Intellectual property has long been an essential part of the semiconductor industry, but the norms of the business conditions surrounding IP transactions have been steeped in secrecy as part of the confidentiality agreements between buyers and sellers. As a result, the cost of an IP transaction has been unnaturally high. IP suppliers and buyers have engaged in hand-to-hand combat over every contract. Each side tries to optimize the business conditions for its own advantage, and neither side has a good understanding of whether it is asking for the norm or something egregious.
Several attempts have been made to create an industry standard IP contract, but they have all failed. No one in the industry has had any sense of what is considered standard.
In 2010, the IP Working Group of the Global Semiconductor Alliance (GSA) created a survey -- the first of its kind -- to collect information from buyers and sellers and to help both sides understand what is considered an IP industry norm without violating any confidentiality provisions. The survey was conducted quarterly through 2012.
Among the most important lessons from the 2010-2012 data is how buyers and sellers are balancing legal risk and liability. Though the IP business is clearly a technology business that is fueling all sorts of exciting developments in semiconductors, it is inherently a business with many possible legal entanglements. The survey results show how the industry has come together to converge on some business norms that both parties can tolerate.
The GSA's IP Working Group has opened a new survey for 2014 with an expanded set of questions for IP buyers and sellers. It probes deeper into the behaviors of the semiconductor IP market. The questions are intended to update the 2012 data and to delve deeper into some topics that remain murky in this highly secretive market.
Here is a sampling of the new questions for both buyers and sellers:
- What percentage of contracts completed in 2013 contained a royalty component?
- What is the maintenance/support period provided?
- What is the extent of indemnification negotiated?
- How much total liability is negotiated?
- What kinds of modification rights are permitted?
- Under what conditions can the customer's contractors access the IP?
For 2014, we also created two additional sets of questions -- one for buyers and one for sellers. The new questions for buyers:
- Where do you primarily look (i.e. shop) for IP?
- Do you plan to increase (diversify) or decrease (consolidate) the number of IP suppliers in the next 12 months?
- What percentage of the IP you purchased do you require to be customized by the supplier for your application?
- What IP do you plan to purchase for the first time in 2014?
- How far in advance of the project start is most IP procured?
We pose some equally engaging questions for IP suppliers:
- Where do your leads come from?
- Have you fired a customer (refused to do business) in the last 12 months? If yes, why?
- Is the average amount of support you are providing customers increasing, decreasing, or remaining about the same?
The GSA's 2014 IP survey is online now. You will need to log in with your GSA user name or password; if you don't have one, you can request one for free. The survey is anonymous, and participants will receive a copy of the results when the survey closes at the end of February. To ensure results are accurate, only one person per company should complete the survey.
We encourage the entire semiconductor industry to join in this unique opportunity to add to the collective intelligence of the community.
Warren Savage is chairman of the GSA IP working group and chief executive of IPextreme.