I have been in the patent game for 30 plus years at this point; doesn’t seem possible given my youthful visage, but alas, tis true. It has been an exciting historical arc to be a part of as distinct trends dominated and receded in the patent business. The effect of various trends, both technical and legal, in these three decades on perceived patent valuations and transactions has been interesting to witness.
One note at the threshold: Patent attorneys, as a group, it seems to me, are usually late to the party when it comes to these trends and their effect. Clients seem to pick up on what the trend is before the people who are supposed to be in the advice giving business about the self-same trends. Maybe it is because patent attorneys are reactionary rather than prescient. Maybe, as well, it is one of those “cannot see the forest for the trees” sort of things. We are so immersed in the process of obtaining and enforcing we cannot see the strategic elements of what is happening in our midst and why. Maybe we just don’t get invited to the right cocktail parties, so we are talking to the wrong people!
Well, that is probably accurate in some respect, as an observation, but it does not serve us very well in rapidly changing and increasingly challenging times. When clients come to us for how they might plan ahead, we always say “steady as she goes”, “keep doing what you’re doing”, “patents last a long time, things will come back around”. All good advice, but none that puts a client on a different track from their competition. But, in the end, isn’t that how clients remain loyal and we stay in business; providing strategic advice that provides a material advantage to our client?
So, as to patent valuations and where the market is vis-à-vis where it has been and where it will go, I offer the following: 30 years ago, the buying and selling of patents separate and apart from an ongoing business enterprise simply did not exist. Sure, the occasional bankruptcy might end up holding a bag of patents, but they had little value aside from their association with the business they represented, i.e., the patents created the possibility of an exclusive business enterprise such that the now defunct business element might be revived and exploited.
The first occasion I was aware of where patents, alone, transferred value was in the context of enhancing a defensive position in an ongoing litigation where the newly acquired patents could be cross-asserted against the plaintiff in an effort to create leverage in that particular dispute. But, as the CAFC began to affirm awards in patent cases, thru the 80’s and 90’s, a wave of interest in the value of patents, as stand alone assets, came about. The business model of becoming a licensing/enforcement enterprise immerged.
Several companies engaged in this patent property business model which, as it has matured, has itself separated into distinct elements, to wit: Tech Transfer, Standards Groups, Trolls, etc. By now, we know that some of these business models have missed the mark, we have witnessed large accumulations of patents, at great expense, that resulted in little value creation. We have seen portfolio valuations drop like never before; billion dollar valuations become millions, and even “no sale”.
So, where is the future going? Have we come full circle to patents having little value?
My view is we have reached a time of strategic purchasing that we not seen or experienced previously. Here’s why: If you want to know the future, technically, you can’t. But, if you’d like to know about the patent property rights regarding future technologies, it’s easy. The patent applications being filed now and already issued will be those that are asserted over the next two decades. If your tech company hopes to be a part of that future, buying into that future, now, makes a certain amount of sense. It is only a question of price. Budgets are being put together, right now, to develop the contours of future technologies by virtue of R&D, acquisition of competitors, and targeting markets and products; it is reasonable that the very same budgeting process should be in place for acquisition of rights. Certainly budgets for patent filing are in place – these should include acquisition as well.
How many of you would pack your belongings and move somewhere to spend the balance of your life without securing, at least, a place to stay during your first weeks and months? You wouldn’t. So why would a company do essentially the same thing vis-à-vis their future with respect to patent properties? Doesn’t sound corporate governance require a look into the acquisition of patent properties? These patent properties, now available, offer rights into the next two decades. This thinking should be an ordinary part of the budgeting and business management process.
We can all agree, you cannot know the future. In the coming decades, new entities and entire approaches, presently unknowable, will arise; but, the patents that will carve up and define the winners and losers with respect to those opportunities are on sale now.
But where do patents that you seek to buy come from? A company could rely on one of those portfolios being “shopped” to the market, but that really isn’t an attractive option. In such sales, for instance, the key indicator of value — evidence of use— is shown to anyone who says they are interested. But would you want to buy a portfolio only to find out later that your competitor already knows your patents, inside and out, having looked at the portfolio when it was for sale? Of course you wouldn’t.
There is a better way, which we call demand driven portfolio acquisitions. Rather than relying on portfolios shopped to the market, contact a third party whose clients have given him/her access to their portfolios, so that when demand arises that third party can select the right patents from their client portfolios, and put together a deal. Not only do these targeted transactions lead to more opportunities to acquire patents with a better fit to your business (as opposed to whatever is in the bucket being shopped), they also open doors to patents/portfolios that are purposefully not advertised as being available on the open market. In our experience at Soryn, this is a way to get quality deals done in an efficient manner that works for everyone.
Our advice: get busy.