Posts Tagged: "patent market"

Are You Bearish or Bullish on the Patent Market?

Are you bullish or bearish on the patent market as we close out 2022 and move into Q1 of 2023? That is the question I recently asked a distinguished panel of intellectual property business leaders and monetization experts. For the most part, those industry insiders who responded are bullish, although several distinguish patents and the licensing of technology and innovation. Indeed, if I were to answer my own question, I would say that given the Supreme Court’s refusal to address the obvious errors of the Federal Circuit relative to patent eligibility it is extremely difficult, if not impossible, to be anything other than bearish on patents as a meaningful asset class — or at least an asset class that will compensate innovators and investors for the full measure of their contributions.

Quickly Modeling Patent Market Prices

Imagine you have found four patent families that address a specific risk to your business, and you are about to ask your boss to approve buying those patents for $2 million. Her questions might include, “What’s the going rate for patents?” Similarly, if you were working with your company’s accounting team and moving four patent families from your corporate parent to a subsidiary, the accounting department might ask, “What is the ‘fair market value’ of these patents for transfer pricing?” A preliminary issue arises: what are you really being asked for? This confusion in part stems from the common use of “price” and “value” nearly interchangeably in day-to-day conversations.

Are You Bullish or Bearish on the 2020 Patent Market?

Are you bullish or bearish on the 2020 patent market? That is the question I asked a panel of experts recently. Each of the experts surveyed will participate on the faculty at IPWatchdog CON2020, which will take place in Dallas, TX from March 15-18. All those industry insiders who responded are bullish, which is an interesting change after many years of insiders being bearish, or at best cautiously optimistic. Indeed, the sentiment expressed across the board by experts from both the monetization / licensing world and litigation world is surprising, at least at first glance. And, as you will read below, while at least several people cited the uncertainty around patent eligibility in the United States, there is real optimism because license deals are getting done and policy changes show evolutionary changes in the IP ecosystem.

Reflections on the 2018 Patent Market

Despite falling average prices, in 2018, the patent market grew fast. We estimate the 2018 market size to be $353 million, up from last year’s estimated $296 million. The 2016 market slump (estimated $165 million market) is, hopefully, a thing of the past. In order to make this estimate, we use the observed sales that occurred in the 2018 market year and used their actual asking prices to determine the market size. As is consistent with the previous two years, if no pricing guidance was provided, the average asking price per asset for the market year of the sale (eg $123,000 for 2018 market year sales), was multiplied by the number of assets to determine the expected asking price. In the 2018 market year, 210 sales were identified, accounting for a total asking price of $527 million. Due to recordation delays, we assume that we have not yet seen 3% of the sales that occurred in the timeframe, so we multiplied this total asking price by 1.03 before applying our standard 35% discount between asking price and expected selling price. Thus, our expected total market size for the 2018 market is $353 million, indicating that the market has increased by 19% since last year and 114% since the 2016 market.

Tracking Buyer and Seller Behavior: 2018 Patent Market Report

As a buyer, tracking the behaviors of sellers, both in aggregate and individually, allows you to operationalize your buying activities. This is especially true for repeat sellers, who account for 41% of the transactions for patent packages listed in calendar years 2017 and 2018. Knowing who the regular sellers are, often companies with a large portfolio, allows you to contact sellers to create a private deal. Keeping track of a seller’s listings, package sizes, and asking prices can also help you in negotiations because you know their negotiation parameters at the outset. Similarly, if you are a seller, it is important to get out the word that you are selling. Listing packages on your website, through the IAM Market, or working with brokers attracts buyers to you rather than you having to spend the time and effort to find them. For the analysis of current sellers and buyers we looked at all of the packages that sold between January 1, 2017 and May 31, 2018 (assignments were last checked on August 15, 2018) regardless of their listing date. Sales continue to be made mostly by operating companies, which is not surprising as they file the majority of patents. Operating companies were the sellers in 67% of transactions. This is remarkably consistent, at 66% in the previous two papers.