Tag Archives: Envision IP
snap-ipo-risk

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

Top 4 Patent Sellers

Panasonic, NEC & Sony are battling with IBM for patent sales leadership

Despite dramatically lower patent valuations, some big companies, including under-performing foreign holders, have taken the number of U.S. sales to new highs.

While IBM still leads, over the past three and a half years, it has been joined by IP-conservative firms from Japan, notably Panasonic/Matsushita, NEC and Sony. All four of these companies have something in common: poor recent financial performance.

In the January IAM Magazine, the Intangible Investor looks at the latest trends in patent sales among the biggest sellers. Activity is up and emerging are new leaders, like Panasonic, which leads even IBM in U.S. sales for the first half of 2015.

Analysis conducted by Brody Berman Associates in conjunction with Envision IP, a law firm that specializes in patent research, reveals that “for the three-and-a-half year period from 2012 to early August 2015, the leading seller by far was IBM, with 5,356 patents. Buyers include Google, Facebook, Alibaba and Twitter. In 2014 alone, IBM sold 2,187 patents, the most in any year over the period by any of the 12 leading tech companies analyzed.

Leading Patent Sellers

“Surprisingly, the number two, three and four patent sellers in the 2012-2015 period were all Japanese companies,” writes this reporter. “Panasonic/Matsushita, NEC and Sony, with 4,203, 2,131 and 1,578 respectively. This is a dramatic shift for conservative Japanese electronics giants, which rarely litigate patents to generate revenue or enable others to.”

Subscribers can link to IAM’s January issue here.

Intellectual Venture’s 70,000 patent portfolio appears to contain no patents originally owned by Apple, Google or Qualcomm, as Envision’s findings indicate. Several patents owned by IV investors appear in its portfolio, including those of Nokia, Verizon, Microsoft and Sony. Only 268 of the 19,559 US patents owned by IV were identified as having a litigation history, representing less than 1.5% of the portfolio.

Top 4 Patent Sellers

Among the top companies IV purchased from are Kodak (1,057), American Express (643), AT&T (358) and Philips (313) and Ericsson (273).

A list of IV’s 35 top sources for acquisitions can be found here.

Image source: Envision IP, LLC

2010 2013 R&D JPEG 1

Higher R&D does not necessarily result in more or better patents

It is unclear that companies with the most significant increases in R&D spending are securing more, better quality or valuable patents. 

A random study of the R&D spending and U.S. patent granted three years following of 12 leading technology companies conducted by Brody Berman Associates shows that costly corporate research spending does not necessarily result in more patents or those with greater impact.

Cisco’s annual R&D spend, for example, increased 11.3% from 2010 to 2013, to just under $6 billion, yet the number of patents granted to it over that period was down 21% to about 900.

Google’s R&D increased 110% to $8B annually over that same period, but its patents granted were up 573%. According to Envision IP the majority were in US classes 455, 709, 370, 715 and the much observed 705. (See chart below.)

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Granted there are many reasons why one company receives more patents than another: Is the business building its portfolio or merely maintaining it?  Does it do business in a mature or maturing sector? Is it planning to use the patents defensively or to monetize them through out-licensing?

2010 2013 R&D JPEG 1

2010 2013 Patents Granted JPEG 2

 

Microsoft’s R&D was up to about $10.5B in 2013 from 2010, but its patents received were down 14%. Is MSFT investing in fewer, better quality patents, or was the decrease merely the luck of the draw? Everyone except Cisco spent more on R&D, but not everyone necessarily received more patents for doing so. Qualcomm’s R&D was up 96% and its patent grants were up 220%. IBM’s $6B+ R&D, a 3% increase, resulted in 16% more patents. Were these of lesser quality than Microsoft’s. It would be interesting to compare.

Intel conducted the most expensive R&D of the group, nosing out MSFT for the spending lead. For its some $10.6B in 2013, a 60% increase over its 2010 budget, it received 12% fewer U.S. patents, or about 1,700. One would hope they are better patents. “The number of reverse citations for Intel increased from an average of 25 in 2010 to 30 in 2013,” says Maulin Shah of Envision IP.

“A higher number of reverse citations may indicate the relative validity of a patent – the more art that is cited on the patent and during prosecution lessens the pool of available prior art that may be used to challenge the validity of the patent based on prior art grounds later.

The trend suggests that a business, no matter how solvent, cannot necessarily “buy” valuable patents or generate meaningful innovation by spending more on R&D. A lower yield per R&D dollar spent may mean better quality patents, but, then again, it may not. More research needs to be done on R&D and how best to measure return on it.

Patents remain a “numbers” game, more focused on quantity than quality, but these R&D/delayed grant figures indicate that the trend is far from universal among large technology companies.

*****

“The cost for IP varies per industry sector,” a revered former head of IP business and strategy told me recently, “but also within a sector it depends on whether a company is a technology leader, fast-follower or in catch-up mode.

“Cost is further determined by the patent efficiency (number of patents filed per million dollar investment in R&D), which relates also to patent quality. If you analyze this you will see some significant differences in numbers (and patent quality), and also in patent cost. Some followers or late entrants have a high patent efficiency (high number of patent filings per million investment in R&D) just to create large numbers (quantity over quality).”

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“With technology leaders there is mostly a kind of non-linear relationship between the number of patent filings and R&D budget (decrease in patent efficiency with increasing R&D budget).

“It generally also holds that companies with less than average R&D budgets in their sector of industry (followers, new entrants) will have higher third-party IP costs, whereas companies with higher than average R&D budgets (technology leaders)  will generally have higher benefits from their own IP.”

Image source: Brody Berman Associates, Inc.; Envision IP, LLC

Life360-300x119

Family App Developer Says it’s the Victim of a Patent “Troll” — Research Indicates Otherwise

When it comes to invention rights (patents) it is often difficult to determine who is a victim and who is merely promoting its agenda.

Life360, which markets the world’s largest family tracking app, says it is being unfairly targeted by what it calls a patent troll, Advanced Ground Information Systems Inc.(AGIS).  SF-based Life360, which has raised $50 million from security giant ADT, says it wasting its capital on defending itself from AGIS, a company that makes tracking equipment and software for the military and first responders. But that is only part of the story.

In a video interview  last week on Bloomberg News, Life360 CEO Chris Hulls, a former Goldman Sachs banker who spent time in the U.S. Air Force, said that “We believe it to be meritless suit from a troll. Life360 is helping people. Our product is one that saves lives, and its ridiculous that we have to defend ourselves in court.”

Life360-300x119

In a letter from Life360 to AGIS, Hulls wrote: “Dear Piece of S***, We are in the process of retaining counsel and investigating this matter… I will pray that karma is real and that you are its worthy recipient.”

In the patent world holders and their patents are not always as good or bad, or right or wrong, as they might appear. The “bad” guys in licensing are sometimes bottom-feeders looking for a quick payout given the high price of litigation, but, more often than not, they are legitimate holders of valid patents that are being used without authorization. Infringers sometimes invent four of five-letter words terms for those who expect to be paid for their inventions. Thus, it may be opportune for a a business edit the story to suit its needs. This appears to be the case with Life360.

The Court of Public Opinion currently is a more powerful ally to a patent infringer than it is to a small holder whose rights have been violated. Patent infringement is not a victimless crime. Unfortunately, it is not always clear who the real victim is.

Inventor-owned Patents

Envision IP, a law firm which focuses on patent research, says that it is unlikely that AGIS is a “troll.”

“The four patents it asserted against Life360 list AGIS as the original assignee – so these patents were not purchased or acquired by the company,” said Maulin Shah, Managing Attorney. “The suit is filed in the Southern District of Florida, apparently in AGIS’s backyard, and does not appear to have pursued an
explicitly patent-friendly jurisdiction like Texas, Delaware of the Eastern District of Virginia.” (The suit lists Jupiter, FL the company’s address.)

Envision IP, which conducts invalidity studies, says that the complaint against Life360 is the only patent infringement lawsuit currently filed by AGIS, and it has not asserted its patents against any other companies. (Life360 is one of 25 defendants sued by an NPE called Remote Locater Systems LLC.) Also, AGIS appears to be an active operating company that has been filing annual reports since 2004. “It does not seem that the entity was formed as a shell used solely for patent licensing/enforcement purposes,” says patent attorney Shah.

Additionally, AGIS is represented by Kenyon & Kenyon, a highly respected law firm known for defending large operating companies, like Bosch and Siemens. Kenyon represents precious few if any plaintiffs, and it is highly unlikely that it would agree to represent AGIS if the case were truly meritless. But, then, you never know.

Life360 to the Defense

Life360 Inc. said last week that it will provide legal support for other small companies sued by Advanced Ground Information Systems Inc. So far, according to Envision IP, it does not appear that any logohave. Jupiter, Florida-based AGIS sued Life360 in federal court in West Palm Beach, Florida, in May 2014, accusing the California company of infringing four patents related to mobile-phone communication.

In a Feb. 3 statement, Life360 said that in addition to assisting others who are accused of infringing the disputed patents, it has filed a countersuit (click on View Complaint) in federal court in San Jose, California, accusing AGIS of marking all of its products with its patents regardless of whether the patent contains a claim covering the product. Life360 is represented by the Bergeson, LLP, a Silicon Valley law firm, in that matter. It is unclear who is representing it in defending against the patent suit.

According to PandoDaily six-year old Life360 has now raised a total of $76 million from more than a dozen investors that include Duchossois Capital Partners, BMW i Ventures, Facebook, Google, Expansion Venture Capital, DCM, and Bessemer Venture Partners.

Potential for an Injunction

Perhaps Life360’s greatest fear – and hence its high-profile defense – is that if AGIS can show that it is an operating company, and one that supports the military and first responders,  it can potentially use an injunction to stop Life360 from selling its app, effectively shutting the company down. Much of this could be saber-rattling to enhance the parties’ respective negotiating position. But for Life360 its defense in the AGIS suit may indeed be a bet-the-company-matter.

According to the complaint (page 3), AGIS’s founder, Malcolm Beyer Jr, who is named as an inventor on the asserted patents, is a former Marine, and graduate of the US Naval Academy. He developed AGIS’ patented technology “shortly after September 11, 2001.” The commercial product based on the patents is called LifeRing. (The page explains the product features and provides a market comparison.) 

Whatever the outcome, going public with a “damn-the-troll” defense, as Life360 has, is looking old and worn, even if it can still sometimes work. Allegations like those are outside the merits of the case, and from the preliminary research, will be difficult to prove.

Image source: agisinc.com; articleonepartners.com


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