capabilities?
- Are there pre-revenue companies that we should monitor or evaluate?
- What is the quality of the target firm's intellectual property and patent positions?
- Are the target's IP rights such that we might modify the control premium?
- Can we 'change the game' in this market by building / buying a foundational IP position?
A better process exists. Here are a few key steps to incorporate this view:
- Develop a dual patent view to support your corporate strategy process
- Become comfortable with direct and indirect competitors, including both "market competitors" and "IP competitors"
- Remove blinders (ignoring patent risk is not managing patent risk)
- Shift from reactive actions to proactive planning and management -- incorporate IP perspectives into your organization's critical business processes, particularly including R&D, corporate strategy, and risk management
- Ask the right questions and incorporate IP awareness into your broader business culture
At the end of the day, too often, effective IP strategy is confused with the tactic of developing and obtaining patents.
Patents and other IP rights are levers that management can use to fulfill their corporate objectives. Leaders seeking to fulfill growth imperatives through market entry (by whatever means) are well-advised to insist upon obtaining the value of these insights early and often.