Case Study 1: Fonar v General Electric
Read the summary of the Fonar v GE case and try to skim through the patent infringement action (the "court case"). Don't worry if you don't understand everything. Just try to get a feeling for what the major issues were and the "tone" of the proceedings.
Q1: Do you get the impression that GE was concerned about the fact that they had infringed Fonar's patents? Why?
Q2: What were two or three "take home" messages for you about the importance of patents?
Q3: In the US, patent infringement cases are heard by a jury (i.e. randomly selected people from the public). What do you think might be the challenge of this for a case like Fonar v GE?
Q4: Do you think the outcome (the payment of $120+ million to Fonar) was fair to Fonar?
Case Study 2: Siemens Acquisition of CTI
To complete this second case study, you will need to do a little quantitative exercise. I would like you construct a simple model. You can do it on a piece of paper with a calculator, or in a spreadsheet, it doesn't matter, so long as a table appears in your answer.
Your model assumptions:
- Assume that CTI launches its first "PET" medical imaging scanner in 1995 - in fact that it sells 10 scanners that year.
- Assume that CTI increases its sales by 50% each year for 10 years (so... 1995 - 10 scanners, 1996 - 15 scanners, 1997 - 23 scanners, etc.). Rounding up is fine.
- Assume that a PET scanner costs $2 million (and that the price stayed the same for the entire 10-year period). This is obviously a bit artificial, but let's work with it.
- Assume that if you were the inventor of the PET scanner, your royalty was 5% of sales revenue.
- Assume that if you were the entrepreneur who founded CTI that your ownership of the company was 5% at the time the company sold to Siemens to $1 Billion.
Q1: Who made more money? The entrepreneur who owned 5% of the company's stock (5% of $1Billion) when CTI sold to Siemens, or the inventor of the PET scanner who was entitled to a 5% royalty on sales.
Q2: How does this model impact your understanding of the value of patents? If you are an academic, do you think that (based on this example) a royalty or equity is a better way to make money?
Case Study 3: SawStop
This case study somewhat builds on the last study, in that an entrepreneur is trying to work out whether to go down the pathway of a licensing deal or actually start to manufacture a product.
Q1: In this case study, what were the challenges with the decision to license vs sell? What was the headwind that the inventor faced to successfully commercialise his product?
Q2: This is an example of where a good technology - even a necessary technology - failed to immediately find a home. Put yourself into Steve Gass' shoes and pretend you are going to try and sell the technology exclusively to one of the big tool makers. If they take this product on, you should assume that it will make them a market leader in table saws. What do you think the technology is worth? What's your "number" - defend it from at least 3 different angles.