Difference between revisions of "Patent Valuation"

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==Patent valuation for a COmmunication firm==
==Patent valuation for a Communication firm==

Revision as of 04:21, 22 June 2010

Patent valuation for a Communication firm


The major claim of 10/801,472 is that of a multimode communication device -- It is a device that allows a phone or device to have more than one network e.g. Apple i-Phone has both Wi-Fi & Mobile capabilities. Similarly some new phones even claim both GSM & CDMA capabilties.

The Application is a continuity of Patent No. 6850510 which essential talks about supporting voice communication via packet network.

The Patent is in turn a continuity of Patent No. 6389010 which covers communication network system which supports the transmission of both voice and Data.

The patent is in turn a continuity of Patent No. 5726984 which in essence is a wireless communication network supporting the trasmission of voice and Data inside a premises.

The filing date of Patent No 5726984 is Oct 5th 1995, that means that if granted 10/801,472 will have a period till Oct 5th 2015. [USPTO PAIR]

*UPDATE - The USPTO has granted the application with a project patent No. 7715375 to be issued on 11th May 2010, and they have issued an extension of 1686 Days (4 yr and 225 Days) i.e. till 12th May 2020 (est.)

Fixed Mobile Convergence

Fixed Mobile Convergence is a service in which the same handset has access to services through a fixed network in addition to a wireless network. The same handset can be used in the home and office and also send and receive cellular calls when traveling in the wider world.

FMC suffered early on from too many technical approaches and too few standards. A number of operators conducted trials but hesitated to commit to full deployment. Fortunately, that period is behind us. Standards have been established and the industry seems to have coalesced around the dual mode WiFi/cellular approach. Operator trials have been replaced by new product announcements and large scale deployments have begun—at least in the consumer segment.

FMC can be accomplished in a variety of ways. Figure I-1 compares three of the most common FMC configurations in consumer homes with the existing scenario: Wireless substitution, Voice over Wireless Local Area Network (VoWLAN), and Fixed Cellular.[Insight Research]

Fig 2-1.jpg

Dual-mode FMC: This form of fixed mobile convergence relies upon dual-mode phones (i.e., mobile cellular and Wi-Fi) and phone-based clients to enable users to seamlessly roam between a wireless LAN (WLAN) and a cellular network. Examples include Agito's RoamAnywhere, and DiVitas' Mobile Unified Communication [Search Mobile Computing]

Dual Mode Phones

A dual-mode phone is a telephone which uses more than one technique for sending and receiving voice and data. This could be for wireless mobile phones or for wired phones.

There are three types of dual mode phones: 1. Network Compatibility : Mobile phones containing two types of cellular radios for voice and data. These phones include combination of GSM and CDMA technology

2. Cellular and Non-cellular Radios : Mobile phones containing both cellular and non-cellular radios used for voice and data communication.

3. Wired Phones : Wired phones with VoIP and POTS technology. These phones can be used for making VoIP calls and also used for phones on the circuit switch network [Wikipedia - Article on Dual Mode Mobile]

We will limit our analyses to the second type,

Why add Wi-Fi to cell phones?


  • Market size estimates vary – roughly 200 million Wi-Fi enabled phones to be sold in 2010.
      • Mainly smartphones
      • Dwarfs estimates for Wi-Fi only phones

Shipment of Dual Mode Phones Worldwide



As indicated by [Espacenet] all the forms in which the patent has been published are restricted to US, thus for the same reason, we shall restrict our analysis to the US too.

Forecast for US Market

Assumptions (Possible Points of Failures)

  • The rate growth of the growth of Dual Mode market remains same for 2014
  • The forecasts made by [Techcrunchies] are fit.

* UPDATE: The patent is now valid till 12th May 2020 (extension by USPTO) thus these valuations need to be extended till 2020.

Year % of Wifi Enabled Phones Number of Mobile Phone Subscribers (In Millions) Number of Wifi Enabled Phones (In Millions) Growth Rate Growth in Growth Rate
2008 8.20% 228.2 18.7124    
2009 11.50% 235 27.025 44.42295  
2010 16% 242 38.72 43.27475 -2.58471
2011 21.30% 247.4 52.6962 36.09556 -16.5898
2012 25.90% 251.5 65.1385 23.61138 -34.5865
2013 29% 255.4 74.066 13.70541 -41.9542
2014     84.21705068 7.955415 -41.9542
2015     90.91686658 4.617784  

Calculation of Value of IP


  • Discount Rate taken as 10% as given by [Wikihealth] for xxxx
  • The diffusion of innovation is independent of the price of the multimode IC

Case I:

Year Number of Wifi Enabled Phones (In Millions) Price of Device Market Size (In Millions) Discounted Present Values (USD Mn)
2010 38.72 10 387.2 387.2
2011 52.6962 10 526.962 479.0563636
2012 65.1385 10 651.385 538.3347107
2013 74.066 10 740.66 556.4688204
2014 84.21705068 10 842.1705068 575.2137879
2015 90.91686658 10 909.1686658 564.5222109
      PV of Revenues 3100.795894

Case II:

Year Number of Wifi Enabled Phones (In Millions) Price of Device Market Size (In Millions) Discounted Present Values (USD Mn)
2010 38.72 15 580.8 580.8
2011 52.6962 15 790.443 718.5845455
2012 65.1385 15 977.0775 807.5020661
2013 74.066 15 1110.99 834.7032307
2014 84.21705068 15 1263.25576 862.8206818
2015 90.91686658 15 1363.752999 846.7833163
      PV of Revenues 4651.19384

Case III:

Year Number of Wifi Enabled Phones (In Millions) Price of Device Market Size (In Millions) Discounted Present Values (USD Mn)
2010 38.72 20 774.4 774.4
2011 52.6962 20 1053.924 958.1127273
2012 65.1385 20 1302.77 1076.669421
2013 74.066 20 1481.32 1112.937641
2014 84.21705068 20 1684.341014 1150.427576
2015 90.91686658 20 1818.337332 1129.044422
      PV of Revenues 6201.591787

Logic for Pricing The device claims include

  • a first receiver and transmitter for communicating via a first wireless communication network;
  • a second receiver and transmitter for communicating via a second wireless communication network; and
  • at least one processor communicatively coupled to the first receiver and transmitter and the second receiver and transmitter, [Espacenet]

And taking Iphone 3GS's components' pricing, the device can replace following

  • Samsung Application Processor (Price: $14.46)
  • Infineon Baseband Processor (Price: $13.00) (Not sure if this is replaceable)
  • Broadcom Bluetooth/FM/WLAN (Price: $5.95)
  • Infineon RF Transreceiver (Price: $2.25) [iSuppli]

Royalty Rate: 7% (Telecom) [Royalty Rate Market Structure]

IP Valuation Case I: $217 Mn (Approx.) Case II: $325.5 Mn (Approx.) Case III: $434 Mn (Approx)

If Priced as $40 (when it can replace base band processor too and performs better) then the valuation = $838 Mn

Net Present Value of IP = Value - Licensing & Other Costs

  • UPDATE: The patent is now valid till 12th May 2020 (extension by USPTO) thus these valuations need to be extended till 2020. The same applies for all family members of the patent.