Recent Acquisitions Suggest Patent Market is Alive

By Gene Quinn
April 6, 2015

Financial growth concept

There seems to be a popular belief that the market for patents is dead, but if you look at recent transactions through Q1 of 2015, there are at least some signs that the patent marketplace is becoming more active. There have been a number of high profile acquisitions in the pharmaceutical space over the last four months, and last week Sony acquired OnLive’s patent portfolio. Earlier today Akamai Technologies, Inc. announced that acquired Octoshape, which will give Akamai access to Octoshape technologies that optimize the quality of video streams for over-the-top content and to enable Internet Protocol television solutions.

So it seems that the market for patented technologies is not as dead as some may believe.

“Although diligence and the level of communication are not indicative of future bidding, we are seeing the greatest numbers of buyers taking a look at portfolios since Spring 2012,” explained Tim Schnurr, who is Chief Operating Office of ICAP Patent Brokerage. The portfolios Schnurr was specifically discussing relate to ICAP’s upcoming April 23, 2015, Internet of Things Auction, which will auction off 34 separate patent portfolios that relate to wearables, smart-home technology, medical records and medical data collection, smartphone audio tours, voice control for mobile devices, gesture recognition eCommerce payment architecture, natural language processing and more.

Indeed, things are looking up on the transaction side of the industry. Compared to how the market seemed to bottom out right after the Supreme Court’s decision in Alice v. CLS Bank, there is much greater movement, and a sense that the worst is now in the rear view mirror.

Over the last several months there have been a number of blockbuster deals in the pharmaceutical sector. Some are attributing the recent deals to the latest so-called “patent cliff” facing the pharmaceutical industry. A patent cliff happens when a company has a number of blockbuster drugs coming off patent and does not have suitable patented replacements in the pipeline to make up the lost revenues associated with patents falling into the public domain, which leads to generic competition.

Moody’s Investors Service has recently identified AstraZeneca (NYSE: AZN), Bristol-Myers Squibb (NYSE: BMY), and Eli Lilly (NYSE: LLY) as having the highest patent expiration exposures relative to their revenue bases. According to Moody’s AstraZeneca and Eli Lilly, despite having a good deal of patent cliff exposure, have also strengthened their pipelines relative to where the companies stood in 2013.

Recent pharmaceutical deals may not, however, be directly attributed to the upcoming patent cliff that will be faced by several of the largest pharmaceutical companies in the world. For example, those companies identified by Moody’s as having the weakest pipelines and most exposure to patent expirations are not among those who have been involved in the most recent acquisition activity. Furthermore, much of the acquisition activity of late suggests a focus on orphan drugs and treatment of rare diseases, as well as drugs directed to niche markets. This focus would allow the acquiring company to charge a premium while at the same time having a far more narrow marketing campaign.

For example, in February 2015, Valeant Pharmaceuticals International, Inc. (NYSE: VRX) and Salix Pharmaceuticals, Ltd. (NASDAQ: SLXP) announced that they entered into an agreement under which Valeant would acquire all of the outstanding common stock of Salix for $158.00 per share in cash, or a total enterprise value of approximately $14.5 billion. Salix Pharmaceuticals is a widely recognized gastrointestinal market leader with a portfolio of 22 total products, including well-known prescription brands Xifaxan, Uceris, Relistor, and Apriso, as well as a strong near-term pipeline of innovative, new assets. “With strong brand recognition among specialist GI prescribers, a highly rated specialty sales force, and a significant product and commercial presence across the undertreated and underserved gastrointestinal market, this acquisition offers a compelling opportunity for Valeant to create a strong platform for growth and business development,” explained J. Michael Pearson, Valeant’s chairman and chief executive officer.


More recently, at the end of March 2015, it was announced that Israeli pharmaceutical developer Teva Pharmaceuticals Industries Ltd. (NYSE:TEVA) would spend $3.5 billion to purchase Auspex Pharmaceuticals Inc. (NASDAQ:ASPX), paying $101 per share. Teva CEO Erez Vigodman explained that the Auspex acquisition moves his company more firmly into central nervous system and movement disorder markets, meeting a need that is currently underserved. Auspex has focused on the development of medicines for movement disorders and orphan diseases such as Huntington’s disease-associated chorea and tardive dyskinesia. Auspex has also been working on a compound known as SD-809, which has been developed into pharmaceutical treatments for involuntary movements associated with neurological disorders. SD-809’s inhibition of the VMAT2 integral membrane protein regulates levels of dopamine neurotransmitters in the brain, helping to control hyperkinetic movement disorders.

Also at the end of March 20125, Horizon Pharma plc (NASDAQ: HZNP) and Hyperion Therapeutics, Inc. (NASDAQ: HPTX) announced they entered into an agreement under which Horizon Pharma will acquire all of the issued and outstanding shares of Hyperion’s common stock for $46.00 per share in cash or approximately $1.1 billion. “The Hyperion acquisition will expand and diversify our product portfolio by adding two complementary orphan disease products, RAVICTI and BUPHENYL, and leverage as well as expand the existing infrastructure of our orphan disease business,” said Timothy P. Walbert, chairman, president and chief executive officer, Horizon Pharma plc. “This transaction will… add approximately $100 million to our adjusted EBITDA, including cost synergies contributing greater than $50 million.”

Outside of the pharmaceutical industry, last week OnLive announced that the company would be closing and had sold various assets, including its U.S. and foreign patent portfolios, to Sony Computer Entertainment. The OnLive patent portfolio covered innovations in cloud gaming. “These strategic purchases open up great opportunities for our gamers, and gives Sony a formidable patent portfolio in cloud gaming. It is yet another proof point that demonstrates our commitment to changing the way gamers experience the world of PlayStation,” said Philip Rosenberg, VP, Global Business Development of Sony Computer Entertainment.

Still further, Akamai Technologies, Inc. (NASDAQ: AKAM) announced earlier today that it acquired Octoshape in a cash transaction. The acquisition of Octoshape is expected to provide Akamai with valuable technology and experience in the area of streaming video optimization.  Through a combination of patented video and network optimization technologies, Octoshape has created efficient transport methods for the delivery of video streams across the Internet using standard media formats and players. “With the addition of Octoshape, Akamai intends to provide customers with the most comprehensive suite of video delivery and optimization technologies,” said Tom Leighton, CEO of Akamai.  “We believe this acquisition will bolster our strategy to further the deployment of Akamai software into devices, carrier networks, enterprises, and homes, and to fulfill the promise of an Internet that is fast, reliable and secure on any device, anywhere.”

In each of the aforementioned instances the acquisition of patented technology was at the core of the deal, which suggests that as of late there is a growing desire to acquire technologies created from the outside to bolster internal innovative efforts. This suggests that the market for patented technologies is not nearly as dead as many people might belief.

These and other issues will be the focus of a free webinar I am hosting on Thursday, April 9, 2015, titled The Art of Patent Dealmaking. The webinar, sponsored by Innography, will take place from 12pm to 1pm Eastern. Joining me will be Tim Schnurr, who is the Chief Operating Officer of ICAP Patent Brokerage, and Tyron Stading, the Founder and President of Innography.

In addition to taking as many questions from the audience as possible, during the webinar we will also take a look at some of the biggest patent deals over the last year and discuss the impact the patent reform debate has on dealmaking and licensing efforts. Our conversation will also touch upon the Innovation Act and the STRONG Patents Act. Finally, we will discuss whether the PTAB is becoming more patent owner friendly and what that means for patent value.

To register for this free webinar CLICK HERE.

The Author

Gene Quinn

Gene Quinn is a Patent Attorney and Editor and President & CEO ofIPWatchdog, Inc.. Gene founded IPWatchdog.com in 1999. Gene is also a principal lecturer in the PLI Patent Bar Review Course and Of Counsel to the law firm of Berenato & White, LLC. Gene’s specialty is in the area of strategic patent consulting, patent application drafting and patent prosecution. He consults with attorneys facing peculiar procedural issues at the Patent Office, advises investors and executives on patent law changes and pending litigation matters, and works with start-up businesses throughout the United States and around the world, primarily dealing with software and computer related innovations. is admitted to practice law in New Hampshire, is a Registered Patent Attorney and is also admitted to practice before the United States Court of Appeals for the Federal Circuit. CLICK HERE to send Gene a message.

Warning & Disclaimer: The pages, articles and comments on IPWatchdog.com do not constitute legal advice, nor do they create any attorney-client relationship. The articles published express the personal opinion and views of the author and should not be attributed to the author’s employer, clients or the sponsors of IPWatchdog.com. Read more.

Discuss this

There are currently 10 Comments comments.

  1. angry dude April 6, 2015 6:00 pm

    “Blessed are those who believe without seeing…”

    Back in 2011, in the wake of huge patent aquisitions of Nortel and then Motorola (mostly junk) patent portfolios, I foolishly decided that my patent might be worth something and put it up for sale on ICAP (a few years before that an Ocean Tomo guy told me that I could possibly get some mid to high 6 figures for it)

    Fool that I was

  2. Gene Quinn April 6, 2015 6:36 pm

    angry dude-

    You seem to base everything you say on an extremely limited data set, namely your own patent(s). What are the patent numbers that relate to your portfolio? It would be interesting to dissect them to see what the problem is and if the patents themselves are flawed in some way.

    -Gene

  3. angry dude April 6, 2015 7:44 pm

    Gene,

    I have just one patent.
    If you suggest I get more patents (and spend more of my hard earned $$$) then my reply will be: thanks but no thanks – I’d rather buy a lottery ticket
    I want to keep anonymity for some reasons (I pissed off some people in SV) but my patent was prosecuted by a very respectable law firm S&P – you can be sure I checked their work before writing a retainer check

  4. Anon April 6, 2015 7:50 pm

    Gene,

    With all due respect to angry dude, I have tried to inform him that his runaway preoccupation with his own personal bias (regardless of the veracity of his past situation) has overcome his ability to intelligently converse on topics of patent law**.

    He may (or may not) be justified in his anger, but that is simply besides the point of his decision to be consumed and to lash out mindlessly that “patents must be worthless.”

    Choosing not to restrain himself is every bit as “bad” as those who choose to simply not be informed about the law and lash out that software patents must be bad, or that patents (in general) must be bad.

    **to a large extent – I do give him credit for attempting to tell Mike T that my view on a later patent rightfully makes an undisclosed prior inventor into an infringer, and that the patent law was purposefully designed to have this “Stick” effect.

  5. Gene Quinn April 7, 2015 12:07 pm

    angry dude-

    You can do whatever you want with your money, but your comments here are extremely jaded and show very little understanding of the patent system as a whole or how to monetize an innovation. You have a single patent and you won’t give us the Patent No. so we can review it, yet we are supposed to apparently take your word that it is the best patent ever written and the innovation is mind blowing. We are further supposed to believe that because you cannot monetize your own patent that means the entire system is to blame. My guess is that there are reasons why you are not able to monetize your single patent the way you had hoped.

    Also, FYI… having a single patent makes it extremely difficult to monetize.

    -Gene

  6. Gene Quinn April 7, 2015 12:08 pm

    Anon-

    I agree. We have no idea whether angry due is justified in his anger. His comments about how all patents are worthless because he cannot monetize his own patent is the typical type of conspiracy theory you hear from independent inventors.

    -Gene

  7. Anon April 7, 2015 12:39 pm

    Gene,

    As you might gather from some of my past posts, I really do not begrudge angry dude for either his desire for anonymity, nor his own personal frustration with a less-than-desirable experience with an effort with patenting.

    And he does bring a valid point that there has been some shift in the IP world towards greater protection with Trade Secrets (although I will be quick to point out that this – like most other actual strategies to be taken – is simply fact dependent).

    It is in recognizing that he does seem to be able to grasp some aspects of the law that I wish to plea with him not to be so consumed with his own emotions.

    In “throwing up his hands” as he does, he does not achieve what I think that he wants to achieve. I think (and I realize that I could be giving him too much of the benefit of the doubt) that what he wants to do is to tell individual inventors to be a bit more pragmatic about thinking about patents. And to this end, I think that pragmatism is a good thing.

    That being said, I think you and I are on the same page that the actual effects of his continued rants fall short, and in some critical ways, far short.

    As I mention, I do not begrudge him a certain level of frustration. But I do distinguish the personal frustration and the over-indulgence that seems to follow from that frustration. Abandoning the patent system is simply not good advice – at least to the wholesale effect that his rants ring to. That is not “pragmatism.”

  8. angry dude April 7, 2015 1:03 pm

    Gene,

    I never said all patents are worthless – apparantly pharma patents are still worth a lot – otherwise all those big US pharma companies would be bankrupt already – cheap generics can kill them in a matter of weeks
    I just said that the type of patent I have (basically an algorithm – implemented in software or hardware – it doesnt matter ) is pretty much worthless.
    Once it’s out there there is not much you can do in today’s environment
    Frankly, I even doubt that all those great algorithmic advances of the past like Public Key Cryptography, RSA algorithm or LZW data compression would be patentable under today’s PTO standards
    Public Key Cryptography would most certainly fall under “abstract ideas” definition

  9. Gene Quinn April 7, 2015 2:30 pm

    angry dude-

    Public Key Encryption would most certainly not be an abstract idea and would still be patentable.

    Again, without knowing what is in your patent it is impossible to know whether your protestations are legitimate or greatly exaggerated. Obviously, patents continue to be issued on software in many diverse contexts. So you are clearly engaging in extreme exaggeration when you say that all patents on software are pretty much worthless.

    Obviously you are biased and you refuse to provide any information that allows for your bias to be evaluated. It is impossible to take you or anything you say seriously any more.

    -Gene

  10. Curious April 8, 2015 11:21 am

    Public Key Encryption would most certainly not be an abstract idea and would still be patentable.
    Let’s be realistic. It would most likely be held invalid in a lower court — particularly in todays environment. Whether it would pass muster at the Federal Circuit would depend upon the panel one gets. While I’m not doom and gloom (based upon my belief that the Alice decision is being applied far more widely than what SCOTUS intended), only a minuscule number of cases will reach SCOTUS and so we are left with the Federal Circuit as a gate keeper.