The term PIPCO – public intellectual property company – was born in 2013 at time when as many as 30 relatively small patent licensing business were trading their shares on NASDAQ and OTC exchanges.
Over the next five years most of these businesses either ceased trading (some were delisted), merged or were re-branded.
PIPCO was never intended as a euphemism for patent licensing company or for non-practicing entity. The fact is than thousands of businesses are dependent on IP, strategically, financially and otherwise. Only a handful are engaged in patent licensing for most or all of their income.
With 2021 stock market indices reaching new highs, and technology companies at an historic premium, it is an excellent time to reconsider publicly traded companies whose performance is dependent on the value of their intellectual property.
The Perils of PIPCOs
Yesterday, IP Watchdog published an Intangible Investor column called ‘Managing the Perils of Public IP Company Ownership.’ It considers the performance and nature of PIPCOs and why financial, judicial and other audiences’ narrow view of them need to be expanded.
“This golden age of public patent licensing companies was short lived largely because of the implementation of the America Invents Act,” reports the Intangible Investor, “which resulted in a nascent Patent Trial and Appeal Board (PTAB) and unsympathetic courts. Added to this is political lobbying and negative public relations that endeavored to render patent licensing—and especially patent-licensing only businesses—suspect, no matter what their motivation, patent quality or merits of the case.”
The graph above reflects a major segment of the PIPCO universe circa 2014. Larger companies, such as InterDigital, Rambus and Tessera (now Xperi) tended to perform better.
It is easy to forget that more defensive-minded patent-rich companies such as Microsoft, IBM and Samsung are also public PIPCOs, although their huge market cap and revenue streams make them much less dependent on the outcome of individual IP disputes or licenses.
Better Measurement Tools
What made many public patent licensing companies attractive to investors was their comparatively simple and potentially lucrative business model oriented to headline-grabbing wins or settlements, absence of costly operations, proximity to undervalued patents and access to equity markets.
“Developing better methods of understanding the role of IP and IP rights in the performance of large IP holders – whether the IP is patents, copyrights, trade secrets or trademarks – will enhance value and provide opportunity for SMEs and independent holders. The IP CloseUp 50 is a start.”
Read ‘Managing the Perils of Public IP Company Ownership,’ here.
Image source: Lake Street Capital
Thanks, Bruce. Your article reinvigorates the discussion of the role of IP in the economy and particularly those companies that owe the bulk of their valuation to such innovations.