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Aon Intellectual Property Assets Briefing - September 30, 2020

Thoughts from the Aon Team 

In today’s global economy, the mantra “innovate or die” is real and enterprises must create to survive. Intellectual property (IP) is the only way to convert innovation into an asset. With this accelerating innovation, more IP assets are being owned by others in constantly evolving markets. Understanding your risks in this ever-shifting IP landscape is critical. You either own the IP assets that cover your innovative products, or you don’t - others may not let you use theirs.

Unfortunately, IP has been an uncommonly difficult asset class to assess and value. IP risks, such as those associated with infringement or trade secret theft, have historically been difficult to measure. As a result, large limit IP liability insurance for patent infringement and other liabilities was absent from the market for nearly two decades. IP-based risks were not well understood even by IP professionals, let alone business and insurance professionals. When IP-based risks were covered, they were often added as part of commercial general liability policies for soft IP and Advertising Injury. These policies were typically bound without rigorous assessment of underlying IP risks to the product and business mix of the insured. 

During this absence of meaningful IP insurance, the importance and value of IP assets have continued to grow. Today, roughly 85% of the value of companies in the S&P 500 is attributable to intangible assets, marking a decades-long historic value rotation from tangible to intangible assets. With so much enterprise value at stake, the need for comprehensive IP liability insurance has never been greater. 

That is why in 2018, Aon introduced an IP liability insurance that offers catastrophic coverage with high limits for such risks as patent infringement, thereby guarding against significant downside risk to enterprise value. I encourage you to read more about it here.

Lewis Lee, CEO Aon, IP

Aon IP in the News

  • The CEOs of Aon and Willis Towers Watson (WTW) published a report this week detailing the value to clients of the pending combination. Greg Case CEO at AON, and John Haley CEO at WTW, wrote that the deal "will enable us to combine data, analytics, and technology to create new, more powerful predictive models – that look forward, and not only look back – and develop solutions at a pace not previously possible."
  • Captive International reported on a recent Mergers and Acquisitions Guide for risk managers published by Aon and Airmic this month. This new guide outlines the types of deals organizations undertake and key guidance on risk, insurance, and human capital factors risk professionals should consider. 

Executive Insights

  • On September 17th, the cloud data warehousing firm Snowflake (SNOW) debuted as the largest software IPO in history. Originally priced at $75 a share, the IPO raised $3.4B and sold 28 million shares, with gains swinging between 100%-150% throughout the day. The multi-billion-dollar day removed the former IPO leader Dell which IPO’ed in 2007 and raised $1B. As a software business, much of Snowflake's value is tied up in its intangible intellectual property, making valuations tricky but in this case, no less lucrative.  
  • Short-form video appTikTok's future continues to be put into question as a District Court Judge in Washington, D.C. recently ruled that President Trump's administration likely overreached its authority in implementing the TikTok ban due to the administration's prohibition on American's sharing personal communications. Oracle and TikTok’s U.S. venture investors, General Atlantic Partners and Sequoia Capital, have placed a bid for a majority stake in the app. Government interests have further complicated the deal; the Chinese government staked a claim in the application's intellectual property rights and the U.S. Government's renewed cybersecurity concerns raised Wednesday by U.S. Treasury Secretary Steve Mnuchin. 
  • Nikola’s $2B lawsuit against Tesla for IP infringement may have been dealt an embarrassing blow this week when news broke that Nikola had purchased the designs for its Nikola One electric semi-trucks, contradicting the founder's earlier claims. In a response to a patent infringement claim brought by Nikola, Tesla accused the company of purchasing the designs of its truck from designer Adriano Mudri who produced a similar concept in 2010.
    • This recent news is one more hit to the Nikola brand, as the founder Trevor Milton stepped down earlier this month in the face of accusations of dishonesty and fraud relating to the company's IP value and misleading investor statements.   
  • The United States Post Office applied for a patent on a voting system that would combine blockchain security and the mail service to assure reliability in voting. The primary claim of the patent looks to pair USPS mail and blockchain and other databases with mobile voting through a QR code mailed to individual registered voters. The solution intends to ensure voter anonymity by keeping votes and voter identification separate, though the verbiage on how this would be carried out is vague.
  • A high court in the United Kingdom dealt a blow to the future likelihood of AI being the inventor and owner of a published patent, by upholding a lower court's decision demanding the withdrawal of the applications due to the AI inventorship claims. In 2019 simultaneous patents were filed in Europe, The United Kingdom, and The United States, by physicists Dr. Stephen Thaler on behalf of an AI inventor (DABUS). This recent UK decision follows a similar ruling by The US Patent and Trademark Office (USPTO) in May. 
  • Vista Outdoor Inc. announced their successful bid this week to acquire assets from Remington Outdoor Company’s Chapter 11 bankruptcy cases. Vista Outdoor agreed to pay $81.4 million for the assets, which include an ammunition manufacturing facility and intellectual property such as the Remington brand and trademarks. Vista Outdoor anticipates closing the transaction in the 3rd quarter of the 2021 fiscal year.

News of Interest

  • 'They used my picture and I should've got paid for it' - BBC News - 9/18/2020
    • Sean Heavey recognised his photo the moment he saw it on Stranger Things. [...] He complained on social media and his remarks were read by executives at Pixsy, a firm that helps photographers fight copyright infringement. They contacted Mr. Heavey and, eager for the help, he agreed to work with them. Pixsy appointed Mr. Heavey a lawyer, David Deal, and together they found six more occasions where Netflix used The Mothership. Netflix settled the lawsuit in December 2018, according to records seen by the BBC.
  • US Squeezes China's Biggest Chip-Maker SMIC - BBC News - 9/28/2020
    • The US Department of Commerce has written to American suppliers of China's biggest chip manufacturer, warning them of "unprecedented risks" that their products could be used by the Chinese military. The letter reminds the firms they must apply for licences to ship controlled items to Shanghai-based SMIC.
  • China Releases Antitrust Guidelines for Intellectual Property - The National Law Review - 9/28/2020
    • China’s State Administration for Market Regulation released the Antitrust (also referred to as Anti-Monopoly) Guidelines of the Antitrust Committee of the State Council on the Field of Intellectual Property. The guidelines are dated January 4, 2019 but only officially released on September 18, 2020. The guidelines cover Intellectual Property Agreements That May Exclude or Restrict Competition; Abuse of Dominant Market Position Involving Intellectual Property Rights; Concentration of Operators Involving Intellectual Property Rights; and other Circumstances, such as patent pooling.
  • Quickly Modeling Patent Market Prices - IP Watchdog - 9/28/2020
    • Imagine you have found four patent families that address a specific risk to your business, and you are about to ask your boss to approve buying those patents for $2 million. Her questions might include, “What’s the going rate for patents?” Similarly, if you were working with your company’s accounting team and moving four patent families from your corporate parent to a subsidiary, the accounting department might ask, “What is the ‘fair market value’ of these patents for transfer pricing?”

Social Contribution

  • Alibaba Group @AlibabaGroup 28 Sep The Alibaba Anti-Counterfeiting Alliance has launched an industry-led intellectual property advisory committee dedicated to small and medium-size businesses. https://t.co/huxOrGFgSS
  • Andrew Zadarnowski @AZadarski 28 Sep The trademark for the Buffalo Sabres' primary logo from 1996 to 1999 expired back in May. Whether by design, or a by-product of the massive organizational purge, the organization only submitted a new trademark application last week to the USPTO. https://t.co/IAysMBD7g3
  • Josh Gerben @JoshGerben 28 Sep So far in September, nearly 40% of all US trademark filings have come from China. The filings indicate an intent for Chinese businesses to sell goods and services into the United States. #uspto #China
  • Rep. Clay Higgins @RepClayHiggins 28 Sep We should be alert to these threats and take all necessary action to safeguard American intellectual property. https://t.co/k5b3vepJSp
  • Johannssen UdoEkpo @patrickjohnie99 28 Sep There’s growing acceptance of competitors working together to share data that helps solve challenges for an entire ecosystem,” says David Bowcott, global director of Growth, Innovation and Insight at Aon’s A rising tide can lift all boats

Aon’s Intellectual Property Solutions team helps clients identify, protect, and maximize value from their most valuable assets in today’s business world, their intellectual property. Aon brings the best minds and strong analytical tools to provide a comprehensive approach to intellectual property strategy, valuation and risk management across a client’s business -- aligning current and future intellectual property assets with a businesses’ overarching strategy.

For more information about Aon’s Intellectual Property Solutions, please contact intellectualproperty@aon.com.  

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