Efrat Kasznik, Author at Foresight Valuation Group

IP as a Business Asset: 5 Takeaways from Educating the Next Generation of Business Leaders

Posted on April 5, 2021 5:00 amModified on April 6, 2021 12:17 amby Efrat Kasznik

When people ask me what I do, I often describe myself as an educator. I have held a broad range of conventional and non-conventional teaching positions throughout my life, from being a tank instructor at the Israeli Defense Forces to being an accounting TA during my business school days at UC Berkeley. Being an educator does not stop in the classroom, but continues every day for me as my line of consulting work involves putting a dollar value on intangible assets. I often find myself engaging in long tutorials with clients, explaining what intangible assets are, how they bring value, and how that value can be measured.

I started teaching IP Management at the Stanford Graduate School of Business in 2011, in the peak days of the mobile patent wars, when the AIA was just getting signed into law and the words “patent troll” sent a chill down the spine of corporate IP managers. My class has been one of the first IP classes offered by a US MBA program. Setting a foot in the door of an MBA program in an elite business school is a humbling experience. The students are extremely bright, the expectations are very high, and the competition (from other classes) is fierce. Below are my top 5 takeaways from my decade of teaching IP Management to Stanford MBA students, lessons that I hope find a good use with others planning similar classes in other business schools:

Beating the competition – the first step in teaching a class is getting students to take the class. IP classes are usually not part of the core curriculum in business schools (core topics include business fundamentals like accounting, finance and marketing), but rather fall within the cluster of elective classes, of which there are many. The list of elective classes in modern-day business schools is long and eclectic, and they are being taught by anyone form Nobel-laureate professors, to professional athletes and celebrity CEOs. This is not very different from placing a product on a busy supermarket shelve. A lot of thought needs to go into the title and description of the class to make sure it gets the right attention and conveys the value proposition, so students are more inclined to include it in their busy schedule.
Conveying the value proposition – My passion for bringing IP awareness into the traditional business curriculum has been driven by a strong conviction that lawyers should not be the only ones running the IP strategy in an organization. Having said that, my own conviction is not enough. Since the topic of IP is regarded as a legal topic, it is not in the main stream of business education, and therefor the value proposition needs to be very thoughtfully articulated to appeal to business students. In my particular experience, I found that topics like valuation and competitive strategy are good ways to bridge the gap, and highlight the importance of IP as a strategic business asset.
Telling a good story – business school classes are often taught using case studies. It is a traditional way of leveraging on the power of a good story to introduce business concepts in an engaging way. That being said, IP case studies are not as readily available in traditional business school case libraries. This requires some creativity on the part of the IP instructor; for example: I have resorted to writing my own case studies (based on fictional versions of actual client cases) or modifying case studies written for other classes (for example: the Google-Motorola acquisition case written for an M&A class, has been converted by extracting the IP elements of the case). Case studies don’t necessarily have to be long and complex; since the field of IP generates daily headlines, one needs to keep an eye on the news feed and find stories for discussion that are current, which help keep the class relevant and reinforce the value proposition.
Speaking the language of business – the key to making IP assets relevant to business students is in treating them like business assets. Even the word “assets”, a term I use often in my IP valuation practice, is not as commonly used by the legal community that usually refers to “IP Rights”. This small semantic difference between “Rights” and “Assets” provides the necessary linguistic bridge between the legal world and the business world. One of the most basic gaps when discussing IP assets in a business context is the fact that these assets are generally not reported on the balance sheets of the companies that created them (under US GAAP or IFRS). I tackle that early on in my class, by introducing transaction data and valuation approaches to valuing IP assets like any other business assets of the company.
Introducing multiple perspectives – the topic of IP management is multi-disciplinary, spanning the legal, engineering, and business functions of the organization. This type of diversity should be reflected both in the student cohort, as well as in the speakers and topics included in an MBA business class. As far as students, while my class is primarily an MBA class, we are open to other graduate students from the law, engineering and medical schools. This student diversity enriches the class discussion and resembles the corporate environment where IP decisions are usually made. Likewise, the students often appreciate hearing from a broad range of speakers from various organizations and industries: in-house lawyers and outside counsel, startup founders and large company representatives, life sciences and high tech, etc.

In conclusion, I predict that IP will become an integral part of business education in 10-15 years, as more electives are offered by MBA programs, and as other efforts are being made to bring IP awareness into mainstream business management. Careful planning needs to go into making IP classes relevant and engaging for business students, but this will eventually result in better IP management decision being made across organizations.

IP Predictions and Wishes for 2020

Posted on January 2, 2020 8:26 pmModified on January 30, 2020 6:35 pmby Efrat Kasznik

At the beginning of a new year, I usually get asked what my predictions are for the coming year. With the beginning of 2020 being also the start of a new decade, I have participated in a survey of IP experts conducted by IPWatchdog, a leading IP blog that I contribute a lot of articles to. Below are the two questions that were posed to me, along with my predictions and wishes for 2020 and beyond!

Looking Forward: What are some of your predictions or thoughts on the IP front for 2020? You don’t need to use your crystal ball unless you want to, but what should we be watching/ expecting in 2020?

Thinking about the future of IP in the next decade, I see the biggest challenge facing the business community exemplified in the mismatch between the assets that bring the most value to companies, and the IP protection afforded to them. The problem has two sides to it: on the one hand, we see the erosion of what used to be the strongest legal protection, patent rights, which largely protect technology assets. On the other hand, we see new types of digital assets that may be even more valuable than technology in some industries, like data assets, which have little or no IP protection at all. This is how we get to the extreme situations of Unicorns (startups with valuation higher than $1 billion) having incredible valuations with no patents, and no other meaningful IP protection to speak of. This problem is mostly pronounced with software companies, who are no longer bothering to patent their underlying technology because of the many hurdles facing software patents, while at the same time developing data-driven assets (collected primarily around their users) which drive their valuation and monetization, but have no legal protection and are easy target for breaches and misappropriation.

As far as activism coming from the IP community, I see a lot of focus on the patent front, and virtually nothing done on the data front. Even if the strength of the patent system is fully restored to its glory days, this will solve only part of the problem. Data assets, growing in importance across many industries, from software to biotech, are left unprotected. The only protection I see is physical protection (limited access or cybersecurity measures), but there is no legal protection. Without legal protection, there is no way to create or price transfer mechanisms (such as licensing in the case of patents), and no way to remunerate the holder of these data assets in cases of misappropriation. My call for action to the IP community is to advocate for the IP protection of data assets. This may require the creation of new classes of IP rights, or at the very least expanding the protection and enforcement of existing types of IP rights.

For the full article, click here.

Your Wildest Dreams: What are your wishes for 2020 (your wildest IP dreams, rather than what you think will really happen).

My “IP dream” is a simple one: I dream of pricing transparency in patent transactions. Transparency around patent prices, royalty rates and licensing terms. Sadly, I have had the same dream over the last 20 years of valuing IP assets, and it is not any closer to materializing now than it has been 20 years ago. I dream of not having to sort through incomplete and random data sets or redacted SEC filings, that happen to be in the public domain, when looking for a royalty rate to apply in a valuation assignment or in a licensing deal. Nothing that exists in the market today fills that gap, because there is no requirement of systematic reporting of IP deals by companies, nor is there systematic valuation on the balance sheet due to the lack of such requirement by the accounting rules. Without this type of transparency, patents will never be managed as the business assets that they are. Let’s hope that the next decade brings some change in this area.

For the full article, click here.

CPA Global: IP in IPO Webinar: Q&A Answers

Posted on July 18, 2019 9:05 pmModified on July 31, 2019 5:40 pmby Efrat Kasznik

In our recent webinar: “IP in IPO: IP Valuation Lessons from Recent public Exits”, hosted by CPA Global, we discussed the role that IP plays in startup valuations, and the types of IP assets that were created by startups who recently went public. This webinar features a study we have been conducting and updating since 2015, which covers Unicorns (startups with valuations exceeding $1 Billion) and their IP positions. Since some of the Unicorns went public in 2018-2019, we continue to explore what types of IP issues frequently emerge pre-IPO, and how are companies dealing with them, and what impact- if any – does IP have on Unicorn valuations. We recommend listening to the webinar first before reading this blog, which documents our responses to the Q&A session following the webinar.

Q: How has the new court application of 35 USC Section 101 (e.g., Alice Corp) against software patents impacted software-focused IPOs?

A: The Alice decision (and ensuing Supreme Court decisions and PTAB developments) have created a lot of confusion and uncertainty in the market with regards to subject matter eligibility and the overall validity of patents covering software inventions. That being said, the correlation between these developments and software company IPOs is not an easy one to draw. For once, as my webinar demonstrated, many of the Unicorns going public (all of which are in the general Software area) have managed to grow their valuations into the billions of dollars without having patents. Whatever the reason may be for the lack of patents (one might argue Alice has something to do with it, others might argue different reasons), these companies could grow significantly without patents, and some of them even managed to exit in a successful IPO without increasing this patent portfolio proportionally to the increase in their valuation. So I would argue that the Alice decision had nothing to do with Software company IPOs.

Q: Do you have any suggestions for how to prepare or develop a patent portfolio so that it will have a higher valuation, and hence contribute more as a business asset?

A: As I explained in my webinar, there are legal sides to a company’s patenting strategy, and there are business sides to that same strategy. The legal side is best handled by lawyers, they can search and determine where patent protection should be pursued based on prior art and the patent landscape in the market. From a business/valuation perspective, a patent portfolio will have value if it is well-aligned with the assets that bring the most value to the business. In companies where Technology is the most valuable asset (usually correlated with heavy investment in R&D, like pharma and biotech) patents can have more value compared to companies where Brand is the main asset (consumer products, as an example). Also, in companies where Trade Secrets are deemed to be the best mode of protection, patents can have less value compared to companies where a patent is the preferred mode of protection. Once it has been determined that it makes sense to invest in creating a patent portfolio as a way to increase the value of the company, the key is to have a good combination of offensive and defensive goals, geographical distribution, technology coverage, etc.

Q: Do you have any suggestions or advice for unicorn startup companies that may have a relatively high number of active patent assets for its valuation?

A: I would argue that you need to worry about having “too many” assets at a later stage in your lifecycle. While a Unicorn could theoretically sell or divest of its IP assets, it is not recommended to do that particularly in the pre-exit stage. A Unicorn (particularly pre-exit) is still in a building mode. There may be industries the company would like to enter in the future, where the patents could benefit them in leveraging freedom to operate with incumbents/competitors. Additionally, if they haven’t exited yet, a patent portfolio can be much more valuable to a potential buyer than it is to the Unicorn, so there is no downside to having more patents as the company is still figuring out its exit strategy. The only downside to having more patents is having to pay maintenance fees, plus incurring additional prosecution costs to grow the portfolio. However, as that should not be a financial hurdle for most Unicorns, I would recommend Unicorns (pre-exit and even post-exit) to hang on to their patents!

Q: For Unicorns, have you looked at timeframe of litigation data? do unicorns acquire inorganic assets? Is there a timeframe when NPEs approach unicorns? (Pre-IPO? Etc)

A: The studies presented in the webinar did not specifically look at litigation, or any other reason for buying. The only tracking we did was for the timeline and the time leading to the IPO exit event. Unicorns buy patents for a variety of reasons, and I am sure that litigation-related reasons (either litigation avoidance, or freedom to operate, or counter-suing in a pending litigation) play a role in those decisions. What I find as a general observation (I don’t have empirical proof of that) is that often times patent acquisitions are highly correlated with the people running the patent function at an organization. Particularly when you see changes in strategy, such as a buying program put in place (see Uber as an example) it’s usually driven by new leadership put in place to manage the patent portfolio creation activities, and they come from a place with higher awareness to the strategic advantages of patents.
As far as your second question about when NPEs are approaching Unicorns, anecdotal evidence indicates that t is usually done at a time when the Unicorn – or any other startup for that matter – has crossed a critical mass of revenues and users (“crossing the chasm” is the phrase most commonly used to describe that phase in a startup’s lifecycle) and is at a vulnerable point that could be leveraged to reach a resolution that is more favorable for the NPEs. In that regard, it is not different from any other litigation strategy, and the fact that there’s a unicorn involved that has no patents does not really create a disadvantage with an NPE, because NPEs cannot be countersued anyways so having your own patents does not help defend against an NPE.

Q: You mentioned that IP evaluation may not correlate with company’s value but is there anything you can do to fill in this gap?

A: What I said with regards to IP valuation is that there is no place on the financial statements of a company where you can find the value of its internally-generated IP assets. The accounting rules in the US and around the world don’t require companies to value their IP on the balance sheet. The “Gap” I was referring to is a reporting gap. There are ways to fill in the gap, but they all involve engaging in a special valuation of the IP assets of the company. This IP valuation is not going to be part of any business valuation because business valuations are not targeted at valuing assets separately. In order for the IP valuation to be informative and realistic, the valuation itself needs to be preceded by a careful assessment of the assets, followed by a strategy phase, where the valuation firm is working with management to identify the possible monetization scenarios to be included in the valuation.

Q: Is the later acquisition of patents a result of actual need for additional IP? or is it driven by third-party patent holders going after deep pockets and a way to avoid lawsuits?

A: A later acquisition of patent (a phenomenon I was referring to as “backfilling”) takes place usually as a result of a threat or perceived threat to the company’s freedom to operate (FTO). The kind of patents that you buy, as opposed to filing organically, are those that are available in the secondary market and those usually have value since there is some infringement associated with them. The actual need to IP to support current products is usually met by internal filing and sometimes through an acquisition of an operating business (not a patent acquisition, but a business acquisition).

Q: Is there a traditional patent valuation methodology (cost, market, etc.) you prefer for startups, and why?

A: The valuation method selection is secondary in importance to the valuation context and scenario. First there needs to be a determination whether the startup has created enough IP to warrant a separate valuation. Something of value needs to have been created or accumulated (think along the lines of the slide showing the three types of assets: technology, data and brand) and/or some IP protection needs to have been developed around these assets. The next question is what is the business model of the startup, and what IP assets bring the most value in that context. Then comes the question of how the Ip assets bring value to the startup, which would prescribe the valuation scenario. And only after all of that has been determined, comes the question of the valuation method. The method really depends on the data available, and I have applied all three of these based on the circumstances.

Q: How do you distinguish between the value high quality patents (those of key importance to the business) vs. other patents in looking at financials? The high quality patents can be worth far more than the rest of the portfolio.

The process that I described in the webinar for arriving at a Price per Active Asset is a process of normalization, so two companies can be compared to one another. In order for this comparison to be meaningful, the normalization process needs to be uniform across the board. So for every company, we divided their equity value by the number of active US assets (pending and issued). Underneath this is an assumption that patent portfolios have a certain distribution and that this distribution is the same in most companies. There’s no practical or subjective way to rank the asset in a portfolio without getting into months of analysis for each company, so for purposes of an industry-wide data analysis the normalization that we did is the easiest way to get to a point of comparability between companies.

Q: Have you looked at unicorn patent strategy by jurisdiction? Do you have any recommendation on how they should strategize internationally?

A: We have not really done that since we only looked at US assets and only checked for US Unicorns (which tend to have a majority of their assets be US assets). There are not that many non-US Unicorns, and if there are then I would guess that China may be the next country of origin for Unicorns, and I would also venture to think that China-based Unicorns are also going to have the majority of their assets as US assets (this is just a guess, I haven’t checked the data). I would not expect to find much difference between jurisdictions because the patenting patterns that I pointed out are ore a function of the industry (Software) then a function of geography. I don’t really have any recommendations for foreign filings for Unicorn companies that would be any different from the generally recommended best practices for foreign filings for other companies.

Q: To what extent does a valuation of one or more patents equate to their capability to capture a significant share of a significant market over any other IP solution?

If I understand the question correctly, you want to know the marginal contribution of one additional patent to increasing market share, as opposed to any other type of IP protection. I am not sure I can answer this question as stated, because the main point I was trying to make in the webinar was that for Software companies there is no observed correlation between having patents and having a large market share, or a large valuation. The value that patents can bring to a Software company is not directly measured by market share (a you can more easily do in pharma or biotech companies, for example). You need to look for the value in their strategic positioning, that is not always evident in market share, like: having an improved bargianing position vis-à-vis its competitors, reducing risk to their freedom to operate, etc. As far as other types of IP protection, I would argue that a strong Brand can actually translate into higher market share in software companies, and a brand is protected by Trademarks and Copyrights, not so much by patents. The other one that can increase market share is Data, which again is not protected by patents.

Q: Is there a minimum valuation for a small company to be able to go public? What (minimum) revenue range is considered acceptable?

A: Not really, as you can see if you look at some of the Life Sciences IPOs which are very small, and are often still in R&D stages. As far as software companies, which were the focus of my talk, companies tend to stay private much longer than they used to, so it’s often the problem that companies due to go public but are trying to avoid it, for various reasons. Keep in mind that, as venture-backed startups, companies have pressure from VC investors to get to an exit event at a certain value, so there is that pressure on the one hand. Companies tend to go public when they would like to get access to funds through the capital markets, as they have exhausted their private funding options. It’s usually a leverage for additional growth. Finally, the SEC have their own rules as to the safety and stability of the company, and regardless of their size or revenue, the SEC will do their own diligence and often times ask companies to restate their earnings as a condition to listing in a stock exchange.

Q: are patents still important today when majority of assets are data and trade secrets? and when most startups are concerned with being first in the market, etc.?

A: The answer varies by industry. For Software companies there is no observed correlation between having patents and having a large market share, or a large valuation. The underlying assets that bring value, such as Brand or Data, are often not subject to patent protection and are better protected by other types of IP. A strong Brand can actually translate into higher market share in software companies, and a brand is protected by Trademarks and Copyrights, not so much by patents. The other one that can increase market share is Data, which again is not protected by patents.

When a Stick Becomes a Carrot: How Toyota’s Royalty-Free Patent Move Impacts The Valuation of Its IP Portfolio

Posted on April 26, 2019 6:11 pmModified on April 19, 2021 8:25 pmby Efrat Kasznik

Toyota has recently announced (April 2019) that it will grant royalty-free licenses on nearly 24,000 patents related to its hybrid electric vehicle (HEV) market. In the announcement, Toyota stated that its goals were to promote widespread adoption of electrified vehicles in an effort to help governments, automakers and society at large accomplish goals related to climate change. Toyota has further noted that it felt now is the time to cooperate with other companies, based on the high volume of inquires it received in connection with its vehicle electrification system from companies who recognize a need to popularize hybrid and other electrified vehicle technologies.

The Toyota announcement comes at the heels of a similar announcement made in January 2015, when Toyota announced at the CES conference that it is going to make its hydrogen fuel portfolio of 5,600 patents available on a royalty-free basis. Toyota’s new patent announcement raises a number of important questions related to the value of these patents and the end goal of Toyota’s move. In this blog we examine the potential motivations for Toyota’s bold move, its implications on patent valuation and brand valuation, and how Toyota’s patent move is very different from what appears to be a similar move made by Tesla.

From Hybrid Vehicle Pioneer to Market Leader

The Toyota brand is synonymous with the hybrid vehicle. Since the launch of the Prius, with its unique love-it or hate-it design, Toyota has solidified its position as a leading auto company in the pursuit of reduced vehicle emissions. The company’s eco-friendly branding efforts have paid global dividends – in 2017, Toyota surpassed the 10 million cumulative global unit sale mark, with Prius models alone accounting for about 60% of these sales. Though they may be the category leader, however, the hybrid vehicle market is fairly negligible in the total global car market, which is pegged at nearly 79 million unit sales in 2018. With an estimated 4.2 million unit sales in 2018, the hybrid market represents just 5% of the total. With such a strong brand in a minuscule category, it is only natural for Toyota to seek to aid growth in the hybrid market.

With the move to allow royalty-free access to its hybrid vehicle patent portfolio, while selling parts and consulting services on the technology, it seems that Toyota is attempting to advance the hybrid market as a whole. A J.P. Morgan analyst report noted that electric vehicles (including battery EVs, plug-in hybrids, and traditional hybrids) represented just 1% of total global vehicle sales in 2015. The same report estimates that by 2030, this will rise to nearly 60%. It is fair to assume that Toyota will be a major supplier fulfilling this increased global demand.

When a Stick Becomes a Carrot

In an article we published in March 2019, Foresight predicted the return of “Carrot licensing” as one of the trends to watch in 2019. The Toyota announcement could not have been a more timely validation of that trend. “Carrot licensing” is a term used to reference licensing activity that is driven by technology transfer, as opposed to licensing driven by enforcement (also known as “Stick” licensing). This form of licensing is more closely associated with emerging technologies, where the licensor is interested in creating markets for new products using an idea protected either by trade secrets or by patents. A Carrot licensing strategy also has economic advantages: it allows expansion into new regions without bearing the marketing, manufacturing and distribution cost associated with the complementary business assets needed to bring a new technology to market. In Toyota’s case, the company decided to grant royalty-free license agreements as a way to boost market adoption, which will in turn drive additional revenues from components and technical support.

Given Toyota’s dominance in the hybrid vehicle market, one could easily argue that the time to cooperate has long passed, as major US manufacturers currently offer their own hybrid vehicles, or have announced plans to go all electric in the coming years. With this in mind, it is unlikely that Toyota is seeking to create partnerships with major US manufacturers to expand their hybrid lineups. Instead, this seems to be Toyota’s push to become a component supplier that also provides fee-based technical support to car makers in developed or developing countries that do not have the same access to electric or hybrid vehicle technology. Through component sales and technical support, Toyota can continue to profit from the innovations protected by these patents without having to build, export and market Toyota vehicles. Since Toyota cannot possibly grow its market share much beyond it already is, it needs to expand the overall pie so others can produce hybrid vehicles, while paying Toyota for parts and knowledge. It is actually a very smart strategy from an economic and market perspective.

Toyota’s Patent Valuation: Boost or Bust?

Toyota’s announcement raises a number of questions related to the value of the 24,000 patents that were just offered royalty-free to the market. If Toyota is granting royalty-free licenses on a significant portion of its patent portfolio, does this mean that these patents hold no value? According to Toyota’s announcement, an actual license with Toyota is still required to gain access to these patents. This approach is markedly different from that of Tesla which stated they would not initiate patent lawsuits against anyone who, in good faith, wanted to use their patents. Toyota is stating that “contracts for the grants may be issued by contacting Toyota and discussing specific licensing terms and conditions.” This sounds more like Microsoft’s approach to granting access to 10,000 patents to startups to defend against lawsuits, subject to the condition that the startup must qualify based on their preceding three-month Azure spending.

We do not yet know what terms and conditions will ultimately be included in the Toyota license agreements, but the language tends to indicate that one could expect to find a tie-in with Toyota’s services and/or Toyota’s components, which could generate significant revenues for Toyota. The company will most likely still continue to maintain and grow its patent portfolio, even though the patents are offered under royalty-free licenses. Assuming this is the case, Toyota is seeking an alternative route to monetization of their patented technology that extends beyond the market which it already dominates in vehicle sales. If the patents help drive other types of revenues, then they still have significant value, which could potentially be even higher than the value calculated based on the royalty savings or royalty licensing potential to Toyota. Patents can also bring strategic value that does not translate directly into a revenue stream. Toyota holds the IP rights to the technology underlying its massive patent portfolio, and can use these IP rights in whatever way it sees fit. From an economic and legal perspective, the Toyota Board has a fiduciary duty to its shareholders to utilize corporate assets (including intangible assets, such as patents) in ways that optimize shareholders’ return. One should assume that careful consideration has been given before 24,000 patents are released royalty-free, as the Board could have left the status-quo as is and have done nothing with the patents; if these patents are indeed worthless, why do anything with them? Let alone offer them free of royalty to the market.

“Toyota Inside”? The Branding Implications for Toyota

Toyota’s gesture also differs from Tesla’s in other important ways. Tesla’s announcement was interpreted as a way to expand adoption of a relatively new market: all-electric vehicles. Tesla viewed its patent portfolio as a road block to the emergence of newcomers in the market. Toyota, on the other hand, is in a much different position: it holds the lion’s share of the market for hybrid vehicles – a market it helped create over 20 years ago with the introduction of the first Prius model in 1997. Since that time, Toyota has effectively utilized its portfolio to restrict competition and build its massive market share, and is now facing an inflection point where the market appears ready to abandon hybrid vehicles in favor of all- electric vehicles. It seems clear that Toyota believes major markets are turning away from hybrids, and it now must find a way to monetize its patent portfolio through a new business model. Time will tell whether this approach will suffer the same fate as Toyota’s fuel cell patent offering in 2015, or if the company is able to extend the economic life of these assets through service and component obligations in emerging vehicle markets.

It also seems that Toyota views itself as a key player in enabling this overall growth. The Prius brand has proven itself to be marketable and sustainable; however, no matter how strong the brand, the demand must exist in the market to realize its true value. Perhaps this is why Toyota is seeking to enable its competitors to more readily produce hybrid vehicles. With the competition now armed with the tools to produce competitive hybrids, new markets could begin to open up. Aside from market expansion in territories like the U.S., new demand in markets such as China and India, which each sold around 25 million and 4 million vehicles respectively in 2017, could mean massive revenue potential for Toyota.

Conclusion

Toyota has achieved a dominant market position in the hybrid vehicle market; a position which has awarded Prius a great competitive advantage. We see the move by Toyota to allow royalty-free access to its 24,000 patent portfolio not only as a move to grow the hybrid vehicle market, but also as a way to extract new revenues sources from its patented technology as well as enhance the value of its brand (Toyota is already boasting a brand value of over $53 billion according to brand ranking service, Interbrand). The company may have won the hybrid market battle against traditional competitors such as Ford and Honda, but now it must deal with competition from a new generation of companies that were born all-electric, namely Tesla. With this move, Toyota reminds us that they are the dominant force in hybrid technology and are eager to drive the industry towards an emissions-free future.