Posts Tagged: "Patent Portfolio Valuation"

It’s this environment of malaise within which Yahoo is trying to bolster its fortunes with the sale of an intellectual property portfolio involving about 3,000 patents and patent applications which the company recently reassigned to a subsidiary known as Excalibur IP. Some of the patents in this portfolio date back to the company’s initial public offering in 1996 and news reports from The Wall Street Journal indicate that some expect the portfolio to fetch a price in excess of $1 billion… “If this sale had happened before Alice, the valuations would be multiples higher,” said Michael Gulliford of Soryn IP Group. Another factor mentioned by Kent Richardson (ROL Group) was the fact that the so-called smartphone patent wars have largely ended so the patents in related sectors are not as important from a defensive standpoint.

An organization’s overall IP strategy should support business strategies and help increase the value of the company. IP strategy will be different depending on the business and market. Value is not always about how much money can be generated by patents. Companies may want to motivate employees; attract customers, attract business partners or investors; protect existing products and the ability to improve them in the future; block or intimidate the competition; license to improve market penetration, generate income or gain access to third-party technology; improve their return on investment, or generate income or savings through joint-ventures, mergers and acquisitions, or investing in start-ups, among other strategic IP goals. Truly valuable patents are rare. Studies show that fewer than 5% of patents in a typical technology patent portfolio are valuable. Finding these rare valuable patents in a large patent portfolio is a challenging task.

Today’s pace of innovation and competitive intensity demand greater protection of new ideas and inventions. Yet intellectual property (IP) management is not a high business priority for many companies. Organizations that fail to recognize IP as a strategic asset put their competitive advantage and profit margins at risk. Companies can circumvent these potentially adverse impacts by maximizing the value of their creativity. Prioritizing and protecting IP assets helps organizations stay in front of competitors and drive greater growth.

The reason it matters as to whether we patent folks can speak non-patent speak is that those who make the decisions about patent value, i.e., corporate C-Level and above, do not speak or grasp patent speak, and instead rely on our guidance to make informed judgments about business and capital commitments. We sadly cannot communicate (think Raj on Big Bang, in the early episodes, around females) and, worse, even if we could, we are not even in the meetings where the decisions are being made. Look at any Org chart: We are often kept at more than arms length by General Counsel or who ever it is that patent counsel report to – solid or dotted line. In short, our fate, and the fate of our life’s work, is being decided by others, without benefit of our thoughts. Tragic, and a real business mistake.

Business Insider reports that Yahoo’s patent portfolio could generate up to $3B. We disagree and we use data to show why. With an estimated street price of $772M (high of $1.15B, a low of $393M), Yahoo has a valuable asset, just not a $3B asset. We often see patent prices stated without any data to back up the analysis. We think this needs to change. Below, we show how a quick analysis of Yahoo’s portfolio and the patent market leads to some bounds on the street price of the patents.

Intuitively, family size and diversity of international filings should be good indicators of value. We hypothesized that like independent claim count, the investment to produce a larger patent family and file international patents would correspond to greater value. However, we found the impact was less significant than even the word count of claim 1 – only a 10% contribution to the overall weighting.

If you were buying patents in 2015, you likely did better than any previous year. The patent market, and, in particular, the brokered patent market, continues to be a robust market for buying and selling patents. Prices are down unless an EOU is available. Sales rates are up, and sales are tending to happen earlier. Caselaw impacted the market but not as much as you might have expected (Alice impacted fintech patents much more than software patents). With an estimated $233M in patent sales, we think the patent market will continue to provide interesting opportunities for both patent buyers and sellers.

A patent litigator knows the ultimate truth about patents: their real value is only revealed in the gauntlet of litigation. In a bygone era, patents were reputed to have a statutory presumption of validity, the power to exclude by way of injunction, and the capacity to yield treble damages if an accused infringer were so wanton as to disregard a notice letter and fail to obtain an opinion of counsel. It was often unnecessary for a patent holder to flex its muscle by bringing suit to enforce its intellectual property rights. Instead, the arms-length Georgia-Pacific theoretical license negotiation might well have occurred even before the commencement of any infringement. Those days are over.

Patent licensing is becoming increasingly challenging and it requires thorough preparation on the licensor’s part to convince a potential licensee that a license is both required and inevitable and to persuade them into serious negotiations. The steps involved will vary based on whether your patents are already being infringed upon or if they protect a new technology that can extend market value or penetration. In this article, the focus is on the research and preparation for the licensing of patents that may already be in use.

Although the job of developing the patent portfolio never ends, once the assets begin to reach a critical mass it becomes equally important to tactically manage the portfolio. Because if not managed properly, a patent portfolio will not only fail to generate revenue, it will also drain the company coffers. With this in mind it is essential to know thy portfolio, prune thy portfolio and monetize thy portfolio. When many think of patent monetization, patent sales and licensing (in and out of court) are what come to mind, but there have been a slew of anti-patent court decisions that patent owners need to consider before monetizing. Crisis is often said to spawn opportunity and the patent world is no different. Uncertainty in the litigation arena has spawned new, non-litigation offerings to innovators desirous of leveraging the value of their patents.

To compete in our new innovation ecosystem — no matter big or small — there are a handful of competencies that an organization should master when it comes to their patent operations. At the risk of over generalizing, these are (1) sound portfolio development, (2) sound portfolio management, (3) building the right team and (4) smart patent deal-making. Although it is nearly impossible to condense actionable wisdom into a multi-part series on the subject, what follows is my attempt to do just that.

To a large extent the meaning of the term depends on your viewpoint, but for a patent owner patent quality is all about value. Indeed, from the patent owner’s perspective it is virtually impossible to divorce patent quality from patent value. This should hardly be surprising. A patent that is guaranteed to have only valid patent claims but which is extraordinarily narrow may be a quality patent in the eyes of some, but commercially useful it will not be. Thus, from the standpoint of a patent owner patent quality must necessarily be a function of value.

The market price plummeted in the second half of 2011, and set off the downward spiral that stormed through the second half of 2013 when the market price reached the record low. There had been no discernible macroeconomic factors to justify the drastic decline in market price during the two years leading up to the end of 2013. As a result, the industry-specific factors might have been the culprit, among which the most prominent is the enacting of America Invents Act (AIA) in September 2011, as demonstrated by the econometric analysis above.