Tag Archives: Kodak

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

Patent Pricing: One Part Market Value; Two Parts Perceived Need

Google’s recent sale of Motorola Mobility’s handset business to China’s Lenovo is an illustration of

how what appeared to have been an over zealous acquisition in 2012 is starting to make more sense. It is a reminder that the eventual cost of the purchase and return to Google is not necessarily visible on the balance sheet or its P&L. Extracting value from patents can be measured in many ways.

Lenovo is now the world’s largest PC maker and fourth largest mobile phone company. In the deal Google gets to keep most of the patents, provide licences to Lenovo (thus establishing their market value), empowers yet another Android handset maker in its battle with rivals Apple and Microsoft, and receives a bunch of cash and stock to mitigate the original cost of the Motorola Mobility purchase. It also gets to retain what could be an undervalued crown jewel – Motorola’s Advanced Research and Projects.

“Beauty is in the eye of the holder,” in the April IAM magazine, I consider the difficulty determining value when buying or selling patents, or their holders. It also kodak_valuations1touches upon overly zealous valuations, such as those of JP

 

Morgan in ParkerVision’s (PRKR) win over Qualcomm, and in Kodak’s eventual sale to a consortium led by Apple, Facebook, Google and Samsung for just $525 million. (Projections by some interested parties were as high as $4.5 billion.).

“Just because some patent holders see their assets in a brighter light,” the Intangible Investor piece observes, “does not mean that stakeholders must be blinded by the glare.”

Buyers and investors alike should be aware of not only who is valuing a particular IP portfolio for sale or estimating return on a dispute, but also what is their relationship to the selling party.

Image source: envisionip.com

 

Liquidation Value of Alcatel IP Rights is said to be $3.9B to $5.9B

Bernstein Research and WSJ say that the company’s patent value is up to three times greater than its current market cap

A credible news source is reporting that the liquidation value of the patent portfolio and other IP rights of beleaguered telecommunication equipment company, Alcatel-Lucent (NYSE: ALU), is worth as much as $6B.

Alcatel-Lucent, which current is trading at $1.12 per share at the close on Friday, has about 28,000 patents, many the best of which according to IP CloseUp sources have already been licensed. Back in February it also tried to license patents through defensive patent aggregator RPX (NASDAQ: RPXC).

alcatel-lucentAccording to a chart that appeared in the Wall Street Journal on December 7 attributed to FactSet and Bernstein Research , the intellectual property liquidation value of Paris-based Alcatel-Lucent is 3B to 4.5B euros or, at $.131 USD per euro, about $3.9B to $5.9B USD. It is not clear if this figure includes equity associated with the Alcatel-Lucent brand or trade secrets.

Alcatel-Lucent still hold some patents based on research conducted at famed AT&T Bell Labs. Lucent was established in 1996 and sold to Alcatel in 2006.

According to patent valuation experts the estimated value of the ALU IP rights could be even further afield than the $2.4B-$2.6B estimate for bankrupt Kodak’s patents. (It was announced last week that the Kodak portfolio is about to be sold for $500M to a “consortium of bidders” as part of a refinancing deal by a group led by JP Morgan Chase and UBS.) The heavily encumbered and much shopped Kodak portfolio could not generate auction bids of much higher than $150M.

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Inflated values for patents of public companies in search of a higher stock price help no one.

Do analysts and the media really believe they can throw around valuation numbers without consequence or support? The sale of Nortel’s uniquely overpriced portfolio for $4.5B in 2011 to a group led by Apple, Microsoft, Ericsson, Sony and RIM was an anomoly. It has skewed expectations about the real world value of patents.

For analysts to suggest that patent may be worth several or more times than they can reasonably generate is arguably irresponsible and a disservice to shareholders and innovators alike.

It could hurt more than help these companies and their investors in the long run, as attempts are made to establish more accurate prices and efficient markets for intangible assets worldwide.

Illustration source: mobile-web.me

Disclosure: Neither Brody Berman Associates nor Bruce Berman owns shares of Alcatel-Lucent or holds a position, long or short.

Patent Valuations: Why do they Differ from Selling Price?

Owners and buyers are frequently out of sync w/ investors

Valuations that are either too high or low underscore the need to provide more bracketed price scenarios when it comes to selling a patent portfolio.

The frequent disconnect between seller, appraiser and buyer suggests a more flexible approach might be needed that anticipates a variety of conditions, contexts, types of buyers, and possible deployments.

Under the best of circumstances, providing an accurate patent valuation is difficult. Valuations typically are conducted for litigation purposes, licensing, taxes and M&A.  A cash flow model applied to patents that are already licensed may not help much. Encumbrances or prior licensing agreements can make these patents less valuable to a new owner. So can an inability to enforce agreements. (Kodak says its patents have generated more than $3B in licensing revenues since 2001.)

Buying and selling whole portfolios is a relatively new phenomenon. Patents are a veritable moving target, with the price of portfolio and individual rights in constant flux. A buyer’s perceived level of need plays a significant role in driving price, not abstract reasoning from accountants or Ph.D.’s. How one or more specific buyers plan to use a particular group of assets will help determine the price it eventually sells for, as well as perceived need, cash position, strength of their current patent coverage, etc.

Reasons for Buying

Large operating companies often buy for strategic (defensive) reasons, i.e. for leverage to counter-balance a potential enforcement against them. A few have started to think about also acquiring patents for their revenue-generating potential. The Rockstar Consortium may have been formed for defensive leverage in mind, but it is clearly in the licensing business. Based on what Apple contributed to the Nortel purchase price, $2.6B, it appears to own 58% of Rockstar. It likely would like more than a strategic ROI.  

Sometimes keeping patents out of the hands of a competitor or competitors is sufficient value to pay a premium to market, especially if the buyer already has a lot of cash and is conducting less R&D that it might. This may have been the motivation behind Google’s $12.5B acquisition of Motorola Mobility and its some 17,000 patents and 6,000 patent applications.

Was Google certain about what it wanted to do with the MMI and its portfolio before purchase? Who knows? Given Google’s cash position and probably need it was not likely to overpay at any price. Foremost, the purchase kept the assets out of the hands of companies who could possibly harm them. (Apple, Microsoft, etc.) After losing out on the Nortel patents the company’s strategy likely changed, as did its willingness to pay a premium to acquire the next “essential” portfolio. There is no disputing that with the MMI purchase Google went overnight from patent have-not to a serious player. (My mother used to say, “rich or poor, it’s nice to have money.”)

Valuations can under-estimate as well as over-estimate price. Here are some recent patent valuations and sale prices or offers:

Kodak, $2.21B – $2.57B –  CNET auction bids to date, $150M-$250M
(Valuation by 284 Partners)

AOL, $290M + $1.1B – Sale to MSFT for $1.1 B (and in turn to Facebook $550M)
(Valuation by M-CAM and MDB Capital)

Nortel, (Stalking Horse minimum bid by Google, $900M) – Sale price $4.5B to Rockstar Consortium
(Apple, ($2.6 B), Microsoft, Ericsson ($340M), Sony, RIM ($770M), EMC)

Motorola Mobility $7.9B market value
(Google paid $12.5B, a 63% premium per share over its stock price, largely for its 17K patents and 6K applications )

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More the Exception Than the Rule

While patent valuation is far from merely throwing darts, it is very difficult to come up with a number for what a buyer will pay for a group of rights at a given time. One could say hitting the sales price target, today, is more the exception than the rule.

If Wall Street and retail investors are to take patent portfolios and transactions seriously, more standardization of terms and methodology will help. There at least needs to be a common vocabulary in discussing patent attributes and possible impediments. Best-case scenarios are not typical. (Perhaps patent valuations should come with a glossary of terms and conditions?) At a minimum, the source of the valuation (paid private firm, investment banking firm, independent appraiser) should be made clear.

In real estate, where there is almost always well-defined body of comparables, mis-targeting the final selling price by much more than 10% is rarely acceptable. For now, missing the final selling price of a patent portfolio by 100% or more is. This does not a market make. Worst of all, it confuses those investors who attempt to make rational stock decisions based on the opinion of valuation professionals. What inventors fail to remember is that intangible assets are much less predictable, and so are their buyers.

Nice-to-Have vs. Need-to-Have

Valuing for litigation damages has always been more art than science. Still, each side has its expert and the court may have one, too. Triangulation often is the result, and it can work in a damages scenario where compromise is acceptable to both parties. Competitive bidding is wonderful for some sellers, but it is only occasionally a realistic option.

Nice-to-have patents are one price; need-to-have another; litigation quality still another. Some but not all of this is in the eye of the beholder.

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Lest we forget, patent valuations for the purpose of a sale may have more to do with goosing the stock price  and enhancing the anticipated offer than establishing a true selling price. For now, surprises in on the high or low end are likely remain the norm. The most useful patent valuations will anticipate the unexpected.

Image source: axialmarket.com; gaebler.com


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