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New IP Monetization Models Will Rely Less on Litigation in 2022

“Do not underestimate the power of social media. It has turned some meme stocks into winners, and it has made crypto more attractive as an investment than a currency. Like it or not, the influence of social media on IP and everything else is here to stay, and all that goes with it.”

From the perspective of the Intangible Investor, 2022 will be a year of new opportunities and transitional growth. IP business models will evolve, and risk and return calculations will become more reliable.

In the decade since the America Invents Act (AIA) was enacted, patent licensing challenges have increased for many technology companies and independent inventors. The neutering of software, e-commerce and algorithm patents are at least partly responsible but, amazingly, software-related patents represent almost two-thirds of U.S. grants for the first half of 2021.

The days of single patent, inventor-generated patent licensing and headline-grabbing damages awards may not be over, but they are no longer the future. More than ever, IP rights depend on WHO owns them and HOW they are used. Litigation-based models will yield to more efficient ways of extracting value. Patents today are often worth more in the context of M&A as a part of a company sale than they are individually – despite however strongly they may read on an infringer’s product.

Fear and Disruption

The forces that fear disruption from strong patents are winning for now, and they have depressed prices and slowed licensing. Some investors have responded to the trend and acquisition funds have been formed. Many tech patents are CHEAP. In the hands of the right buyer, they can take on new meaning and greater value.

Trends likely to impact the Intangible Investor in 2022:

  • More IP rights, longer disputes, fewer large damages awards that stick
  • Continued high hurdles for small and medium enterprises (SMEs) and independent tech inventors
  • A few large IP holders will file less and aim for greater quality
  • Others will continue to file in volume, largely for defensive purposes
  • IP monetization models will continue to evolve and emerge
  • A wider range of capital providers will be willing to offset IP-related risk
  • Smarter private equity investors will learn where and how to place their IP bets
  • ‘Middle class’ content creators will grow and seek new ways to monetize
  • Social media will play a larger role in generating IP value
  • AI, blockchain and non-fungible tokens (NFTs) will have greater influence on IP rights and value
  • China will continue to recognize the value of IP rights, even if they do not respect them
  • More investors will want to see IP properly reflected in balance sheets
  • IP standards will receive greater attention, especially as they relate to IP language, valuation, and acceptable behavior

Social Media – the Catalyst

Sooner or later, for better or worse, individual investors will be trading IP rights like penny stocks. That may not be the best thing to happen to IP rights, but like stocks, trading will encourage the more serious-minded seeking return to learn more about patents and other rights, their purpose and market value.

Do not underestimate the power of social media. It has turned some meme stocks into winners, and it has made crypto more attractive as an investment than a currency (Bitcoin is presently hovering just under $58,000; Ethereum $4,700, Dogecoin $.22). Like it or not, the influence of social media on IP and everything else is here to stay, and all that goes with it. The full promise of blockchain for IP transaction efficiency and transparency has yet to be realized. NFTs could add a layer of respectability to IP ownership and transactions if they can survive the hype of promoters and become widely acceptable (I believe they will).

Lest we forget, intangible investors reflect a broad swath of stakeholders: people, businesses, and institutions impacted by IP and IP rights. They include individuals with and without capital to invest or knowledge to guide them. IP awareness is building momentum because IP impacts lives and value. Understanding how IP rights function as assets matters even if to most people understanding a particular patent claim might not.

No Panacea

The transition to greater IP awareness is underway. It will materialize slowly over time, but when it does, expect to see higher values, more transactions, and greater access to capital. Increased participation from a wider range of parties is not panacea, but it will put IP rights and values on the corporate map in a way that did not seem possible a few years ago.

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