HP Licenses Aggressively to "Right" Partners
Hewlett Packard Interview with Tao Zhang
Hewlett-Packard, the California-based information technology behemoth, decided some time ago after investing a "tremendous amount of money," in its large healthcare and life sciences portfolio, that it would get out of that product line according to Tao Zhang, the director of the company's patent sales.
HP had become "very good," she says, at developing such items as an inhaler that delivered precise droplets of medicine to ensure that patents weren't either over-drugged or under-drugged. Other micro devices were developed for the accurate testing of blood or other bodily fluids to allow for testing in just a few minutes for diabetes or other ailments.
When HP decided that the life sciences portfolio and its hundreds of patents and licenses were no longer an integral part of its core competencies --providing products, technologies, software, solutions and services to individual consumers, small- and medium-sized businesses and large enterprises, including customers in the government, health and education sectors, it fell to Tao Zhang to find a market for them.
HP maintains an extensive marketing operation for its portfolio of intellectual property, which includes more than 37,000 patents. It is considered to be the fourth-most valuable such portfolio in the world. HP ranked in the top 10 of US patent producers every year from 2004 to 2009. Obviously those are far more patents than HP can use. They are developed by a network of seven laboratories across the world, with the company's Open Innovation Office coordinating research collaborations with top researchers and entrepreneurs in academia, government and businesses across the globe. The innovation office consists of a global team that brings together expertise to foster discovery and address important issues.
HP has long sought to aggressively license technology to what it considers the right partners. That means staying away from the so-called "patent trolls," The company helps SMEs to assess their technology needs and works with them to find the patents, technology, trademarks, and other IP that will help them to achieve their objectives by increasing freedom of design, creating better products and services for customers and speeding their time to market.
Accordingly Ms. Tao, who has been with HP for 22 years, presides over a three-tiered IP trading model. The first is a direct sales channel in which she and business development managers visit customers, buying and selling direct with them.
""We engage with them, we explore their needs, we try to find a match as to what HP can sell to them that best meets their business needs," she says. "This is the most effective route." The second tier consists of IP patent sales brokers to reach out to their own client bases. There about a dozen such brokers, each presiding over a defined geographical area, with some specializing in particular fields, such as semiconductor or software patents. In the same fashion as real estate or other brokerages, the patent brokers earn an agreed-to commission on revenue generated for the patent owner.
The third tier is HJP's own website. http://h20229.www2.hp.com/hpvps/OnlinePatentSales.html, on which the company lists patents for sale during a particular time period. It is refreshed regularly and allows customers to visit without competitors or anyone else knowing who they are. The customers can then contact HP's network of patent brokers, or contact HP directly."
:"It is very effective, Ms. Tao says. "Our goal is to provide the most convenient and comfortable path for customers to look at what we have to offer."
Ms. Tao doesn't disclose specific revenue figures, but says "they are pretty substantial. They are a very important part of the HP business plan." Asked to give a percentage figure, she points out that HP's sales were US$126.3 billion in 2010 and that patent sales obviously are a relatively small part of that compared to the size of the company. But, she says, "the growth rate of the IP revenue is very substantial."
Why sell patents? "Because some of the portfolio is technology that is no longer important to us, such as the health care, life-sciences patents. If they don't feed into our current near-term product strategy, then we are willing to license or sell those patents, depending on the area."
Ms, Tao, a native of mainland China who also is a practicing patent attorney, said that despite the widespread perception of Asia as a place where patents go to die and copycats prevail, "I have seen an unprecedented awareness in Asia for intellectual property rights,: As Asian companies globalise, she says, "they have started to realize that they need to pay attention to their IP portfolios. It is to their advantage. From large to small, everybody is starting to see the importance of intellectual property rights, not just the large corporations. If they don't have IP protection, and if they put investment into their products only to have their ideas stolen, then they lose.
In China, she says, the government has started to establish IP training classes and a certification programme to train people to be more knowledgeable about patent protection. Companies trying to expand outside of the mainland, she says, are particularly aware of the need for patent protection and IP licensing, especially as they move from assembly to design, climbing up into the higher and more sophisticated areas of technology. And the higher the companies go, the more investment it takes and the more the need to protect investment grows.
"Every country has a kind of evolution, she continues. "No country wants to stay at the bottom. Everyone wants to increase the intellectual property content of their products. I think that if you go back a little bit, you will see how much awareness of intellectual property protection has increased. It is tremendous. The number of patents applied for by Chinese companies with the US Patent Office has increased tremendously."
Domestically, patent application numbers have also begun to zoom upwards as well, surpassing the number of patents applied for by all foreign companies put together, Ms Tao says.
"Chinese entrepreneurs and the government itself "are starting to become more and more aware of this," she says. "It is a wonderful trend. There is a kind of foundation point (in awareness of patent protection). We are at that point in China, where IP protection is about to take off."
She describes patents as "like building a fence to protect your products. When you set up your own licensing program, it is a virtual fence that allows you to enjoy exclusivity for a period of time. In China, they want technology transfer, they want to get the patents so that they can have some protection to defend themselves against other aggressive companies."
She regards Hong Kong's nascent effort to set up a trading bourse as a platform to trade intellectual property as "wonderful." Getting governments involved in rationalizing IP sales as "very helpful" and says she would be willing to collaborate in establishing such an operation.
"I sell patents for HP," she says. "It is my job to try to optimize the opportunities for HP. I believe it would be mutually successful for us both."