What is a patent owner to do when they want to monetize their patents?

EDITORIAL NOTE: Jaime Siegel will be a speaker at the upcoming 2015 IP Dealmakers forum in New York City on December 7-8, 2015. Siegel will speak on a panel titled “Boom or Bust: The Public IP Market.”

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dollar-sign-businessman-335One thing is certain in these tumultuous times, the business of patents has changed.  The days of bulk buying at $10,000 per patent have ended; public IP companies are under legislative and shareholder pressure; and, IPR’s have significantly impacted the value of weak patents. These are just some of the examples of significant business changes.  So what is a patent owner to do when they want to monetize their patents?  There are only three options for patent owners: they can license their patents, they can sell their patents or they can do nothing.

A patent owner that wants to sell their patents faces buyers that are looking more closely at the strength of the patent offering.  For a seller to maximize their return, they should plan on doing more work ahead of an offering to entice buyers.   As a first step, it is important to understand who your buyers will be so that offerings are tailored to the target audience.  Is the buyer a patent assertion entity? A defensive aggregator? A strategic player looking to add to their portfolio?

Each type of buyer needs a different pitch.  Assertion entities need to understand what the potential value of the licensing market is.  So, a list of potential users would be a key part of any offering.  A defensive aggregator wants to know which of its members may have an interest in funding an acquisition, so a listing of members that may use the patent would be valuable to prepare.  A strategic would want to know why your patents are relevant to a particular technology they may be looking to amass a portfolio on, so preparing a comparison to a relevant standard may be useful.

Any potential purchaser will consider validity, so a seller should consider conducting a relatively inexpensive prior art search to provide some comfort to potential purchasers, allowing a more in depth engagement to occur.

Finally, and perhaps most importantly, sellers should have a sense of how much they are looking for in a sale. Are you looking for a lump sum? A back end on licensing? Patents in exchange?  It is not necessary to have a price certain predetermined.  But, at least knowing your reserve price, if any, will help you conduct a negotiation for sale.

In the best situation for sellers, there will be more than one interested purchaser, in which case you should consider an auction.  But even an auction has different formats that should be considered – live auction or blind auction?

If a patent portfolio is a part of a technology or know how offering, a different strategy needs to be employed, but that would be the subject of a separate article.

In conclusion, there is certainly a market for patent sales, it is just necessary for sellers to be better prepared to enter the process.

[JV-2]

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3 comments so far.

  • [Avatar for Ron Hilton]
    Ron Hilton
    November 30, 2015 11:36 am

    Of course the third option is to commercialize the patent oneself through a startup venture. That is the most difficult but also the most lucrative, with licensing second and sales third (a distant third – raw undeveloped IP is typically worth pennies on the dollar). Basically the more effort one is willing to put into getting one’s invention to see the light of day, the bigger the potential payoff.

  • [Avatar for Paul Morinville]
    Paul Morinville
    November 30, 2015 10:01 am

    Patent Leather, Whether it is $10,000 or $100,000 is irrelevant because a many patents are no longer marketable and nobody will buy them. Certainly most patents related to software have risk of invalidation under 101, and even if they survive a challenge, the cost of litigating them has made many patents economically impossible to enforce.

    A measure of sold patents against all patents or sold patents against those put on the market would be much more useful.

  • [Avatar for patent leather]
    patent leather
    November 30, 2015 09:40 am

    “The days of bulk buying at $10,000 per patent have ended;” I am assuming you meant “$100,000” per patent, right? I don’t even think in this day and age patents are selling for that cheap. Otherwise, interesting article!