Posts Tagged: "patent monetization"

During day one of IPWatchdog LIVE in Dallas, Texas, a panel of speakers discussing current trends and the prospects of patent monetization going forward noted that the “heyday” of patent monetization was approximately ten years ago, with several large patent awards increasing interest in patent monetization. The panelists noted two major factors which presently act as a “glass ceiling” over patent valuations. First, the inter partes review (IPR) proceedings instituted at the U.S. Patent and Trademark Office (USPTO) in 2012 as part of the America Invents Act (AIA) has made investment in patents a riskier proposition.

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.

On the penultimate day of IPWatchdog’s CON2020, a session titled “The Future of Monetization” featured a panel of experts discussing how the changing patent policy landscape in the United States continues to alter business models and monetization strategies for associated patents worldwide. The panelists discussed what the future of patent monetization looks like and factors influencing expectations of success. Gene Quinn
, President & CEO of IPWatchdog, Inc., asked each panelist their viewpoint on whether monetization of patents is getting better, worse, or staying the same. Daniel Papst, Managing Director and Co-Owner of Papst Licensing GmbH & Co., said that he is hopeful things will become better in the future.  “The most dire times are behind us; it looks like the market is filled with more liquidity. There have always been portfolios out there that appear to be worth monetizing, and the courts, especially in the U.S., seem to be getting a little more rational again.”

The COVID-19 pandemic and widespread shelter-in-place orders have hit every corner of the country’s economy, including tech companies of all sizes. Many tech companies have traditionally maintained large patent portfolios to enhance company value and for defensive reasons—i.e. to dissuade competitors from filing suit. But monetizing these dormant patent assets—which can cost a great deal to simply maintain—may provide a solution during these difficult economic times. We of course do not recommend asserting any IP right that could hinder a coronavirus cure or treatment. But for companies with large patent portfolios in computer, server, software, and other hardware-related technology, the economic times may be right to monetize those assets, and luckily, the law is trending in favor of patent holders both in district courts and before the Patent Trial and Appeal Board (PTAB).

To keep pace with competitors, businesses must constantly monitor, adjust, and streamline their patent portfolios. Doing so ensures that portfolios deliver the maximum potential return on investment by staying aligned with corporate goals, industry and technology developments, and growth areas across industries and businesses. This process requires managers to adjust the makeup their portfolios to maintain effective coverage in specific areas and eliminate or reduce low-value patents to minimize maintenance… There are four goals that can be achieved through portfolio audits: streamlining portfolios; ensuring portfolios are well-positioned, positioning portfolios for optimal monetization, and ensuring the portfolio provides sufficient coverage without excess. Portfolio audits may help identify strengths and gaps.

Asserting patent rights is a surreal endeavor these days. While the statistics on survival at the PTAB are improving, with the percentage of initiated proceedings declining and some patents seeing their claims affirmed, the cost and time necessary for a patentee to claw their way back to the district court—i.e., back to Square One—proves too much for many patentees. Spending hundreds of thousands of dollars (or more) to fight at the PTAB simply to confirm issued patent claims is pushing many patentees out of the enforcement market. With such oppressive legal hurdles and costs, what good is a patent? For many, it cannot be enforced?

Patent Monetization is a wake. The Patent System failed US tech companies. Licensing is dead. Patent values are zero – perhaps even negative…. The Silicon Valley elites have patent strangled start-ups and hire away their talent. There is no respect for patents at all. Zero. Nada. Ironic in view of the past creation of Silicon Valley where patents were, once upon a time, the driver of value accretion. Not anymore. Data is the new “oil” in them thar hills. If you have and can secure and sell data, you’ve got it made. Gee, sure hope you do not rely on patents to protect any of what you do to collect, secure and sell that data!

Patent monetization has become nearly impossible for middle-market technology companies without engaging in some level of legal action. Management teams have consequently shied away from pursuing licensing opportunities, even when the revenue potential of a company’s intellectual property is compelling. While traditional debt and equity investors have an aversion to patent monetization stories, there are specialized investors willing to underwrite capital raises aimed at financing licensing revenue initiatives. By structuring these financings in a way that isolates monetization risk to the patent investor, companies can pursue licensing initiatives that have the potential to generate significant residual value for all stakeholders in the capital stack. In addition to capital, patent investors bring monetization expertise that can play a critical role in the success of a licensing revenue strategy… In many contexts, licensing revenues will only persist so long as the underlying patents remain valid. Increasingly, however, licensees and strategic third parties seek to invalidate patents in Inter Partes Review, rather than continue to pay or renew patent licenses. The uncertainty of future revenue streams further justifies financing structures that ameliorate such risk.

Today (TTOs) are increasingly being run by professionals who are experienced in startups, licensing, monetizing and have tremendous depth of technical knowledge in a variety of fields. But they are all waging a losing battle in an industry where 73% of the offices are losing money and an additional 16% just breakeven. It is not because of the efficiency of these offices, it is because of the underlying business model… But the impact of technology transfer on the US economy has been enormous. Since 1980 more than 5,000 startups have been created. From 1996-2013 technology transfer has contributed $518 billion on the US gross domestic product, and $1.1 trillion on the US gross industrial output.

Enforcement of patents through litigation occurs when licensing has failed to result in an arms length negotiated resolution. In other words, patent owners resort to litigation when there is a market failure… When Keller says that the value of a patent is inextricably tied to the value obtainable through litigation that is just an economic truism. If the patent has no value when enforced in litigation, whether because the subject matter of the innovation has become patent ineligible, or because of a bias that tends toward finding practically everything obvious, the patent has no enforcement value. These litigation realities spill over into the business dealings because a patent that has no enforcement value will have necessarily have no licensing value.

Marathon is transferring certain parts of its intellectual property portfolio to newly created special-purpose entities (SPEs), which would give greater control over patent monetization strategies to a financial partner of Marathon… DBD’s parent company Fortress Investment Group LLC, who has been making interesting forays into patent licensing operations in recent years. Marathon is only one of several patent monetization companies in which Fortress made investments through its DBD subsidiary.

Faced with ever-shrinking budgets and mounting pressure from the C-suite to demonstrate intellectual property (IP) value, many enterprises have jettisoned a once-prevailing global patent strategy: “File anywhere in the world where we or our competitors manufacture or sell products.” In view of the substantial costs of global patent protection, enterprises should pursue protection only when, and where, a value proposition can be rationally articulated. Thus, seven hallmarks of a rational global patent strategy are as follows…

While patent portfolios are entering the market other patent portfolios continue to leave the market having been purchased. Asking prices seem to have also reached an equilibrium point, according to Kent Richardson of the ROL Group. There are buyers on the market looking for good portfolios, both tech companies who themselves have thin patent portfolios who are looking to back-fill their portfolios. Some non-practicing entities that had previously left the market have also started to come back as buyers over the last 12 to 18 months, at least kicking tires and strategically acquiring where the assets are strong and the price is right.