“[I]n a transfer scenario, a lot of time can be wasted by legal and paralegal staff working to determine whether a particular serial number is directed to the proper underlying patent asset…. Instead of tracking that information down an entity acquiring patents simply asks the transferor to convert their patent asset data into the SPIF format.”
During 2020, the total value of all mergers and acquisitions taking place around the world has been reported at $2.817 trillion (USD) according to Statista and the Institute for Mergers, Acquisitions & Alliances. That represents a significant dip from the $3.37 trillion in global mergers and acquisition value in 2019, which is unsurprising given the shutdowns to major portions of the world’s economy during the COVID-19 pandemic.
While global M&A activity may have hit a bump in the road last year, the value of intellectual property assets, especially patents, to mergers and acquisitions is only growing. The difficulty of patent valuation makes it hard to show the increase of that value in absolute terms, but valuations of the brokered patent market show that patent sales in the secondary market increased by about $50 million to $353 million in 2018. That same year, 191 patent packages were sold, the single largest total of packages sold for any year, according to Richardson Oliver Insights.
Different Patent Data Formats Create Issues in Identifying Transferred Assets
Major mergers typically make for attention-grabbing news headlines but many legal professionals working at the ground floor of finalizing these mergers know that the path of M&A activity is fraught with concerns involving improper patent asset identification. The proliferation of IP recordal software solutions and patent data analytics tools in recent years has created an unintended problem in patent data formatting. With conflicting data formats, it’s sometimes the case that acquiring companies are provided data on patent assets being transferred, leading them to believe that they’re acquiring a different, and perhaps more valuable, asset than they’re actually getting in the deal.
A free-to-use, open-source solution to this problem has recently been unveiled by a group of entities meeting at the intersection of patent acquisition and strategic IP management: standardized patent identification (SPIF), a standard developed with contributions from Richardson Oliver Insights, RPX, OIN, Cipher, IAM and Unified Patents. A conversion tool using the SPIF standard, made available online for free by Cipher, is designed to take patent identification information from different data formats and provide reliable identification of the exact patent assets that are identified in portfolio data from the entity transferring the patent. Data generated by SPIF can be outputted via spreadsheets compatible with Excel, and members of the SPIF standard offering database platforms, such as Unified, are expected to enable SPIF data conversion when users export data.
“We’re solving a problem that existed when I began working in patent practice 27 years ago,” said Kent Richardson of Richardson Oliver Insights. “It shouldn’t have existed then, and it shouldn’t exist now.”
Richardson noted that data sources on patent identification within a single entity are consistent within that entity based on which docketing or management solution is being used, but in a transfer scenario a lot of time can be wasted by legal and paralegal staff working to determine whether a particular serial number is directed to the proper underlying patent asset or whether part of the serial code includes a typo. Instead of tracking that information down, Richardson suggests that an entity acquiring patents simply asks the transferor to convert their patent asset data into the SPIF format using Cipher’s free online converter.
Solving a Problem That Goes Beyond M&A Activity
The uncertainty over the reliability of asset list data in patent transfers creates a credibility problem for firms involved with patent transactions. “The ability to quickly and easily get a reliable asset list is so fundamental to many other major transactions,” said Erik Oliver of Richardson Oliver Insights. “You’d never do a bond swap without the underlying bonds being clearly identified, or a real estate deal without the list of properties being clear.”
Indeed, the problem this coalition of entities is attempting to solve goes beyond M&A activity to difficulties in identifying proper patents or patent applications based on various citations or other information that purportedly identifies the patent asset. Gene Quinn, President and CEO of IPWatchdog, offered the following remarks regarding the new SPIF patent identification standard:
It has always amazed me how difficult it is to get a citation to a public record document. With patents and patent applications there are so many different ways that people will cite to the same document; it is enormously frustrating.
An overview of the patent identification format developed under the SPIF standard notes that there are multiple root causes which make it difficult to match asset lists provided by patent sellers and brokers to the actual underlying asset as registered with the granting office, including the lack of standardized data interchange formats, inconsistent practices among national patent offices, and inconsistent practices among docketing and analytics tool vendors. Although SPIF is not a tool that provides for identification of important patent characteristics, such as priority date or whether the patent is still in force, it covers basic identification for various asset types including issued patents, utility patent applications, utility models and Patent Cooperation Treaty (PCT) international patent applications. Along with PCT applications, SPIF at the time of its launch covered patent assets filed at or issued by national or regional offices in the United States, China, EU, Japan and South Korea.
SPIF: A First Step in Solving an Industry Credibility Problem
The overview of the SPIF standard does identify a few areas of general issues that the patent identification standard still needed to improve as of its launch. For example, SPIF has limited usefulness in identifying patent assets in instances where the patent application has only recently been filed and there is no serial number yet issued by the filing office. A similar problem exists for pre-publication assets for which a serial number has been issued but not yet matchable using analytics tools. While the countries covered by SPIF at launch are limited, it’s expected that more countries will be covered in the future.
While the SPIF standard is aimed at the problem of reliably identifying patent assets based on various serial number formats, it doesn’t solve issues that many practitioners face in dealing with a reliable solution for identifying all assets owned by a particular assignee. Although that problem continues to exist for the time being, Richardson said that the tools being built around SPIF provide a foundation to solve many of the problems experienced by those involved in patent asset identification and that the roadmap for SPIF’s future expansion holds the potential of addressing other issues in reliably identifying assets by other criteria.
One area where an improved standard for patent identification could improve business efficiencies is in the growing sector for special purpose acquisition companies (SPACs), which is an increasingly popular method being chosen for bringing private companies to public trading markets without going through an initial public offering (IPO). In late March alone, there were multiple tech developers who announced that they were going public through a SPAC acquisition, including vertical farming developer AeroFarms, space infrastructure developer Redwire and high-value metal additive manufacturing firm VELO3D. As IAM has reported, the software, pharmaceutical and biotech industries have seen a great portion of SPAC-led transactions. Given the highly innovative nature of those industries, it would seem that a patent identification standard that can take a lot of time and expense out of due diligence while improving the reliability of identifying assets would be very valuable in the SPAC context.
Another area where Richardson expects to see more uses relates to standards-setting organizations (SSOs), which collect and try to organize data on patents declared as essential to certain standards by a range of companies submitting that information in different formats.