Company Overview and IP Portfolio. 2
Geographical Breakdown. 3
Patent Cost 3
Competition Landscape and IP Ecosystem.. 4
IP Strategy. 5
IP Vision. 5
License Models, Contracts and Negotiations. 5
Implementation of Strategy. 7
Establishing Fractus’s Intellectual Property (IP) Strategy requires the accountability of several factors, fundamentally the IP Portfolio and the relevant actors in the IP Ecosystem. It is imperative the IP Strategy is connected to the business strategy, milestones NK(2 and projects to ensure the company NK(3 objectives are uniform in direction.
The strategy goals,; objectives and IP Vision for Fractus should be examined. These which should consider the core purpose of the business;, in an ideal world what would the company achieve and what is expected to be accomplished using IP.
Fractus’s IP Plan will act as a guiding principal for evaluating competitors’ products and Fractus’s portfolio. Providing a plan of stance during infringements and an understanding of the business’s use of patents and what path and scale the business is pursuing.
With the IP Strategy outlined the implementation of the plan should not be overlooked, potential challenges should be considered, and the risk associated with these challenges mitigated.
Company Overview and IP Portfolio
Fractus was founded in 1999 as a contract engineering service provider and design laboratory. Specialising in antennas based on fractal formations for use in devices such as tablets, pacemakers and smartphones. The company suffered from patent infringements from customers. It was able to seek litigation against customers because of the strong patent portfolio in place. Resulting from this, the company evolved into an international tech development and licensing company, relying heavily on enforcing its Intellectual Property. (European Patent Office, 2017; United States District Court for the Eastern District of Texas Tyler Division, 2012).
The policy enabled the company to grow from two original patents in 1999 to over 40 present day (European Patent Office, 2017). From 2007-2009 Fractus downsized and other growth strategies were explored due to an increase in the number of customers violating patents by duplicating designs and not paying royalties.
The company adapted moving from a products and services company developing customised designs for a few number of large clients, to a technology licensing company creating excellence in antenna technology, serving numerous companies in multiple markets. Now approximately 90% of the company revenue source is from licensing, the remaining 10% from sales of products and services (European Patent Office, 2017).
Fractus has a total of 61 granted patents and 10 patent applications distributed into 71 patent families (Figure 1 NK(4 and 2). The main technology areas are ground plane, electromagnetic wave signals, space filling, wireless devices and radiating systems. Based on the countries of patent applications, the focal markets for Fractus are USA and Europe (Cipher, 2017).
Fractus have Hheadquarters in Barcelona, Fractus with has operations all over the world and has attained a vast network of business partners. Showing the territorial breakdown of the company’s patent portfolio (Figure 3), NK(5 makes it possible to determine the geographic markets the company is focusing onNK(6 . USA has the highest percentage of patent coverage with a total of 53 patents (5 of these being within the category of package, integrated circuit package, radio frequency, invention relates, conducting pattern) and Europe second with 10 patentsNK(7 .
Since 2008 the cost of patents has fluctuated ranging from $469,000 in 2008 to 2017 where the estimated annual expenditure was $617,000 (Figure 4). Significantly more money was paid towards NK(8 the patents within ground plane, electromagnetic wave signals, space filling, wireless device and radiating systems. The increase in annual expenditure towards the patent portfolio being a result of the evolving company and business plan.
Figure 4 – Estimated annual expenditure to obtain and maintain the selected group of patents (Cipher, 2017)
Fractus has undergone 8 litigations overall ranging in duration from 5 months to 1.5 years, on two occasions acting as the defendant the rest as plaintiff (Figure 5). The opposing company in each case varying with Samsung Electronics Co and Samsung Electronics Research Institute being responsible for three in total of the offensive disputes.
Competition Landscape and IP Ecosystem
Fractus reorienting its business activity from manufacturing to licensing patents to third parties resulted in an increase in turnover of almost 3000% between 2009 and 2011. During this period the company made strategic agreements with major mobile phone manufacturers using their products: LG, HTC, RIM, Motorola, Sanyo, Pantech, Sharp, Palm and UTStarcom. (United States District Court for the Eastern District of Texas Tyler Division, 2012). Samsung was the only company to refuse to agree to negotiate the settlement, consequently Fractus filed a suit against them alleging a violation of IP rights and won.
Fractus has a proactive role within industry, helping shape IP rules to create an environment that fosters and rewards creativity and innovation through R&D investment. This combination of engineering know-how and entrepreneurial track record has won recognition from respected organisations in the industry. This recognition has been obtained through licensing with organisations such as LG, HTC, Kyocera, Sharp, Motorola and Blackberry.
Although companies such as Texas Instruments and ARM offer licensing within some of the same areas of technology as Fractus, due to the unique nature of Fractus’s background and business plan, competition is sparse. Research has shown there are no other companies in the exact same industry as Fractus commercialising fractal antenna technology through licensing agreements.
To withhold the reputation within the antenna technology industry for creating and utilising IP to license patents to companies, for use in products and to progress in solving new challenges raised in the development of fractal antenna technology.
· Complete the three current projects in progress by each of their respected predicted completion dates.
· Constantly manage and update the IP Portfolio where appropriate.
· Maintain compliance with the rules set for the IP handling within the company.
· Monitor and mitigate risks of patent infringement.
To continue bridging the ownership of IP with acquisition utilisation and to spend the allocated IP Budget as effectively as possible to provide the company with the maximum return on investment.
License Models, Contracts and Negotiations
Research such as Arora & Fosfuri, 2003 and Grindley & Teece, 1997 suggests the need for a licensing model and strategy. Acknowledging the position of Fractus and its goals, maintaining the companies unilateral licensing model, offering exclusive licensing is most suitable. Recognising the company is still looking to improve its reputation within the industry by offering exclusive licenses, companies will be more inclined to seek Fractus for license agreements rather than conducting their own research, provided the license is only possessed by a limited number of companies (Arora & Fosfuri, 2003). The company must ensure it is not static, especially considering research suggests innovation is becoming more collaborative with patent pools and open innovation becoming more apparent (WIPO, 2011). Ensuring the model evolves with industry technology, patent evolution and Fractus itself is critical for the company to achieve its long-term goals.
Good negotiations require the utilisation of both knowledge and experience. It is important during negotiations of licensing contracts Fractus knows what it wants and understands the customers’ position. It is important the company has confidence and procedures are made and followed. This will ensure courage prevails and negotiations are terminated when appropriate (Lin, 2011). Efficiency is imperative to saving both time and money whilst enhancing customer satisfaction. It is far simpler to license registered rights than unregistered rights, hence to efficiently conduct licensing agreements appropriate procedures should be made to register rights.
In choosing the type of licensing contract the nature of the scale of Fractus and its risk and return profile should be recognised. Considering the customer base of Fractus currently consists of large international companies with diversified product portfolios, quantity based licensing should be agreed for customers producing large amounts of products. This is the case for Samsung, HTC, Blackberrry and Motorola. Due to the mass scale nature of the production of these companies the revenue received would be smaller in comparison to what would be received done on a quantity basis. However, for companies such as Kyocera a variation of this type of licensing should be considered. Kyocera sell low quantity high priced products and so Fractus should apply a revenue based licensing type agreement with such a company specifically.
However, depending on the future vision of the customer portfolio of Fractus it may be desirable to vary the type of licensing agreements made. If low revenue smaller customer types were to be introduced, a fixed fee plus quantity should be considered, as this guarantees a return from the fixed fee. This fee would not be influenced by the customers’ pricing policies in terms of discounts to penetrate markets. For the case of some of the smaller companies within the technology industry being rising stars within markets the royalty received by Fractus would not be influenced as much, as the amount received will not be affected by the revenue stream of the company. Additionally, an upfront fee should be considered, since the future of smaller companies is a lot more unpredictable than of larger companies (Lin, 2011).
The planned length of contracts should depend on the customer and the volatility of the market they are in. Long term contracts should be agreed for stable markets and short-term contracts for highly volatile markets. This mitigates the risk involved with making license agreements with companies at risk of not being able to pay royalties.
Having outlined a licensing model and plan for contracts and negotiations it is important to recognise a lot of the factors which determine the method chosen are influenced by customer demands and markets. Compromising with customers in making such agreements is important for Fractus to retain loyal customers.
It is key for Fractus to bear in mind litigation as a last but important resort when it comes to fighting wilful infringements. A fundamental step in successful litigations is a robust IP portfolio. Breadth and utilisation must be understood to create a robust IP Strategy and integrate different forms of IP into the plan. The inclusion of strict clauses within contracts, although off-putting to some customers is vital in order to specify the ownership of the IP rights associated with a certain deal to remain with Fractus. To successfully fabricate a strong IP Portfolio, Fractus should partner with counsel skilled in IP, to cautiously map out the essential features of both Fractus’s licenses and products, but also customers and potential competitors. IP mapping and the inclusion of improvements within the industry will ensure designs and features cannot be copied (like they have been done in the past), whilst charting the competition will ensure Fractus identifies potential infringement and licensing opportunities.
To act on infringements an offensive strategy will be required. Utilising a fencing strategy will incorporate a procedure of registering the firm’s patents to construct a patent network around the basic patents of those within the industry. The outcome of this would limit freedom of movement of a competitor and propagation of the company’s innovations. Due to the nature of Fractus’s business plan, the filing of many patent application and maintaining them, although a costly affair would aid the business in deriving revenue through licensing.
In 2009 Fractus engaged an IP litigation law firm whom agreed to work on a performance basis receiving a percentage of any damages triumphed in court. The firm’s ability to take Samsung to court and win proves its competency of knowledge and experience within the industry, considering the background of the Fractus and the potential unknown challenges which may be faced in the future, maintaining the relationship with this IP litigation law firm is important.
Alongside the development of Fractus’s own arsenal of IP assets to defend its position in the market place, attention needs to be allocated to avoiding infringing other people intellectual property. Avoiding infringement will reduce unnecessary costs related to IP, ensuring the IP Budget is used as efficiently as possible.
In view of the on-going projects undertaken by Fractus a balance between maximising the IP Portfolio and optimising it, is suitable. By maximising the portfolio, Fractus will be able to expand the portfolio to cater for the projects, involving the research into a new antenna technology to replace conventional antenna solutions by a miniature and standard component of capable of multiband operation in hand held devices. In addition to being necessary for the project, maximisation will increase the reputation of the company, another aim of the company, whilst simultaneously appearing technologically superior and attaining a vast quantity of potential exchange material. Through optimisation Fractus should protect the vital basic license held by the company to preserve and develop the core competences of the company, aiding in the maintenance of the reputation held.
Fractus’ patents are licensed globally by many of the World’s major device manufacturers, Fractus being recognised by the European Patent Office (EPO) for its innovative development of antenna technology for wireless communications (Fractus, 2017). Fractus has patents in USA, China, Japan, Korea, Europe and in other regions of the World. Acknowledging the global scale of Fractus is important when creating patents and when agreeing licenses with customers. Foreign laws and regulations can often stifle procedures, especially in emerging technologies and markets (Hill, 2008). Aspects of this will either require contractors who have enhanced knowledge of local laws and legislations or the opening of further offices around the World. This choice is influenced by the background of the current employees and the availability of funds for a potential expansion.
Implementation of Strategy
Having outlined the strategy, implementation is the next stage. Initially, support from management is needed and the direction they are trying to take the company needs to be accounted for. All employee stakeholders must agree on the Strategy for it to be implemented successfully. This will ensure support is provided for the IP Budget, since filing patents, clearance searches and opinions all cost money. Senior management should be informed regarding all the processes involved with the IP Strategy. The business environment is not static, ensuring management are in the loop will enable the IP Strategy to evolve with the environment.
All stakeholders need to understand the importance of IP to the organisation, in the case of employees, training for this is critical. The employees need to know what the strategy is trying to achieve, to arm them with the information needed to make decisions on where to direct their resources. Sharing the vision is paramount, organising annual performance plans for employees and departments should be part of the plan itself. Other stakeholders should also be kept in the loop of the actions taken by the company, this should be accounted for when organising conferences and meetings. An understanding of not only the company’s adversity to risk but also all stakeholders is a decider in the strategy itself and its implementation.
The IP Team’s functionality should be monitored appropriately. They are responsible for developing and implementing the IP Strategy, hence to develop a successful useful Strategy the team needs technical business and legal expertise and need to know all the aspects affecting the company, so the strategy can address the issues the company faces and move towards the goals the company is aiming for. Ensuring activities are prioritised to make sure all tasks are relevant to the company’s direction is a key process is carrying this out.
It is vital the patent portfolio and strategy developed is based on continuing R&D, updating the portfolio when relevant will be required to ensure this. This will enable the company to focus on technology licensing and help secure financing. It is important in developing the IP Vision, although switching strategy worked in the past to gain tangible returns on investment, time is taken to allow the current strategy to materialise, hence switching strategies to clutch fast financial gains should be avoided.
If a company began making licensing agreements for similar technology to Fractus using the name or logo similar, the reputation of Fractus would be at risk. When licensing, a major incentive is setting the industry standard and deterring entry, to prosper from these, it is important Fractus registers trademarks for its brands. Fractus operates on an international level, so it is important checks are made to ensure the brands are available in all regions.
It is important the IP Strategy is re-evaluated at least once a year and then appropriate KPIs are monitored to evaluate the success of the strategic goals. The company may need to do this more frequently if circumstances change for example adaptations to the business strategy, employment of new staff or entry in new markets are discussed. In process of re-evaluating the IP Strategy research is required regarding the management of IP and its developments. Developments such as patent pools are becoming increasingly more common in industries such as telecommunications and consumer electronics, monitoring such evolution will be key for an up to date IP Strategy to provide a competitive advantage (Al-Aali & Teece, 2013).
Areas of the future of IP is unknown and Fractus should be examining the benefits of the future possibilities brought by developments in IP. It is recognised the Unitary Patent and Unified Patent Court will simplify administration, providing greater legal certainty and reduce the associated costs (Intellectual Property Office, 2014). These benefits if taken advantage of appropriately will be a potential tool for helping Fractus enter markets that are not immediately comprehendible.
During the writing of the report multiple datasets where utilised to arrive at conclusions. Where comparisons were not possible (patent portfolio information) Cipher was used as the source to provide the information. In the case of certain areas where more detailed information may be required, for example the details of the licensing agreements, further contact should be made with the company. Additionally, more databases may be useful in providing more accurate data. Patentsight Patsnap and IFI Claims were contacted for the writing of the report and are all organisation with potentially useful tools and details of IP within the industry. These resources were not used for the report due to financial restrictions of the research, access to this data was chargable.
Al-Aali, A. Y. & Teece, D. J., 2013. Towards the (Strategic) Management of Intellectual Property: Retrospective and Prospective. California management review, 55(4), pp. 15-30.
Arora, A. & Fosfuri, A., 2003. Licensing the market for technology. Journal of Economic Behavior & Organization, 52(2), pp. 277-295.
Cipher, 2017. Fractus. Online Available at: https://app.cipher.ai/report/1jjncmob/full?section_id=summary&list_show_in_modal=&list_company_ids=&list_cluster_ids=&list_years=&list_temporal_selector=&list_geo_selector=&list_geo_value_ids=&list_inventor_ids=&age_years=1,21&age_grouping_id=byCluster&acAccessed 04 12 2017.
European Patent Office, 2017. Snowflake pattern precipitates new application for antennae. EPO SME Case Studies, pp. 33-38.
Fractus, 2017. Fractus. Online Available at: http://www.fractus.com/Accessed 04 12 2017.
Grindley, P. C. & Teece, D. J., 1997. Licensing and Cross-licensing in Semiconductors and Electronics. Managing Intellectual Capital, 39(2), pp. 1-34.
Hill, C., 2008. International Business: Competing in the Global Market Place. Strategic Direction, 24(9).
Intellectual Property Office, 2014. Guidance: The Unitary Patent and Unified Patent Court. Online Available at: https://www.gov.uk/guidance/the-unitary-patent-and-unified-patent-courtAccessed 06 12 2017.
Lin, L., 2011. Licensing Strategies in the Presence of Patent Thickets. Journal of Product Innovation Management, 28(5), pp. 698-725.
United States District Court for the Eastern District of Texas Tyler Division, 2012. Fractus, S.A Plaintiff vs. Samsung Electronics Co., Ltd., et al., Defendants. Case No. 6:09-CV-203 Patent Case.
WIPO, 2011. World Intellectual Property Report: The changing Face of Innovation, Geneva: WIPO Publication.
NK(1Instead of ‘will provide’ could you just say ‘provides. Be careful changing this as may change the tense of the whole document…
The abstract has a couple of words which may be confusing… eg ‘simultaneously’ is this the correct word to use here?
Check out the formatting of the contents page
The first time you say IP you need to state it in full. I don’t know what your talking about here babes
NK(2What do you mean by milestones? Milestones set by the company?
NK(3That is multiple… do you mean company’s
NK(4Should you not just call this figure 1? It might meess up your numbering.. not worth it if so att his time
NK(6Not sure this makes sense
NK(7Reference. Also why
NK(8Is this about figure 3? You haven’t mentioned it