Key Issues in

IP Due Diligence, Auction,

Sale, and Monetization

The Value Perspective

Presented by:
Weston Anson
CONSOR Intellectual Asset Management
800.454.9091
www.consor.com

Key Issues

1.
1.Identification
Identificationand
andContext
Context

2.
2.Quality
Qualityand
andTriage
Triage

3.
3.Valuation
ValuationProcess
Process

4.
4.Value
ValueExtraction
Extraction

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 Key Valuation and Disposition Questions

What IP does the debtor own?

How does IP value change in various contexts?
 Bankruptcy, Going-concern, M&A
Should the IP be valued?
How do you value IP in a distressed scenario?
How do you market and dispose of these assets
most cost-effectively and time-effectively?
Disposition Process:
 Direct Marketing or Static Auction?

When Is Valuation Necessary?

Strategic assessment of whether the IP assets

be sold separate from the business
Negotiation of “stalking horse” bids and initial
asset bundle pricing structures
Evaluation of bids for global asset portfolio
versus individual asset buyers
IP assets to serve as collateral for various forms
of financing
Purchase price allocation analysis of IP-related
transactions

2
 IP & Intangible Assets

Intangible Assets

Intellectual Property

Data & Customer

Knowledge & Vendor
PATENTS TRADE Bases Relations
MARKS

COPY Proprietary
RIGHTS
Internet Proprietary
Software
COPY TRADE Software
Assets
RIGHTS SECRETS

Marketing Bundle of Intangibles

Corporate name and logo Worldwide public

Primary trademark
Marketing umbrella and
brand name
Sub-brand names and
trade dress
Worldwide trademark
registrations
Secondary trademarks
relations efforts
Consumer advertising
Marketing strategy
Packaging design and
copyrights
Product warranties
Graphics
Promotional concepts

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 Technical Bundle of Intangibles

Key patents Technical data sheets

Trade secrets Evaluation data
Formulae Proprietary test
Process technology results
Design technology Plant and production
Packaging technology design
and sources Product specifications
New product
technology

IT Bundle of Intangibles

Enterprise solutions Domain names /

Custom applications URLs
Databases E-commerce sites
Source code Third party software
tools
Data warehouses
Credit / payment
systems

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 Intangible Asset Bundles

6. Corporate Identity 11. Real-Estate Related

1. Trademarks
Assets Assets
2. Other Brand-Related 12. Communications-
7. IP Contracts
Assets Related Assets

3. Patent-Related 13. People-Related

8. IT/Software
Bundles of Value Assets

4. Internet-Related 9. Data/Information- 14. Other Technology

Assets Related Assets Assets

5. Product-Related 10. Research-Related 15. Miscellaneous

Assets Assets Assets

Identify IP / IA Bundles for Value

Stratify IP / IA
 Core v. Periphery
Peripheral portfolios may be monetized
 Vertical and horizontal
 Out-licensing / Spin-off
Analyze quality of IP
 Relevancy to current / future business
 Relative strength analysis
Potential infringement assessment

5
 Birth of the IP Auction / Sale Market

 History
 Genesis – When, Who
 Size – Dollars, Frequency, Statistics
 Issues
 Alternatives

Types of Auctions Used with IP

Public Open Cry

 Dutch
 Private
 Segregated / Isolated
 Stalking Horse

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 Monetizing IP Assets

Monetization Alternatives
 Sale
 License
 Creditor Settlement
 Sale & Leaseback
 Securitization
 Litigation
Securitization Alternatives
 Line of Credit
 Take-out or DIP
 Interim
 Long term

Disposition Process:
Direct Marketing vs. Static Auction

 IP assets are unique with few comparables in the

marketplace (El Comandante)
 IP assets require a strategic plan to identify incremental
value opportunities (Polaroid)
 Targeted buyers typically need more information than is
offered through static auction process (Collins & Aikman
USA)
 IP assets must be creatively packaged to match specific
buyer needs and / or strengths (Tower Records)
 Static auctions market the auction, not the specific
assets (Ocean Tomo)

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 Case Study - Collins & Aikman

Key Assets:

 Instrument Panel Skin / Materials / Process

 Safety Systems / Invisible Airbag Door (107 patents)
 Interior Trim (96 patents)
 Skin Materials and Processes (67 patents)
 Console / Door Trim (18 patents)
 Decorative Finishes / Laminates (14 patents)
 Kinematics / Air Registers / Cupholders (45 patents)
 Exterior Trim (40 patents)

Collins & Aikman: Direct Sale

Sale Process:
 Direct marketing campaign to Tier 1 and Tier 2
automotive suppliers
 Technology due diligence was highly labor intensive
 Asset bundles sold individually to multiple buyers for
nearly $5 million
 Total marketing and sale process executed over 9-month
period

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 Case Study – Amherst Fiber Optics

Company: TVC
Context: Liquidation of subsidiary
Cause: Parent company cash flow
Massive potential tax benefit
Components: 8 related but independent
patent bundles
Fiber Optics after-market, repair
and maintenance
Cause: Liquidation
Valuation Approach: Components of value
Replacement value

Amherst Fiber Optics: Monetization

 Identify all IP in each patent / technology bundle

 Inventory patent applications and registrations
 Collate related trade secrets,designs, assemblers,
etc.
 Benchmark valuation
 Liquidation context
 End-use dependent
 Market the assets / close transactions
 Results:
 $400,000 – $700,000 cash
 $10+ million tax refund

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 Case Study – Middleby Marshall
Trademarks and Technology

Company: Middleby Marshall

Context: Acquisition
Components: Core corporate brand
Two sub-brands
Patent and Technology bundle
Cause: Loan securitization
Approach: Imputed royalties
Comparable sales
Concept of Value: Going-concern
Components of value

IP and Intangibles in Foreclosure

Summary Case Studies

Types of Intangibles
(A) (B) (C) (D) (E)
Relative
Value Patents &
TM’s & Brands IT & Databases Internet Other
Ranking1 Company Technology

A plus 1. Warnaco Domain

Warners, Speedo, Complex operating Manufacturing
names & N/A
B+C CK licenses systems technology
Website
C+E 2. Borden Corporate brand and Manufacturing Multiple and Chemical
Chemicals Limited
A, B, D sub-brands systems proprietary processes
3. Montgomery Montgomery Ward, Operating
B Ward Ship N Shore, plus Mail order
platforms; None Online store
A+D 100+ TM’s & sub- system
brands Mailing lists

4. Exodus Complex Hosting

B, C, D, E Corporate identity Massive systems Multiple BMP’s2
assets processes

C+D 5. beenz.com Proprietary Online

International
Corporate TM technology and sweepstakes Other BMP’s
B databases
BMP service
E+C 6. Mosler Security IT & UL
Corporate name Multiple patents Modest
A, D, B software certifications
1 The rankings for each company reflect relative value within that company in a bankruptcy or liquidation scenario (e.g., Montgomery
Ward will realize most value from the “B” assets, IT & Databases).
2 BMP = Business Method Patent. A BMP provides protection for intellectual concepts and systems sufficiently unique to earn patent
protection. The on-click ordering system of Amazon.com is a BMP.

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 Bankruptcy and Reorganization

 Amherst Fiber Optics  Kenar

 AstroTurf  LA Gear
 Barneys  Marvel Entertainment
 Boston Market  Montgomery Ward
 Collins & Aikman  Owens Corning
 Dan River  Polaroid
 El Comandante  Service Merchandise
 Fortunoff  Starad, Christopher
 Jacobson's Stores Radko
 Jenny Craig  Tower Records

Summary

 Identify all IP / IA in the current project

 Understand the context for historical and potential
use of the assets
 Triage the assets by quality and priority
 Bundle the assets for optimal effectiveness
 Benchmark valuation
 Liquidation context
 End-use dependent
 Market the assets / close transactions
 Licensing
 Sale or other disposition

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