Posts filed under ‘Intellectual Property Desk’
Last October 25, 2012, Ayala Foundation’s Technology Business Incubator participated
Intellectual Property Office of the Philippines’ (IPOPHL) training workshop on Appropriate Technologies and Intellectual Property held at the Tanghalang Teresita Quirino of the University of Santo Tomas. In cooperation with the World Intellectual Property Organization (WIPO), this event featured the short-listed contestants for the WIPO-KIPO Competition on Innovative Solutions for Everyday Life.
Of twenty-three entries to the competition, seven were chosen for their innovations: (1) Design and Development of a Small Scale Machine for Recycling Discarded Thermoplastic into Fibre for Insulation, (2) Utilization of Woven Water Hyacinth Fiber Mat as Corrugated Composite Roof Sheets, (3) Immunomagnetic Bead Separation Kits For Detection of Human Fecal Biomarker in 10 ml Water Samples, (4) Utilization of Waste Mango Seed Husks (MSH) as Feedstock for Biomass Briquetting, (5) Biodegradable waste decomposer, (6) Water-driven Turbine Pump, and a (7) Mini-Biodiesel Plant. The top three teams who managed to use their knowledge and appropriate technology in solving problems in the Philippine society were awarded with a token and the cash prize of $500, $750, and $1250 respectively.
Atty. Andrew Michael Ong, Deputy Diretor General of IPOPHL talked about the “Promotion of Innovation through Effective Use of Intellectual Property Rights” where he pointed out that knowledge is best identified and delineated so that it can be owned, protected, valued, and transacted. Mr. Heum Jeng Kang of WIPO and Ms. Hee-jung Hong of the Korean Intellectual Property Office (KIPO) gave back-to-back talks on the successful innovation cases of KIPO and the problem-solving methodologies, inventions, and engineering design. Mr. Omar Katbi, Head of the Outreach Services Section, Communications Division of WIPO talked on “Appropriate Technology Competitions: Experience and Outcome” emphasizing how we can utilize patent information for these solutions.
Ms. Virginia Aumentado of IPOPHL and Mr. Konard Lutz Mailander of WIPO discussed how patent information serves as a reservoir of knowledge and posed a series of business questions: “Are there any gaps or white spaces i.e. areas with little patent protection, that permit business opportunities?”, “Where are the crowded areas?”, “What is the quality & value of an individual patent?”. A concluding panel session with Mr. Katbi, Atty. Ong, and Mr. Johnson Fong tackled Practical Approaches to Appropriate Technology Development and Commercialization: From the Idea to the Market. Ending with the challenge to the audience to cite problems in our society which they think can be solved by new technologies.
A foreign company is interested in the invention of one of our friends and he wonders how much royalty he should ask for. If the life of the patent is 15 years and the company makes an annual revenue of $100 billion, he is also wondering, “Should I ask for a one-time royalty or a percentage of profits/revenues?”
According to our expert, “There are several factors that you have to consider in making a decision.” In a nutshell, here are the major points to consider:
1. Sure the patent lasts 15 years, but what is the technology or product? Is it something that can easily be replicated or replaced by a better one in the market? If the answers to both are yes, then the seller should recoup as much early on in the implementation of the agreement. Normally, the prescribed royalty payment scheme could be initial down payment of X amount (lump sum), then running royalties based on generally sales. When computing for sales, parties can opt to use Gross Sales or Net Sales.
2. Is the product/technology already mature that no major development need to be incorporated? If there are further developments that need to be done in order that the product/technology can be marketed, then obviously the buyer will include that in his cost factor.
3. You can also use profit as base but only if you are confident enough that when the product is marketed it will take on.
4. As to the rate of royalty, what I have seen as standard now is 5% of net sales. If it is a breakthrough product or technology you can ask for a higher one. But for purposes of negotiation, it is better to quote a higher rate so that 5% will still be your floor. Licensing should be a win-win situation, so do not price the technology too high as to turn off the interested buyer.
5. There are other cost factors that can be included in the estimate. If the transfer would necessitate the training of the Japanese personnel or supervision by the technology owner during the adaptation of the technology into the manufacturing, then that is another source of payment outside of the transfer of the technology. Make sure the buyers will cover your per diem while providing this assistance.
6. Another option, if licensee would not want to bother anymore with the activities under a license, it is an outright sale. Here, the seller will have to be very diligent in forecasting the market for the product and potential sales, because if the product becomes a hit in the market, you lose your share in future earnings. If otherwise and you are happy because you will get paid but the buyer tries to bring down the sales price, then your negotiating skills should be really good.
7. Lastly, make sure the contract explicitly states that the buyer will market the product because sometimes licensees buy technology to shelf it because it is competing with their own existing products. There also ought to be no provision on the automatic transfer of any future major improvements made by the licensor on the technology. Should the buyer want to partake of the improvements, this must entail negotiations for a separate payment.
The AyalaTBI blog has another new feature, IP Desk, which answers your questions on intellectual property, an important but tricky terrain for innovators and inventors. AyalaTBI is here to help. Please email us your questions and we will field it out to our network of experts to help you with your inquiry!