Pre-IPO Snap, with $25B valuation, paid $9M for 245 IBM patents

A soft market for patent licensing has not stopped the right patent portfolio from commanding a respectable price from the right buyer – at the right time.   

Snap, the corporate parent of Snapchat, reported recently in its S-1 pre-IPO filing that it had acquired a strategic patent portfolio from IBM, according to PatentVue, the data-focused IP blog.

In a well-researched post, PatentVue reports that approximately 245 of Snap’s 328 issued patents have been purchased from IBM.

“While the terms of its patent acquisition from IBM were not made ibmpublic,” says Maulin Shah, Managing Partner of Envision IP, “and with no mention of this patent transfer in the S-1, it appears that Snap may have paid roughly $9-10 million for the 245 patents and 207 pending US patent applications from IBM.

Excluding the patent applications, this means roughly $36-40k per patent.

Twitter acquired 945 patents from IBM in 2014 for a reported $36 million, in an effort to settle patent infringement claims brought against it by the technology giant. This comes out to approximately $38k per patent, again, excluding patent applications.

Similar Strategies

“Snap and Twitter’s patenting strategy at this point appear to be very similar,” concludes Shah, “with the vast majority of both portfolios predominately made up of acquired patents from IBM.”

The current IAM magazine features an article, “Big Blue’s new groove,” which examines IBM’s evolving patent strategy, and lists 34 patent and portfolio sales Big Blue has made between 2014 and 2016. Buyers include LinkedIn, Hulu, snap-ipo-riskRed Hat, Global Foundries and Lenovo. IAM subscribers can find the article here.

Snap, Snapchat’s parent, expects to raise approximately $3 billion from an initial public offering this spring. Despite a $25 billion valuation, Snap lost $514 million last year.

Facebook, Twitter, LinkedIn and others all sought patent portfolios before they went public, in part to justify their valuation, and perhaps because they had the cash to justify the instant leverage provided by a meaningful portfolio.

Today, patents’ more abstract M&A or financial transaction value can be more meaningful that its direct licensing or revenue-generating value.

The PatentVue post, can be found here. The blog’s original coverage of Snap’s mobile messaging patent acquisition, here.

Image source: computerweekly.com; techcrunch.com

About Bruce Berman

IP trend spotter, consultant and author.

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