Posts Tagged: "investors"

Joe Mullin, a policy analyst at the the Electronic Frontier Foundation (EFF), recently penned a misleading article about the Inventor Rights Act  (H.R. 5478). He says it will promote and protect patent trolls. To unravel what he really means, it is first necessary to understand early stage investment, and from there, to define what a “patent troll” truly is. Through organizations like EFF and their companion organization, Engine, Big Tech often writes scary stories about how patent trolls hide under bridges for no other reason than to utterly destroy innovation. Very scary stuff. Scary because this fantasy has misled the courts, Congress, and multiple administrations, convincing them to change the law in ways that destroyed America’s startup engine. Scary because early stage investment is fleeing to China at the expense of American startups. Scary because it has created perpetual Big Tech monopolies with no allegiance to the United States that are immune to American competition and taxes. These forces now control what we read and say, how we vote, and even what we believe to be true.

Technology and intellectual property (IP) have become vital components to virtually every business in all industries as they often drive the value and efficiencies of a business and enable companies to monetize their products and services. In order to capitalize on this trend, private equity (PE) investors are making significant investments in companies focused on developing and commercializing IP. In 2017, a record number of PE deals were IP and technology focused, ranging from consumer-facing companies with valuations driven by trademark portfolios and brand awareness, to cloud platform and biotech companies with significant patent portfolios and research and development efforts. According to analysts of PE deal-trends, this wave of IP-centric PE transactions has continued and will continue to grow during 2018.

It is no wonder that Bitcoin has recently reached a record of $600 billion in the total market value, and Thomas J. Lee, the head of research at Fundstrat Global Advisors, predicts the total value of Bitcoin to reach $1.2 trillion by the end of 2018… Every digital investor has a special set of goals in cryptocurrency, but whatever your goals online safety measures must be taken. Be sure to consider the fees, accessibility, and liquidity as well as your own safety when choosing a platform for your exchange.

Once your patent has been awarded you may still need additional capital to turn that patent into a business. Fortunately it is not as difficult to find investors as you may think. Equity crowdfunding is on the path to surpass venture capital as the preferred way for start-ups and small businesses to raise capital. In a nutshell, equity crowdfunding is the sale of equity (or debt) in your business directly to investors using an online platform instead of a stock brokerage firm.  It is also less expensive than hiring one. Although direct to investor funding over the internet has been around since the late 1990s, it came of age with the JOBS Act in 2012.   

Patent monetization has become nearly impossible for middle-market technology companies without engaging in some level of legal action. Management teams have consequently shied away from pursuing licensing opportunities, even when the revenue potential of a company’s intellectual property is compelling. While traditional debt and equity investors have an aversion to patent monetization stories, there are specialized investors willing to underwrite capital raises aimed at financing licensing revenue initiatives. By structuring these financings in a way that isolates monetization risk to the patent investor, companies can pursue licensing initiatives that have the potential to generate significant residual value for all stakeholders in the capital stack. In addition to capital, patent investors bring monetization expertise that can play a critical role in the success of a licensing revenue strategy… In many contexts, licensing revenues will only persist so long as the underlying patents remain valid. Increasingly, however, licensees and strategic third parties seek to invalidate patents in Inter Partes Review, rather than continue to pay or renew patent licenses. The uncertainty of future revenue streams further justifies financing structures that ameliorate such risk.

For more than two centuries, the U.S. Constitution, black letter law and precedent construed a patent as a property right. This is important because it is the nature of property rights that enables investment in early stage startup companies, especially those with cutting edge technologies in highly competitive fields like pharmaceuticals, biotech, smart phones, enterprise software, internet, semiconductors and other technologies critical to our infrastructure, military and much more… The same agency that takes inventor money to grant patents takes infringer money to destroy them. This creates an appearance of double dealing, and inventor belief that the USPTO is breaching the “grand bargain” of the patent system. Inventor confidence is at an all-time low because inventors are lured away from using trade secrecy protection, but then given nothing in return for disclosure. The effect of PTAB on inventors is devastating. Since institution of PTAB, over 50% of inventors simply quit rather than suffer the financial and stressful indignation of post grant invalidation.

“In our time together today we are going to try and take stock of the health of the American patent system,” Michel began. “It is important to remember that the patent system was founded in the Constitution… and although the world ‘right’ appears many times in the Bill of Rights, in the original Constitution the only ‘right’ mentioned is the patent right.”… Investment is being disincentivized by uncertainty created by the aforementioned three waves of changes to the system. We should be looking at the impact on the flow of money, Michel explained.

Now that Trump has won, the discussion has narrowed to whether Trump will keep patents weak or make patents great again. From the outside perspective, it is a curious exercise to say the least… Why are we even asking these questions? Property is property, right? Can you remember an election where people were asking if their deed would keep squatters out of their living room depending on who won the presidency? I don’t. It seems a preposterous question. After all, the deed on your house is a property right and everybody knows the government will back it up and eject the squatters. So why then do we, or should we, have to ask whether a Trump Administration will be in favor of strong patent rights? It all seems bizarre to say the least.

Stifling innovation and curtailing investments are the effects of the AIA from what I see and hear. This is infuriating! It is disincentivizing inventors, innovators and investors! Before last year I have never been an activist or protested anything publically. The AIA issue has change that for me… We are standing to protect the rights of Americans to profit from their ideas. The patent system has been broken and rigged to suit corporations. Stealing IP is cheaper than developing it…

Patent investors are no different than investors in any other asset class. They abhor uncertainty and charge a stiff premium for risk. In the wake of the AIA, the cloud of uncertainty hanging over patents is dark indeed. This uncertainty has depressed the value of patents and the returns to research and development, and may have broader ramifications that are yet to be seen… Like so much well-intended regulation, the AIA may have undermined the very system it was aimed at improving. While well capitalized players may be able to ride out the current storm—or even take advantage of it—many others have been irrevocably harmed by these changes.

RUSS KRAJEC: The startup company has an exclusive license, so they have full control of the asset, and they have a buyout option that can be exercised at any time. And the buyout cost is reasonable, is predictable, and it’s known ahead of time. So from them, it is purely a matter of financing while the startup company has excruciatingly high cost of capital. Angel or venture money averages 30, 40, 50 percent per year. Our financing is much lower than that, it’s a better use of capital. If at some point in the future, the company may be able to get a bank loan where the cost of capital is much cheaper, and it makes sense to exercise the buyout option. The patent financing is purely an analysis of Net Present Value in these scenarios.

A recent Barron’s editorial, however, has raised some eyebrows among those who are familiar with the effect of proper patent enforcement on financial fortunes. Published May 14th, “Patents Can Be Dangerous to Inventors’ Welfare” is a perfect example of how a rather odious point-of-view can be freshened and sweetened when some of the inconvenient truths are laid by the wayside.

CUBAN: I have invested in more than 150 companies and never has having or not having a patent impacted the final decision. Small businesses can and do become great without patents. The problem for little guys with patents is that no patent lives in a vacuum. Particularly with software and technology. There is always a work around and you can always find a patent that enables the big guy to sue the little guy. So with just few exceptions the current system doesn’t protect anyone.

The engine that made America a greatest economic power was a patent system that led to tremendous innovation by incentivizing entrepreneurial inventors.