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Intellectual Property Issues of Interest to High Tech Companies
Vol 4 Issue 9 October2004

in this issue

How to play the licensing game.

Nintendo goes tilt over license.

Tip of the Month

Disclaimer


 

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Welcome

There's an apocryphal story about a large manufacturing plant brought to a complete halt by a problem in a key machine. The repair person shows up and, with one quick twist of a screwdriver, gets the plant up and running. The plant manager is outraged when handed a bill for $10,000 so the repair person quickly offers to itemize it:

Time to repair machine, 1/6 hour @ $60/hr = $10,
Knowledge about which screw to turn, $9990.

If you have ever negotiated license terms for your patents you know valuation is one of the the most difficult tasks an inventor faces. How much should you expect if your invention is a low cost item that enables a high value product? What happens when you see that your licensee is making a lot of money from YOUR intellectual property? Read "Nintendo Goes Tilt over License" to learn how one inventor tried to "game" the system.


  • How to play the licensing game.
  • Valuing your IP for licensing is a game of strategy. Maybe you will undervalue it and watch as some else profits from your brilliance. Or maybe you have an inflated sense of your invention's value because it's "your baby".

    Acting as your Director of Intellectual Property, TechRoadmap can stand back and help you identify a fair estimate of the value of your patent and we work with experts who have successfully negotiated both large and small license agreements.

    Review our services
  • Nintendo goes tilt over license.
  • How much value does an idea have - specifically a patented idea? Although always a tough question to answer, one way to maximize your patent's value is to try to find as many licensees as possible. In a recent appeals court case the inventor of a tilt sensitive electronic game controller tried to expand the value of his patent by first licensing a supplier of an enabling technology for his controller (Analog Devices) and then suing the enabled manufacturer (Nintendo) for infringement. Was this a legitimate way to get royalties from each step in the value chain or simply trying to get two companies to pay for the same benefit.

    Jordon Jacobs owns a US Patent on a tilt sensitive controller for video games. The claims generally cover controllers with any tilt sensing means. Jacobs sued several manufacturers (Logitech, Microsoft) for direct infringement and also sued Analog Devices charging inducement and contributory infringement since Analog sold tilt sensitive components to the manufacturers. Note that Analog did not infringe directly since its product (a micromachined accelerometer) was not a tilt sensitive controller - just an effective component for an infringing controller.

    Analog settled with Jacobs and was granted an "irrevocable, perpetual" license to "...make [and] sell...micromachined accelerometers, for use in tilt-sensitive control boxes." In addition, Jacobs "covenants not to sue Analog" for "any cause of action...by Analog or any other party..."

    Having made peace with Analog, Jacobs then sued Nintendo for building a tilt sensitive controller with Analog's accelerometers. Jacob agreed the settlement protected Analog against being sued for direct or indirect infringing activities but argued that the protection did not extend to Analog's customers.

    The court held that giving Analog the right to sell its accelerometers for use in infringing tilt-sensitive controllers would be meaningless if Jacobs could effectively prevent Analog from making those sales by suing its customers for using those accelerometers for the very purpose for which Analog was authorized to sell them. The court said Jacobs should not be permitted to do "through the back door [i.e., suing Nintendo] what he cannot do through the front door", i.e., by suing Analog.

    Thus, even though an inventor is free to license his invention for whatever value he can negotiate he cannot double the value by demanding both the seller and the buyer pay for the same transaction - that would be "gaming" the system.

  • Tip of the Month
  • Licensing takes a cool head and a steady hand:

    • Get help if you can't be dispassionate - Like any negotiation, you'll do better if you let someone without emotional involvement do your negotiation.
    • Play fair - You learned this in kindergarten. If you press too hard you'll drive licensees to another technology (eventually). Don't trade short term gain for long term failure.
    • Help you licensees be successful - A small percentage of a big pie is better than a larger percentage of nothing. Make your technology the industry standard.

  • Disclaimer
  • Nothing in this newsletter should be construed as legal advice. TechRoadmap serves as an interface between companies and their legal counsel.

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