Patents and Technology Transfer Cornelis Schüller — Group

Patents and Technology Transfer Cornelis Schüller - Group Head of Patents and Technology Transfer Genève, 6 th November 2007 1 Finance & Control

Patents and Technology Transfer u Introduction u The Patenting Process u Technology Transfer in Theory u Technology Transfer in Practice u Conclusion 2 Finance & Control

Patents and Technology Transfer Introduction u Universities/public research u Innogenetics u Nestlé 3 Finance & Control

Patents and Technology Transfer u. The Patenting Process 4 Finance & Control

Patents and Technology Transfer The Patenting Process u Exclusive rights vs. Full disclosure u Encourage scientific/technological development 5 Finance & Control

Patents and Technology Transfer The Patenting Process Patents are primarily used for, u Protection of R&D results u Preventing competitors from entering a certain field u Avoid being blocked out of a field by third parties u Cross-license to get access to third party products and technologies u Marketing tool » Proof of innovativeness » Selected licensing » PR. 6 Finance & Control

Patents and Technology Transfer u. The Patenting Process u. Trade Secrets 7 Finance & Control

Patents and Technology Transfer Trade Secrets (1) u employees move to other companies, including competitors more often there is no such thing as ‘life-time’ employment anymore, u education is similar if not identical in terms of textbooks, handbooks, scientific journals etc. , u access to information is universal via the internet, 8 Finance & Control

Patents and Technology Transfer Trade Secrets (2) u access to information is universal via the internet, u retrieving information from inside or outside of a company is easy, u via internet or on discs etc. huge amounts of information can be transported unnoticed, industrial espionage is growing, think of the formula 1 wherein Mc. Claren was accused of using Ferrari info. 9 Finance & Control

Patents and Technology Transfer u. The Patenting Process u. Trade u. The Secrets Current Situation 10 Finance & Control

Patents and Technology Transfer Current situation u Patents protect economic interests u Patents serve to attract investors u ‘Patent or perish’ 11 Finance & Control

Patents and Technology Transfer u …. . the process of developing practical applications for the results of scientific research. u …. . the process of transferring process and production technologies from one factory to another. 12 Finance & Control

Patents and Technology Transfer u Transfer of Patent Rights and Trademarks u Transfer of Technology u Licensing as the Core of a Larger Contractual Package 13 Finance & Control

Patents and Technology Transfer Key players u Universities/public research u Innogenetics u Nestlé 14 Finance & Control

Patents and Technology Transfer Universities/public research u Bayh-Dole Act(1980) gave universities control of their publicly funded patents, u Prior to enactment the US goverment had 30, 000 patents 5% of which were licensed u Petitions for ‘march-in’ rights have mostly been denied. 15 Finance & Control

Patents and Technology Transfer Universities/public research u Association of University technology managers 6000 members (w. w. ) u US univ. 3000 US patents/year. u Research budget 40 billion USD, Licensing revenues 1. 4 billion USD Top 5 institutes account for 91% of the revenues (Univ. Calif. , Stanford, Harvard…) 16 Finance & Control

Patents and Technology Transfer University (Groningen) The TLG’s profile Who are we and what do we do? u The Transfer & Liaison Groep is a faculty department of the Office of the University of Groningen (Ru. G). We function as the main link between RUG academics on the one hand authorities (local, regional and national) and the business community on the other. You can find us at the university’s Zernike Science Park. 17 Finance & Control

Patents and Technology Transfer Innogenetics 2006 - Product sales increased by 13. 2% to reach € 47. 9 million Total revenues increased by 10. 6% to reach € 53. 7 million Total income increased by 6% to € 58. 0 million Operating loss from continuing operations € 25. 7 million versus € 20. 0 million in 2005 Cash position € 22. 3 million 18 Finance & Control

Patents and Technology Transfer Innogenetics products (web site : Innogenetics (2007) 19 Finance & Control

Patents and Technology Transfer 20 Finance & Control

Patents and Technology Transfer 21 Finance & Control

Patents and Technology Transfer Nestlé in Figures 2006 • • Worldwide Sales: CHF 98, 458 billion EBIT: CHF 13, 302 billion Net Profit: CHF 9, 197 billion Factories: 481 in 87 countries Employees: Around 265, 000 Organic Growth: 6. 2 % R&D Expenditure (F&B): CHF 1. 7 billion (1. 8% of sales) 22 Finance & Control

Patents and Technology Transfer Sales by region Percentage of total F&B sales in 2006 Europe 38. 3% Americas 42. 4% Africa, Asia, Oceania 19. 3% ( Excluding globally managed businesses ( Pharmaceutical, Nestlé Waters, Nestlé Nutrition) 23 Finance & Control

Patents and Technology Transfer Sales by Product Group in 2006 • Ph a rm Alcon Laboratories, ac Galderma eu tic al s Nescafé, Nesquik, Milo, Nestea, Perrier, San Pellegino • 26. 3% • Beverages 6. 8% • Chocolate Kit Kat, Smarties, • Confectionery • 11. 6% Crunch, After • Biscuits Eight • 17. 9% • 25. 8% • Milk Products • Nutrition • Ice Cream Cooking Aids • 11. 6% Prepared Dishes • Pet. Care Nestlé, NAN, NIDO, Dreyer's, Mövenpick Stouffer's, Buitoni, Maggi • 24 Pro Plan, Purina ONE, Friskies, Dog Chow Finance & Control

Patents and Technology Transfer 2006 World's largest Food and Beverage Companies 25 Finance & Control

Patents and Technology Transfer Some perspectives Sales growth 2006 (CHF b) Nestlé Cadbury Schweppes Danone Coca Cola General Mills Heinz Numico Unilever Campbell Kraft Hershey - 1, 000 2, 000 3, 000 4, 000 5, 000 6, 000 7, 000 8, 000 26 Finance & Control

Patents and Technology Transfer Our Brands Finance & Control

Patents and Technology Transfer 25 brands with sales over CHF 1 billion Beverages Chocolate, confectionery and biscuits Prepared dishes and cooking aids Water 28 Finance & Control

Patents and Technology Transfer 25 brands with sales over CHF 1 billion Milk products Nutrition Pet. Care Ice cream Pharma 29 Finance & Control

Patents and Technology Transfer Local tastes and needs u Nestlé tailors products to local tastes and needs: – around 200 Nescafé blends to answer local consumers expectations Japan Poland Europe Malaysia Africa, Greece Russia, Israel Switzerland Japan Russia 30 Finance & Control

The Group Intellectual Property Department Manages IP Rights Worldwide

Patents and Technology Transfer Organisational Intellectual Property Department 32 Finance & Control

Patents and Technology Transfer Strategic and local brands are protected & managed Brands Protections Local 22'132 7'653 84'253 Strategic 33 365 Status 24. 10. 07 / E. Dum. Managed by 17 Regional IP Advisers (RIPA's) for local Nestlé Operating Companies Managed by Center IP Department in cooperation with the Strategic Business Units ('SBU's) and the RIPA's Finance & Control

Patents and Technology Transfer Nestlé has a substantial patent portfolio The Nestlé patent portfolio contains as at 24. 09. 2007: u 10'418 granted patents u 6'173 pending cases which may result in the grant of a patent They key patenting territories for Nestlé are: USA, Europe, Canada, Japan, Australia, and more recently China and India. 34 Finance & Control

Patents and Technology Transfer Most Valuable Global Brands 2006 35 Finance & Control

Patents and Technology Transfer Nestlé 36 Finance & Control

Patents and Technology Transfer Nestlé's IPRs are centrally owned & licensed to local Nestlé Companies. . . • Société des Produits Nestlé S. A. is the registered trademark and design owner and Nestec SA is the registered patent owner, in both cases acting as nominee for Nestlé S. A. , who is the beneficial owner - Central ownership applies to trademarks linked to strategic as well as to local brands • These rights are licensed, together with know-how, to the Nestlé Operating Companies who pay royalties for their use 37 Finance & Control

Patents and Technology Transfer Nestlé SA (Holding Co. ) Royalties Funding Nestec SA (Knowledge Co. ) Operating Company Knowledge and Licences 38 Finance & Control

Patents and Technology Transfer Joint Venture Nestlé is party to a number of important JVs: u BPW (Beverage Partners Worldwide) with the Coca Cola Company u CPW (Cereal Partners Worldwide) with General Mills u Innéov with l’Oréal u Galderma, Lactalis etc. 39 Finance & Control

Patents and Technology Transfer ‘Innovating the Future’ This strategy is enhanced by the following u continuous improvement into consumer insights and their translation to innovative products built on superior science and technology, u harnessing the vast expertise in our research and development work, u working closely with leading universities and outside partners on cutting-edge science and technology, u recruitment of open-minded and passionate innovators who can bridge science, technology and business needs, u bigger pioneering innovations that hit the “innovation sweet-spot” where best in class science and technology combine to deliver precisely the needed N, H and W products needed. 40 Finance & Control

Patents and Technology Transfer Technology transfer …. - includes patents, trademarks, brands etc. extensive defence is needed against counterfeiting and copying. 41 Finance & Control

Patents and Technology Transfer Counterfeits are a serious problem and a crime in most countries! Example Trademark NESCAFE infringement in Russia + Unfair competition + Fraudulent act with penal sanction 42 Finance & Control

Patents and Technology Transfer NESCAFE PLATINUM in Russia 43 Finance & Control

Patents and Technology Transfer Universities u rely on technology licensing groups which are not always experienced enough, u license (co-own) and are therefore free to exploit outside of field of sponsoring company. u feel the pressing need to exploit, as patents cost money and are perishable, u understand that technology is only the starting point, u may get additional sponsoring for further research, further co-development and licensing of IP relating to same project. 44 Finance & Control

Patents and Technology Transfer Biotech companies/INNX u further develop certain fields like Universities, u are tied to the Industrial results of their licensee, u still rely heavily on public subsidies, u understand that the basic, scientific steps are not the most rewarding as there is a long way to go to a final product and that is where a big part of the risks is located. 45 Finance & Control

Patents and Technology Transfer Food Industry/Nestlé u primarily 46 has direct ownership of results by direct investment, either by full-ownership or in the form of JV’s, u intergroup licensing involves multiple subjects know-how, training, patents, trademarks, u is more and more accepting ownership by developers outside their own field of use, especially with engineering firms, u Starts co-development in ‘Open Innovation’ with peers. u is more open for licensing especially since developments are going fast and so IP becomes outdated faster. Finance & Control

Patents and Technology Transfer 47 Finance & Control