Posts Tagged: "patent sales"

These IP deals were not necessarily selected for their size, but for their indicative nature of a set of circumstances that exist in current markets that made these deals not only possible, but essential… The three trends highlighted by these patent deals: acquisitions by foreign buyers, Unicorns and other well-funded startups looking for assets, and various strategies to avoid the burden imposed by the PTAB, are likely to continue well into 2018. None of these deals would have been entered into if the parties involved did not deem U.S. patents valuable and critical for their relative business, and that is one positive message that all of us involved in the IP marketplace can take with us into the new year.

Though patent sales rates have decreased in 2016, the patent market remains viable and robust. We continue to see a trend in the increased speed at which packages sell (over 50% are sold within four months) as well as an increased sales premium for packages with Evidence of Use (EOU) — a 27% price boost. 2016 also saw a rise in sales rates from larger patent packages; its highest sales rates were from packages with between 11 and 25 assets, an increase in package size from 2015, which counted its highest sales rates from packages with six to 10 assets.

After five years of analyzing and reporting on the patent market, the only constant appears to be change. Although asking prices have stabilized, sales are down, bringing the value of the brokered market down to $165 million from $233 million last year. However, the launch of both IAM Market and the Industry Patent Purchase Program (IP3) has introduced new buying opportunities. At the same time, the impact of negative patent decisions is becoming apparent as non-practicing entities (NPEs) pull back from the market. For the first time, purchases by corporations have exceeded NPE purchases. Even the biggest NPEs have been affected, with RPX succeeding Intellectual Ventures (IV) as the new buying leader. Further, the data shows that the US Supreme Court’s decision in Alice has crushed much of the nascent financial technology (fintech) patent market and affected software package sales rates. Finally, we received better litigation data this year and it appears that the litigation risk from sold patents is much higher than previously reported – you may want to reconsider your risk models and membership of defensive aggregators.

The validity of secondary markets for a variety of goods and services is never questioned. Securities are sold and resold many times after their initial offering, homes and buildings and built and resold many times, as are automobiles. A quick review of the products listed an eBay leaves little doubt that a robust secondary market exists for many goods and services across the American economy. However, not everyone is in agreement that a secondary patent market is beneficial. For some reason, many people villainize companies that practice patent licensing. Even resorting to the use of pejorative terms such as “patent troll” to describe these businesses. These detractors fail to account for the fact that inventors may not be the most efficient licensors. In addition, they don’t take into account that, just as a builder generates revenue to build more buildings by selling their current ones, companies that sell or license patents help fund further R&D with the proceeds.

What causes operating companies to sell their patents? Our intuition tells us that patent sales take place when the seller is in financial distress or the company is underperforming. We asked ourselves whether data aligned with our intuition… 71% of the sales occurred when the seller underperformed the overall market by more than 5 percentage points.

Lenders and investors like Gerchen Keller and Fortress, among others, have provided capital to or are partnering with private and public NPEs. These business are well suited to assessing market conditions, especially value, and calculating risk for given rights in a specific industry. That they are still willing to fund activities and co-invest in this climate is a testament to the durability of good patents. Also, there is some expectation that we are at or near bottom, and that there are more opportunities now.

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.