CambridgeIP is a leading provider of technology business intelligence and IP-based strategy services to the technology community, capital firms, and policy makers.
Contact Ilian Iliev, CEO
Contact us today for more information on how we can provide fact-based input for your key business strategy decisions.
CambridgeIP is headquarted in Cambridge, UK with representation in Boston, Houston, London and Geneva.
|
Authors
Ilian Iliev
CEO CambridgeIP
Mark Meyer
Head of Business Development,
North America
|
|
| Greetings!
Private and public investment in Low-Carbon Energy technologies continues to grow at a rapid pace as new consortiums and research alliances are established, VCs continue to invest in young technology companies, and major corporations become increasingly active in the space.
The role of Intellectual Property (IP) in enabling commercialisation of low-carbon energy technologies has gained an unusual prominence in Climate Change negotiations (especially in the lead-up to the Copenhagen summit). But beyond the headlines, how important is IP in the low-carbon energy future? How is its role likely to evolve in global policy decisions? And on a practical level: how should investors and company executives react to it?
We want to share several findings with you:
- Acquisitions of IP-intensive companies is a key growth channel for large corporations
- Early markets for new US technologies are primarily outside of the US
- Cross-over innovation from other industries is driving value creation
- Convergence between different industries' IP models is creating uncertainty - and innovation
- Accelerated adoption and definition of technology standards - backed by IP pools
Recent research conducted by CambridgeIP jointly with Chatham House (the Royal Institute of International Affairs) and Climate Strategies has uncovered some interesting trends that can inform investment and growth strategies for companies in the low-carbon energy space.
We undertook an extensive analysis of patent ownership and the market adoption rates of six low-carbon energy technologies: wind, solar photovoltaic (PV), concentrated solar power, biomass-to electricity, clean coal and carbon capture. We also looked at how company strategies relate to different industry IP practices (such as cross-licensing agreements or technology standards).
Here we provide the members of the CambridgeIP community some of our insights and suggestions about investment and growth strategy in this space.
|
|
|
Acquisitions of IP-intensive companies is a key growth channel for large corporations
For many major corporations the speed of market development in the low-carbon space is faster than anticipated. New competitors, regulators, institutional investors and stakeholders are putting pressures on existing business models. Therefore major corporations look at acquisitions of IP-intensive companies to complement their technology portfolios and accelerate market access.
Just in 2009 we have seen:
- ExxonMobil sign a $600 million deal with Synthetic Genomics, Craig Venter's company developing an algae-based biofuels process. The company's founder has made no secret of the importance of a strong IP portfolio in protecting the company's value.
- BP invest $90 million in a JV with Verenium for the development of cellulose-based biofuels.
- GE acquire Scanwind for $18.5 million, and thus gained access to direct-drive systems for offshore wind turbines - accelerating entry in the rapidly growing offshore wind space
Many emerging market companies have also used an IP-led acquisition strategy to accelerate their penetration of developed economy markets. Suzlon (India's wind energy leader) has built up its presence in Europe through the acquisition of Danish company AE-Rotor Techniek in 2000. Suzlon went on to raise $338 million in an IPO on the Indian market, and then acquired Hanson International, a leading Belgian manufacturer of transmission systems. There are also many examples of Chinese state-backed companies buying out technology in the UK and Germany.
Some Implications:
- Trade sale exits can be accelerated and company valuations increased by building up a stronger IP portfolio
- Large corporations that are falling behind their competitors in key market niches, or seeking entry into rapidly growing segments are strong exit candidates
|
|
Early markets for new US technologies are primarily outside of the US
While the United States is producing 50% or more of new patents in the low-carbon energy space, the market for low-carbon energy technology lags somewhat.
Our research indicates that an increasing number of early stage technology companies are seeking a revenue foothold in Asia Pacific and Europe. In particular, the deployment of US-bred super-critical coal and carbon capture and storage applications tends to be outside of the US. Our clients are citing regulatory uncertainty as the primary reason for deferring their US market development. That may of course begin to change in 2010 as the US Senate considers the Climate Change bill, or the Environmental Protection Agency clarifies its position with regards to CO2 emmissions.
Some Implications:
- Global market analysis of a company's technology space is critical to early revenue realization: even if the long-term market is in the US
- Partner analysis for Asia-Pacific and EMEA markets could save companies significant time in getting started
- Patent filing strategy should be adjusted accordingly
There is an early indication in the US of downsizing by mid-sized and large oil & gas industry players to refocus on a new, smaller "core" businesses; the expanded commercial use of relevant clean technology IP during these downsizing efforts remains uncertain (e.g. ConocoPhillips).
|
|
Cross-over innovation from other industries is driving value creation
Our analysis identified many instances where market-winning innovations in the low-carbon energy space were based on technology developed and commercialised in other sectors: what we call 'cross-over technologies'.
The table illustrates some of the 'cross-overs' in the wind energy space. Other examples are use of 'clean coal' boiler technology in biomass applications, use of rocket engine technology in oxyfuel coal burn, use of satellite technology in solar concentrator technologies, and even stealth technology in helping reduce the radar footprint of wind farms.
In addition, other pervasive technologies, like nanotechnology are increasingly are making their way into critical energy system components.
Source: Chatham House (2009)
In addition, government innovation and industrial policies are already stimulating the conversion of 'old'/high-carbon industries in the low-carbon economy, which will create additional instances of 'cross-over' innovation.
Some Implications:
- VC investment strategy can be modified to look more closely for 'cross-over' opportunities: technology companies or University research that is applicable in new (and often unexpected) parts of the low-carbon energy technology chain
- Corporate acquisition strategies will be increasingly amenable to 'low-carbon' companies that are synergistic with 'high-carbon' inherited infrastructure
- Innovation in key technology system segments which are bottlenecks to energy system scaling up will drive value growth
|
|
Convergence between different industries' IP models is creating uncertainty - and innovation
Another clear trend is the convergence and increasing overlap of the value chains of industries that were until recently fairly distinct. For instance leading players in the CCS space include oil & gas companies, chemical industry giants, utility companies and biotech start-ups. Entrants in the smart-meter space include electricity utilities, mobile applications developers, telecoms equipment manufacturers, and countless technology startups.
The emerging business models, and associated IP strategies are as yet unclear. Where such convergence takes place, players from different industries bring with them frequently divergent IP strategies and business models. That may result in more difficult licensing negotiations and a greater risk of litigation.
Delays in adoption of key industry standards, or the conflict amongst different regional standards could further reduce both the market size and the early revenue outlook.
Some Implications:
- Company IP strategies need to be formulated more carefully to account for the divergent IP practices between different corporate trade sale buyers
- IP partnerships in pursuit of "critical mass" (or critical market value) may develop over time as one strategy to drive industry standards through sheer early market penetration
- Innovation partnerships and field trials will continue as a method for obtain federal funding
- Established innovation centers of excellence will be rewarded with higher flows of funding, greater synergy and better partnering opportunities; marketing of these centers may become critical in the federal funding competition
|
|
Expect accelerated adoption and definition of technology standards - backed by patent pools
A key concern right now for policy makers is to ensure rapid and affordable diffusion of low-carbon technologies. The adoption of technology standards backed by patent pools has worked well in accelerating diffusion and innovation in the telecoms and semi-conductor spaces: think 'Symbian' for the Smartmeters and Wind farms.
It is likely that major buyers and the public sector will push for early adoption of technology standards in order to achieve economies of scale. We are already seeing such trends in the smart-meter space, as plans for large-scale deployment require some level of standardisation.
IP strategy under a technology standard or industry cross-licensing regime differs significantly from more 'traditional' IP strategies: with much of the value derived from control over the ecosytem.
Frequently incumbents find it difficult to disengage from a 'proprietary standard' paradigm, and may look at a tie-up with a smaller player to experiment in developing new technology standards. That opens a number of opportunities for smaller IP-intensive companies
Some Implications:
- Smaller players with a strong and essential IP portfolio can play a disproportionate role in shaping the development of industry technology standards.
- Conversely, smaller players with a weak IP portfolio have little legitimacy in participating in technology standard development, and should pursue partnerships to leverage their technology.
- Investors can focus on the technology standard potential of investment proposals: whether it is in software, communications protocols or mechanical interfaces.
|
|
Read More: CambridgeIP Research
|
|
About CambridgeIP
Please feel free to get in touch with the authors:
About Us: CambridgeIP is a provider of technology business intelligence and IP strategy services to the technology community and policy makers.
The company has a proprietary platform enabling efficient handling, real time analysis and online display of large patent (and other structured data) datasets, unique analytics, and highly granular focus at the level of individual technology, inventor or organisation. We provide fact-based IP strategy, R&D and investment due diligence services to the technology community at large.
We have representations in Cambridge and London (UK), Houston and Boston (USA) and Geneva (Switzerland)
Mailing Address:
Cambridge Intellectual Property Ltd,
Sheraton House, Castle Park, Cambridge, CB3 0AX, United Kingdom
|
|
Disclaimer
This newsletter includes analysis, together with opinions and observations expressed by CambridgeIP. They do not constitute legal advice. The reader should not rely on them to make (or to refrain from making) any decision. Any decision is the reader's sole responsibility.
| |
|
|
|
