IKE_Group I_Tessera Case Analysis_08032015_final

List of Presenters:
1. Alexander Christian
2. Dina Sandri Fani
3. Jenna Widyawati
4. Ridwan Martawidjaja
Binus Business School
MM Executive Batch 20
Innovation & Knowledge Economy
Tessera Case Analysis

TesseraataGlance
Leaderininnovating&licensingtechnologywithmorethan$2billioninrevenues
3/12/2015IKE-Tessera
2
About Tessera Technologies, Inc.
 Got its start as IST Associates in 1990
 Founded by 3 IBM veterans, i.e. Igor
Khandros, Scott Ehrenberg, and Tom
DiStefano
 Headquartered in San Jose, California
 Leader in innovating & licensing and
intellectual property
 Patented TCC chip-scale packaging (CSP)
in 1990
 Got the 1st two clients in 1994, i.e.
Hitachi and Shinko Electric Industries,
Ltd.
 NASDAQ Initial Public Offerings (IPO) in
2003
 Acquired Digital Optics Corporation in
2006

TesseraataGlance
Leaderininnovating&licensingtechnologywithmorethan$2billioninrevenues
3
About Tessera Technologies, Inc.
 Mission: to create, develop, and license
innovative semiconductor, interconnect
and imaging technologies to deliver
value to its customers, partners,
employees, and stockholders
 Global footprint of approximately 200
employees includes approximately 120
engineers and scientists, of whom
approximately 80 hold advanced degrees

4
TesseraInnovationatEarlierStages
Challengedoftheexistingpackagingsiliconchips
 Placed in was simply a carrier
 Significantly larger than the actual
silicon chip
 Typically made of ceramic with tiny
metal wires bonded to the surface of the
IC
 Low-performance due to smaller solder
ball: could not handle the stress due to
the difference in expansion coefficients
between the chip and the board
Initial packaged chips
 Tessera “compliant chip”: chip-scale
package technology
 Enabled a multichip module to be
assembled with only good die
 Flexible package design: can absorb the
mismatch that allow the movement
 Appealed to semiconductor
manufacturers and electronic system
builders
 Assisting its customers in implementing
high-volume manufacturing of reliable,
miniaturized, high-performance and
cost-effective semiconductor packages.
Tessera’s Innovation

5
InnovationatTessera
Focusesondevelopingareliable,high-performance,andcost-effectivesemiconductors,
semiconductorpackaging,andadvancedimaging
 Innovative developer of miniaturization
technologies; taking form onto various
intellectual properties (IPs)
 2 broad inventions categories, i.e.
o Advanced chip packaging for
microelectronic devices
o Image capture & processing technologies
 Practicing IPs licensing; focusing on
semiconductors, semiconductor packaging,
and advanced imaging
 Widely used in the production of consumer
electronic devices, such as mobile phones &
notebook computers

InnovationatTessera
InnovationEvolution:FromDRAMs,RDRAMs,toDDR3
6

7
InnovationatTessera
Monetizingitsinnovation:IPcommercializationthroughIPlicensingpractices
 Commercialize its intellectual property on
technology innovations through licensing model
 Licensing included patents, know-how, and trade
secrets
 Actual selling cycle is quite long, i.e. 6 to 18 months
or more
 What to sell: IP license adoption (performed by
licensing team), running royalties (a.k.a. renewal
and maintenance fee), and professional services
provision (performed by the implementation team)
 Professional services include transfer of the
technology, ramp up production, pilot production,
or even in-house training

8
InnovationatTessera
Monetizingitsinnovation:choiceofcarrotvs.sticklicensing
Carrot licensing
 Friendly process
 Licensor to convince
licensee to take a license
 Adoption of the
licensor’s technology
 Charging costs should be
borne by the licensee
with the hope of making
the licensee’s product
better or cheaper
 Usually involve an
exclusive license to the
licensee
Stick licensing
 Slow, unfriendly,
aggressive, time-
consuming, uncertain,
expensive and litigious
process
 The prospective licensee
have been using the
licensor’s IPs, knowingly or
unknowingly
 Considered as IPs
enforcement effort

9
InnovationatTessera
Tessera’schoiceofcarrotlicensingastheirwaytomonetizeitstechnology
Hinged on certain criteria, i.e.:
 Chip-scale packaging was destined to be so
widely used
 Derived more income through wider adoption;
thus need to allow its technologies to be
incorporated into the supply chains of other
firms
 Self-manufactured is seemed impractical
However, stick licensing will be concluded when
necessary in enforcement-based licensing in order
to ensure the protection of the rights

10
InnovationatTessera
ChallengesonTessera’sInnovation
Payback period of investment: long cycle of conversion
Substantial investment vs. potential revenues realization
High dependency to the other manufacturer firms
Changes on patent law enforcement: harder to get the injunction of
the infringement
The rise of white manufacturers and/or non-practicing entities
Direct competition with internal R&D at those firms

11
InnovationatTessera
Possibilitiesotherthanlicensing?
Monetization through IP Exchange
 Trading the intellectual
property through new financial
exchange
 Sell its patent or group of
patents as “unit license rights”
(ULR): grants a one-time right
to use a particular technology
in a single product
 Can be bought and sold like
shares
Benefits
Lower transaction
costs to market
Unlock value in
inactive IP
holdings
Maximize revenue
generation in all IP
holdings
Speed and
streamline
process of getting
IP to market
Secure early
adopter
advantage and
thought
leadership in fast-
moving IP world
Add efficiency
throughout IP
management
https://www.ipxi.com/inside-ipxi/the-exchange.html

12
InnovationatTessera
TheroleofpatentinTessera
Patent’s role
Financi
al
Bargain
ing
Reputat
ion
Primary role of patents
is to optimize income
through license
To improve the position of a
company & to enhance
market position as the
innovative developer of
miniaturization
technologies
Patents designed to
promote strategic
alliances with licensee

13
InnovationatTessera
Thewarwithwhitemanufacturers:thebestwaytomonetizesilentaircoolingtechnology
Monetizing silent air cooling
technology
Licensing
Manufacturing
Sell to Highest Bidder

Licensing–samelikeTesseracurrentpractice,registerpatent,selllicenseand
workingtoimplement ideasintoproduction
14
Pros:
Familiar business model
Mature business model
for Tessera
Cons:
Long selling cycle
Higher threat/risk from
white manufacturer
High investment to prove
high-volume scalability

Manufacturing–manufacturingtheproductinTessera’smanufacturingfacility
inaccordancetocustomer’stechnicalspecification
15
Pros:
Higher control, smaller risk
from white manufacture
Only need to enlarge
capacity of initial
prototyping production line
Cons:
High investment for
manufacturing facility
Might require high
product variability to
achieve cost effiency

SelltoHighestBidder–UnprecedentedstrategyforTesserawherethelicense
andknow-howsoldtosinglehighestbidder
16
Pros:
Low investment, only R&D
Shorter selling circle
Transfer the risk to buyer
Cons:
New business model
No control over
further technology
development
Considered as the best solution and can be new business model option

FurtherAnalysis
CanIndonesiancompaniesachievethelevelofbreakthroughofinnovationlikeTesseraorApple?
17
Generally, hardly to achieve the level of breakthrough of innovation…
Education system Government role Socio-cultural system
 Key vehicles for the
intellectual and
professional development
 Problems related to quality
and access as well as the
even distribution of well-
trained teachers
 High number of dropped
out student
 Low Human Development
Index (.629; ranked 121
out of 185 countries)
 IP law enforcement does
not run as expected by the
IP owner
 The Judiciary usually
imposes the minimum
punishment in the case of
IPR infringement
 The nature of IPR crimes is
by complaint (warrants
complaint)
 Complexity on IP
registration process
 Lack of incentive program
for the Innovators
 Openness towards new
ideas or constructive
feedback
 Multicultural, rooted in
older societies
 Rooted in imperialism
mentality
 Deference to authority,
paternalism, and social
stratification hinder
innovation process run
smoothly

FurtherAnalysis
18
… however, there is a little example of Indonesian company who already could and
has a similar approach of monetizing its innovation like Tessera
 Began in 1992 as a software
development company
 Having started in
telecommunication industry;
but then further spread its
solutions to the public sector,
utilities, and other industry
 Delivers total IT solutions,
including Supply Chain
Management, e-Government,
and Managed Services
“A complete web-based
application for automating
the entire procurement
process, from purchase
order creation
on the front end to decision
making and reporting tool
that provide greater
management control”
The Product
 Carrot licensing (module
licenses, i.e. Vendor
Management, Core
Modules, and Contract
Management)
 Includes transfer of
know-how in
implementation stages
 Professional fee charges
to its client
What to Sell

FurtherAnalysis
19
… however, there is a little example of Indonesian company who already could and
has a similar approach of monetizing its innovation like Tessera
 Established in 1996
 Founded on the passion to
combine management & IT
 A leading provider of
business application
solutions and software-
related services
 Focus on developing
innovations & providing
customer-oriented
solutions to help
companies of all sizes and
industries achieve their
business goals

FurtherAnalysis
TheMainObstaclesinMonetizingInnovationinIndonesia
20
1 Lack of Awareness
Little has been aware of the need to grasp the value of
IP in terms of its commercial relevance
3 Total economic value of royalties received & paid
Significant differences. Perform extremely poorly in
comparison (a difference of USD 1.5 billion)1
1. Ghafele, Roya and Gibert, Benjamin. “Promoting intellectual property monetization in developing
countries : a review of issues and strategies to support knowledge-driven growth”. July 2012
2
Lack of ‘ecosystem of incentives’
Has not promoted and ecosystem of incentives for
individuals and/or companies to file IPs in order to
stimulate domestic innovation
4
Weak law enforcement
Lead to the rise of Non-Practicing Entities (NPE). More
active support from government departments or other
public agencies needed to suppress no. of NPE.
5
Heavy requirements in Injunction Proceedings
Proof of IP ownership; sufficient evidence to prove the
existence of IP infringement, huge amount of payment
of warranty

IKE_Group I_Tessera Case Analysis_08032015_final

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IKE_Group I_Tessera Case Analysis_08032015_final