Download - Patent valuation using MDMP methodology
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Patent Valuation – The Achilles’ heel of Technology
Commercialization
Multi-Dimensional Multi-Perspective Valuation Methodology
© Crafitti Consulting Private Ltd.
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What life cycle stage is your Invention/Patent?
April 27, 2011 © Crafitti Consulting Private Ltd. 2
Idea Invention
Patent Application Granted Patent
Post Grant Opposition
Cross Licensing
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Valuation Methodology for a Patent
April 27, 2011 © Crafitti Consulting Private Ltd. 3
Current State of the Patent/
Patent Value Indicators
Citations
backward/
forward
Maintenance
levels/ Legal
Status Technical
Description
Family
Size
Claims Analysis
Remaining
Life
Parameters used by standard methodologies
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Standard TRIZ-based
Social and Value
Network Analysis
Future Potential
Patent Life Contradictions resolved
Thought Experiments
Valuation
Multi-Dimensional Multi-Perspective (MDMPTM) Valuation does not produce a single $ number. The methodology gives a sum total of past, current and potential future value that the asset may create in a range of possibilities.
Crafitti’s Multi Dimensional Multi-Perspective Valuation Methodology (MDMP)
(c) Crafitt
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© Crafitti Consulting Private Ltd. 5
Lets go back 60+ years ……..
1946,
WW II has just ended
A 20 years old Engineer in Baku, USSR, working in USSR Innovation Office, decided
To develop a method for systematic invention that could transform engineering creativity from MAGIC, attainable by few, into a logical discipline available to many more.
He Conjectured, the key secrets of inventiveness should NOT be sought inside the inventor’s minds, but rather in the logic of inventions themselves.
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Father of TRIZ - Genrich S. Altshuller (Oct.15 1926 - Sept. 24,1998)
Main postulates of TRIZ:
► The evolution of engineering systems is not a random process, but obeys certain laws;
► Products/processes evolve towards the increase of perfection (ideality) by elicitation and overcoming technical and physical contradictions.
He uncovered the secrets of systematic creativity, successful
innovation and design.
The development of TRIZ involved thousands of engineers, took more
than 50 years and included the analysis of millions patents
worldwide.
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Estimating The Current State of the Patent Using TRIZ – why TRIZ?
April 27, 2011 © Crafitti Consulting Private Ltd. 7
• 1946 Patent Officer in Russian Navy
• Discovered patterns in patents, published paper. Sent to Gulag
• 1954 released, analysed 2,500,000 patents
• Identified what makes a successful patent
• 1956-1985 TRIZ formulated
Theory of Inventive Problem Solving by Altshuller
Main postulates :
► The evolution of engineering systems is not a random process, but obeys certain laws;
► Products/processes evolve towards the increase of perfection (ideality) by elicitation and overcoming technical and physical contradictions.
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Patent Valuation
• 4 Key Pillars of Our Holistic Approach
– TRIZ
– Social Network Analysis
– Scenario Planning
– Analytic Hierarchy Process (AHP)
• Multi-Dimensional Multi-Perspective Methodology
April 27, 2011 © Crafitti Consulting Private Ltd. 8
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Crafitti Multi-Dimensional Multi-Perspective (MDMP) Valuation Methodology for a Patent
April 27, 2011 © Crafitti Consulting Private Ltd. 9
Current State of the Patent
Future State of the Patent
Historical Factors related to the
invention/Patent
Current State of sub-systems,
components and parts that make-up
the patent
Future State of sub-systems,
components and parts that make-up
the patent
Historical Factors related to
components and sub-systems
PAST PRESENT FUTURE
Current State of Technology, Market
and Competition
Future Scenarios in Technology, Market
and Competition
History of Technology, Market
and Competition
Sub
Sys
tem
Sy
stem
Su
per
Sys
tem
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Crafitti Multi-Dimensional Multi-Perspective (MDMP) Valuation Methodology for a Patent
April 27, 2011 © Crafitti Consulting Private Ltd. 10
Current State of the Patent/
Patent Value Indicators
Citations
backward/
forward
Maintenance
levels/ Legal
Status
Technical
Description
Family
Size
Claims
Length/Breadth
Remaining
Life
Assessing the Patent Using Theory of Inventive Problem
Solving (TRIZ) – A Unique Proposition
TRIZ Level of Invention 77% of inventions are at Level 1 or 2, 19% at Level 3, 4% at Level 4 less than < 0.3% at Level 5, Higher Level means higher Valuation
TRIZ Laws of Evolution 9 Laws have been identified. Based on the position of patent on each of these laws it is possible to ascertain the strength of the patent
TRIZ Function and Resources Analysis How does various parts of the invention combine to perform the function and how much resources have been utilized help in understanding the strength of Invention
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5 Levels of Inventions
• Pioneering Invention – based on newly discovered phenomenon
• Pushing existing technology to a higher level
• Revolutionary Level 5 (<0.3%)
• New System Developed
• Interdisciplinary solutions
• Replacing old technology with New Level 4 (< 4%)
• Radical change or elimination of one principal system component
• One Engineering Discipline
• Resolution of a physical contradiction Level 3 (19%)
• Slight Modification of the system
• Knowledge from different areas within the industry
• Resolution of a technical contradiction Level 2 (45%)
• A simple improvement
• Knowledge within the trade
• No system conflicts are resolved Level 1 (32%)
April 27, 2011 © Crafitti Consulting Private Ltd. 11
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Small incremental
improvement
Invention using constructs
known within the domain
Invention using a known construct from another (possibly related) domain
Invention using a conceptually distant construct (totally unrelated domain)
How strong are the inventions?
(c) Crafitti Consulting Private Limited
This patent
belonged to a
startup
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A law of technological system evolution describes significant, stable, and repeatable interactions between elements of the system, and between the system and its environment in the process of its evolution
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© Crafitti Consulting Private Ltd. 14
TRIZ: Laws of Evolution
1. Law of Increasing Degree of Ideality - Increasing Ratio -> Benefits/Harm (cost)
2. Law of Non-uniform evolution of subsystems -> Leads to System Conflicts
3. Law of Transition to a higher Level system -> from simple to more complex
4. Law of Increasing dynamism (flexibility) -> More adaptable to change
5. Law of Transition to micro-level -> Increasing fragmentation
6. Law of Completeness -> Gradual Elimination of Human Component
7. Law of Shortening of Energy Flow Path -> Reduction in Energy/Info transformation stages
8. Law of Increasing controllability -> Evolution of controlled interactions of system elements
9. Law of Harmonization of rhythms -> Synchronization of natural frequencies of elements
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Patent Benchmarking Competitor’s Patents to TRIZ Lines of System Evolution
Case Study: Technological Alternatives Study on EP0922744
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Crafitti Multi-Dimensional Multi-Perspective (MDMP) Valuation Methodology for a Patent
April 27, 2011 © Crafitti Consulting Private Ltd. 16
Current State of the Patent/
Patent Value Indicators
Citations
backward/
forward
Maintenance
levels/ Legal
Status
Technical
Description
Family
Size
Claims
Length/Breadth
Remaining
Life
Assessing the Patent Using the its Relative position in its Ego-Centric Citation Network and
Social Citation Network
TRIZ Level of Invention 77% of inventions are at Level 1 or 2, 19% at Level 3, 4% at Level 4 less than < 0.3% at Level 5, Higher Level means higher Valuation
TRIZ Laws of Evolution 9 Laws have been identified. Based on the position of patent on each of these laws it is possible to ascertain the strength of the patent
TRIZ Function and Resources Analysis How does various parts of the invention combine to perform the function and how much resources have been utilized help in understanding the strength of Invention
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SOCIAL CITATION NETWORK ANALYSIS OF A PATENT – Crafitti’s Methodology
April 27, 2011 © Crafitti Consulting Private Ltd. 17
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April 27, 2011 18 © Crafitt
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A unique way to quantify the relative value of a patent in its citation network
HOW SOCIAL IS YOUR PATENT?
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Relative Centrality of the Patent in its Ego-Centric Citation Network
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1997 1996 1987 1985 1984 2000 2002 2003 2006 2007 2008 2009
EVERY DOG IS A LION IN ITS STREET
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Relative Centrality of the Patent in its Ego-Centric Citation Network
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1997 1996 1987 1985 1984 2000 2002 2003 2006 2007 2008 2009
Building the Ego-Centric Citation Network of the Patent
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Relative Importance Index quantifies (using crafitti’s methodology) the centrality of the Patent in its Ego-Centric Citation Network
April 27, 2011 © Crafitti Consulting Private Ltd. 21
1997 1996 1987 1985 1984 2000 2002 2003 2006 2007 2008 2009
Relative Importance Index gives a view
of vitality of the patent. If its value is
more than the rest of the patents in its
ego-centric citation network, valuation
should be more
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Relative Centrality of Patent in its “Social” Citation Network – taking a cue from social network analysis
April 27, 2011 © Crafitti Consulting Private Ltd. 22
Relative Social Importance Index gives a view of vitality of the patent in its social network of patents which is formed by connecting all forward and backward citations of patents in its ego
centric citation network. This involves forming the “social” citation network of the Patent, which may large number of patents
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CASE STUDY
April 27, 2011 © Crafitti Consulting Private Ltd. 23
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Citation Analysis from Espacenet
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EP Patent No. EP1514784A1
Social Network Analysis and Ego Centric Index Computation Using Crafitti’s Methodology for finding important patents in the dense citation
network of a patent
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What is the Ego-Centric Citation Index of a Patent?
Ego-Centric Citation Network of a Patent (called the central patent) consists of all those patents that either cite the Patent or are cited by the Patent. Besides the ECCN of a Patent has links that connect any two nodes in the ECCN but need not pass through the central patent.
Social Citation Network of a Patent (called the central patent) consists of all patents in its ECCN plus all patents that cite or are cited by each patent in the ECCN of the central patent.
Crafitti’s Social Citation Network Analysis measures three indices on these Patents – Patent Dependency on Network Index (PDNI, which gives a relative measure of how much the network depends upon the Patent in terms of citation relative to all other patents in the network. Network Dependency on Patent Index (NDPI) gives a relative measure of how much patent depends upon the Network in terms of citation relative to all other patents in the network. The Ego Centric Citation Index (ECCI) gives the relative measure of how much it cites the other patents and how much it is cited by other patents in the network.
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Ego Centric Citation Network of Espacenet Data
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Social Citation Network of Espacenet Data (Depth 2 or Degree 3)
87 Patents
129 Citation Links
Which of these Patents
are more important?
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Crafitti Multi-Dimensional Multi-Perspective (MDMP) Valuation Methodology for a Patent
April 27, 2011 © Crafitti Consulting Private Ltd. 31
Current State of the Patent/
Patent Value Indicators
Citations
backward/
forward
Maintenance
levels/ Legal
Status
Technical
Description
Family
Size
Claims Analysis
Remaining
Life
Assessing the Patent Using the its Relative position in its Ego-Centric Citation Network and
Social Citation Network
TRIZ Level of Invention 77% of inventions are at Level 1 or 2, 19% at Level 3, 4% at Level 4 less than < 0.3% at Level 5, Higher Level means higher Valuation
TRIZ Laws of Evolution 9 Laws have been identified. Based on the position of patent on each of these laws it is possible to ascertain the strength of the patent
TRIZ Function and Resources Analysis How does various parts of the invention combine to perform the function and how much resources have been utilized help in understanding the strength of Invention
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COMPARING APPLES WITH ORANGES – AN EXPOSITION OF AHP
Similar to Decision Matrix approach but
allows a wider range of values in
comparison of alternatives
Developed by T.L. Saaty (1980)
AHP invites pair-wise qualitative
comparisons
The problem is organized as a hierarchy
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Why AHP ?
Qualitative Inputs
Pairwise comparisons
Gartner
Reduces Complexity of decision by organizing it in structured
format
Promotes comparison of homogeneous characteristics
Framework to check logical consistency
Facilitates What if Scenarios
It undermines Political Agendas
Facilitates Senior Managers’ buy-in
Sound Mathematical Basis
Consistency Evaluation
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Citation
Network
Analysis
Family
Size
Claims
Analysis
TRIZ Level of
Invention
Function/
Resource
Analysis
Integrated Patent Valuation Rating
Technical
Description
Analysis as per
TRIZ Laws of
Evolution
Maintenance
levels
Ego-
Centric
Citation
Network
Social
Citation
Network
Combining Multiple Value Indicators Using Analytic Hierarchy Process (AHP)
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Using the AHP for relative importance of each parameters from multiple experts
April 27, 2011 © Crafitti Consulting Private Ltd. 35
Parameter Relative Importance
Level of Invention 15.0%
Position as per Laws of Evolution 15.0%
Function/ Resource Analysis 15.0%
Citation Network Analysis 15.0%
Maintenance levels/Legal Status 5.0%
Technical Description 10.0%
Claims Length/ Breadth 12.5%
Family Size 12.5%
Total 100%
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Crafitti Multi-Dimensional Multi-Perspective (MDMP) Valuation Methodology for a Patent
April 27, 2011 © Crafitti Consulting Private Ltd. 36
Current State of the Patent
Future State of the Patent
Historical Factors related to the
invention/Patent
Current State of sub-systems,
components and parts that make-up
the patent
Future State of sub-systems,
components and parts that make-up
the patent
Historical Factors related to
components and sub-systems
PAST PRESENT FUTURE
Current State of Technology, Market
and Competition
Future Scenarios in Technology,
Market and Competition
History of Technology, Market
and Competition
Sub
Sys
tem
Sy
stem
Su
per
Sys
tem
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Scenario Writing and Thought Experiments (understanding something about something in future)
37 © Crafitti Consulting Private Limited
Scenario Writing: Description of sequences of
events for thought stimulation on potential crisis and to anticipate future. Usually include plausible, but unexpectedly important situations and problems that exist in some small form in the present day.
Thought Experiments: the process of employing imaginary situations to help us understand the way things really are. The understanding comes through reflection upon this imaginary situation.
Crafitti Approach Combines Scenario Writing with Thought Experiments
During the Idea Crafting Engagement for one of the world’s top three financial data provider, four global scenarios were written and future initiatives played out in each of Global scenarios as thought experiments to rank order the initiatives
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Valuation Methods Used (in Practice)
• The Capitalization Approach
April 27, 2011 © Crafitti Consulting Private Ltd. 38
• The Income Approach
• The Cost Approach
• The Market Approach
We Propose a Valuation using multiple perspectives and
multiple Scenarios
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MDMP Valuation
• In each of scenarios (i) that emerge during the valuation study what are the potential benefits that can accrue from the patent (bi) and the risks (ri)
– Incorporating the Invention in the existing products
– Potential Market Share enhancement
– Using the invention to Invent more adjacent areas
– Does it denies a space to competitor
– Does it enhances the portfolio of the inventor – the synergistic effect
– How easy it is to design around the patent?
– How easy it is to verify the infringement?
• In each of scenarios Value (vi) of Patent will vary within a range based on benefits and risks of the patent loosing its relevance (bi) and (ri)
• Each Scenario also comes with an estimation of likelihood or a probability estimation (pi)
• Overall value V = ∑ pi x vi = ∑ pi x f(bi , ri)
April 27, 2011 © Crafitti Consulting Private Ltd. 39
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Crafitti’s Patent Valuation Methodology
• Is Multi-Dimensional and takes into account multiple perspectives to produce a robust valuation considering multiple futures, current state and past trends
• We combine multiple science based methodologies to come up with the valuation framework
– TRIZ Based Patent Analysis
– Value Network Analysis
– Analytic Hierarchy Process
– Scenario Writing
– Standard Patent Landscaping and Analysis
– Systems Analysis
Multi-Dimensional Multi-Perspective (MDMPTM) Valuation does not produce a single $ number. The methodology gives a sum total of past, current and potential future value that the asset may create in a range of possibilities.
April 27, 2011 © Crafitti Consulting Private Ltd. 40
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Thank You
Navneet Bhushan, Co-crafter
Founder Director| Crafitti Consulting Pvt Ltd |www.crafitti.com
+91-9902766961 |+91-80-41688077
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