Tag Archives: Motorola Mobility
2015

Top patent defendants have faced far fewer suits in 2016, so far

The size of businesses sued most frequently for patent infringement in 2016 were significantly larger than in 2015, when five little-known patent holders were among the top defendants. The amount of litigation also is much lower this year.

Pharmaceutical company Eli Lilly (341) is the top patent litigation defendant in 2016, with a ten-fold lead over number two Samsung (31). No doubt much of Lilly’s defense is the result of ANDA procedures brought by generic drug manufacturers against branded competitors to establish bio-equivalent drugs.

The rest of the list – Amazon, Actavis, AT&T Mobility I, Huawei Technologies, LG Electronics, AT&T, T Mobile USA and Motorola Mobility – all have 21 or fewer suits filed against them so far this year.

2016

This represents a significant drop over last year, according to data supplied by Patexia.com.

Actavis, which acquired Allergan in 2014, is another diversified pharmaceutical company. Actavis is based in Dublin, Ireland, and is a subsidiary of Teva, an Israeli company. Five of the top ten defendants this year are foreign companies. Absent from the 2016 list is Apple and Google, which owns Motorola Mobility.

More Suits Filed Against Unknowns

For the entire 2015, Lilly had 977 patent suits filed against it. That is in contrast with the 341 filed so far this year. Samsung was again number two last year, with 49 cases filed against it.

The rest of the top-ten defendants for 2015 had some less-known names, including: Spin Screed, Sandi Scales, Conlin Properties, Amneal Pharmaceuticals and Lupin Pharmaceuticals. Rounding out last year’s list was H-P, Actavis and Amazon. Only three companies, Samsung, H-P and Amazon, appear to be IT pure-plays.

The number of suits filed against Lilly last year was almost three times higher than 2016 to date, and those for companies in the two through ten spots were about two times higher.

2015

Response to Increased Risk?

The increase in litigation filings against more established patent holders may have to do with the greater likelihood of favorable settlement or payout of damages from them as opposed to smaller players.

It may also have to do with the changing economics of patent litigation which must anticipate the likelihood, time and costs associated with inter partes reviews.

For access to the top-ten patent litigation defendants and the number of suits filed against them from 2007-20016,  go here.

Image source: patexia.com

LexMachina - cover page

Top Plaintiffs are Operating Cos Not NPEs, New Study Shows

Seven of the top ten plaintiffs with the most patents asserted in cases open in 2013 are operating companies.

Data presented in a report released this morning by Lex Machina, the legal analytics firm based in Silicon Valley, indicate that businesses that sell products are much more likely to be involved in active patent litigation than so-called patent “trolls.”

This may come as a surprise to many trying to weaken the patent system because of NPE activity. “2013 Patent Litigation Year in Review” presents a host of timely facts, among them plaintiffs with the most patents enforced. Only two NPEs Intellectual Ventures (twice) and RAK Technology Licensing, are among the top ten companies.

LM Ericsson and Ericsson, Inc. were the most litigious, with a total of 176 active cases open. Motorola Mobility, owned by Google, and Apple, also were on the top ten list, each with 52 active cases.

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Figure 20:
Plaintiffs With Most Patents
Asserted in Cases Open During 2013

1. Telefonaktiebolaget LM Ericsson 103
2. Intellectual Ventures I 100
3. Intellectual Ventures II 81
4. Ericsson, Inc. 73
5. Finisar 59
6. Ronald A. Katz Technology Licensing 65
7. Motorola Mobility 52
8. Apple 52
9. Philips Electronics 41
10. Pfizer 30

*Intellectual Ventures I and II and Ronald A. Katz Technology Licensing are NPEs.
The remaining seven plaintiffs are operating companies.

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Suits, Trials, Damages 

Some of the most frequently asserted patents originated at Xerox, AT&T and Stamford University. Five of the top ten damages awards were in the life sciences, not IT. Average awards were up 28%, “dragged higher,” the report states, by “healdline-stealing damages.”

The median patent damages award for 2013 was still slightly over $1 million, at $1,256,920. It is up but remains relatively low given the hoopla surrounding patent awards and the increase in suits filed. (Much of the increase in suits filed can be attributed to “joinder” provisions in the America Invents Act, which make it more difficult to enforce against multiple parties in a single suit.)

There were just 128 patent trials last year, a number which has varied little for more than 20 years. This is amazing given the explosion in patents granted (a total of 302,948 in 2013 alone), increasing complexity of innovation and the number and importance of IP rights in consumer and other products.

The entire Lex Machina report can be found here. It compares favorably with those patent litigation reports from RPX and PwC.

Illustration source: lexmachina.com 

sticker,375x360

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

 

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.

*     *     *

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

n-goodbye-aol

Could AOL Patent Sale Have Netted More Than $1B?

Investor Pressure May Have Triggered a “Too-Quick” Sale

It was widely reported yesterday that AOL Inc. (NYSE: AOL) on Monday agreed to sell more than 800 patents and related products to Microsoft Corp. (NASDAQ: MSFT) for $1.056 billion. It was also written that the struggling online services provider was under pressure from activist investor Starboard Value, holder of 5.2% of AOL’s shares.

AOL shares were up 43% for the day.

Experts caution the $1.3M paid per patent for the portfolio, among the highest on record, should not be the focus of this transaction or its meaning. Two experienced patent managers told IP CloseUp that they believe perhaps 25 or 30 patents generated the bulk of the immediate value to Microsoft, but which ones remain somewhat of a mystery. AOL, in business since the 1980s, is not new to the patent game. Early priority dates on some of their patents covering Internet security, communications and transactions are certain to be useful in negotiating with competitors today or down the road.

Clearly, the patents are worth more in the hands of cash-rich Microsoft than AOL. And from Microsoft’s perspective, it is important they stay out of the hands of their rivals.

According to the WSJ story patent valuation firm M-Cam, Inc. had appraised the patent portfolio at $290m, and Clayton Moran, an analyst with Benchmark said “Most on the Street viewed $300 million as the likely maximum value.” These value estimates appear to have been dramatically off.

Another View

One IP transaction expert who had reviewed some of the patents had a slightly different take on the deal. He thought that while the sale price appeared more than fair, some of the patents are truly fundamental, and a more methodical and inclusive sale process may have netted more for AOL shareholders.

“Based on the patents that I examined I thought the entire AOL patent portfolio could be worth as much as $1.79B, the entire market cap of the company,” said Rob Aronoff, Managing Partner of Pluritas, LLC, an IP transactions firm that Brody Berman Associates has advised. “At least several fundamental patents were included in the core portfolio, and my informal assessment indicated that full portfolio value of all AOL’s 1,100 patents without the business operations was probably in the area of $1.4B. Had there been more time for a marketing effort by Evercore Partners instead of a rush to sale the AOL may have gotten closer to the full $1.79B company value.”

“This transaction appears to have been rushed into the marketplace on a relative basis when compared to other major patent sales like Nortel and Motorola Mobility,” concludes Aronoff, who is based in San Francisco. “The beneficiary appears to be Microsoft. The approximately one-month sales process does not appear to have been played out to the benefit of the all shareholders.

“The call for bids was made only Friday of last week, and they have already awarded the patents, with no further rounds of bidding to Microsoft, on whose benefit Evercore had recently conducted a complex transaction regarding ADAPTIX.

“Had the process taken say three months AOL may have gotten Google, Apple and possibly others interested enough to bid higher. $1B may sound like a lot to pay for 800 patents and licenses, but for these timely rights the price may be more of a bargain than many had imagined.”

Illustration source: glossynews.com; syracuse.com

carl-icahn1

$12.5b Motorola Sale Nets $1b for “Activist” IP Investor Carl Icahn

Recognition of Patent Value Results in Big Shareholder Win –

In developments discussed recently in IP CloseUp, activist IP investor Carl Icahn has made a truly historic impact on the wireless and intellectual property industries with the sale of Motorola Mobility to Google for $12.5 billion.

A couple of weeks ago in an SEC filing Icahn put pressure on Motorola Mobility management, demanding it explore the sale of patents in the wake of the Nortel’s $4.5 billion auction. This move resulted in yesterday’s announcement.

His 26.8 million shares are now worth over $1 billion, up from $655.8 million on Friday. They were worth less than $500 million when Icahn filed an amended 13D on July 20 to suggest that management explore patent sale options. Icahn also urged Motorola two years ago to split into the company into two entities, the Droid-owning Mobility (MMI) and Motorola Solutions (MSI).

It appears that patent-hungry Google has come away a winner, with more than 17,000 focused patents and about 4,000 applications. It also has acquired a business that appears to be in the turnaround mode, reporting strong profits. Shares of InterDigital, whose patents had been sought by Google, dropped just under 20% on Monday. InterDigital will likely continue to be pursued by other smartphone providers, probably at a lower valuation.

*     *     *

Yet to be answered: What will the deal mean to Google’s Android users like HTC, Samsung, Kyocera and LG?

With Motorola, Google be competing more directly with them in smartphones. Might its OEM partners choose to seek an operating system like Microsoft’s Windows Phone 7 or other non-competitive alternatives. Microsoft and Nokia already have agreed to work together.

If so, a Google hardware spin-off may be not-too-far down the road.

*     *     *

Icahn’s victory is not without its dark side: According to Fortune, “Based on Google’s $40 per share acquisition price, Icahn’s MMI stake currently is valued at around $1.07 billion. His MSI position is at around $1.23 billion. If we add that to the $1 billion in earlier disposals, Icahn has realized or holds around $3.3 billion in Motorola and its successor companies. That’s just 3.5% below Icahn’s original investment — or $120 million — compared to the double-digit percentage losses he previously was facing. For example, he was down more than $700 million when Bloomberg did its math.”

This is not the first time good patents have bailed out investors. It won’t be the last.

Image source: onenewspage.co.uk

interdigital

Valuations Soar on Smartphone Patents and Stocks

Speculation is Boosting Some Companies for Now; The Shortsighted are Paying a Premium to Compete –

What hath the Nortel auction wrought? Never before has it been so apparent that the right patents in the right hands (at the right time) are valuable financial assets.

InterDigital’s stock had been up 73% since July 18, a period which saw a better than a 15% across the board market correction. As of this morning InterDigital (IDCC) is stil up an astonishing 57.5% year-to-date.

After bidding $4 billion for Nortel Networks wireless patents and losing to a group let by Apple and Microsoft, Google has purchased more than 1,000 patents from IBM. Most of the patents, I understand, have little to do with Google’s primary businesses. Google continues to be in discussions with InterDigital. Now, apparently Samsung, Apple and others are interested in ID’s portfolio or, possibly, the entire company. This has bid the stock price up considerably.

TechCrunch wrote on August 4 that Google, late to the patent game, is in a tight corner and may be an unwilling buyer. (4G patents are terrific, but wouldn’t Google benefit from acquiring other, somewhat less expensive but strategic patents that read on Microsoft, Apple and others’ products? The IBM purchase were likely castoffs from its vast portfolio. High-performing IBM does not currently appear to need the cash but may be more motivated by Android/Linux success.)

Personalized Media Communications, for example, has 59 self-generated patents than read on many mobile and other display devices. It already has settled suits with Motorola Mobility and Cisco, and a number of patents have successfully survived re-exam. PMC is not the biggest name in technology, but it may have the strategic assets some businesses need to compete on the IP front. (Brody Berman Associates has advised PMC about its portfolio.)

Assuming a 5 percent unit compound annual growth rate and a 10 percent discount rate, the InterDigital portfolio, believes InvestorsHub, could be worth between $3 billion and $10 billion to Apple.

* * *

Icahn Picks Bone with Motorola Management in 13D Filing

Lately significant investors who not ordinarily care about patents or IP strategy have become increasingly vocal about them. This is especially true of investors in companies that operate in the mobility field.

Activist investors are not new. For decades they have been pressuring senior managements about how to best use tangible assets, like real estate and cash. Now, however, the have become more vocal about deploying valuable intangibles, like patents.

Witness billionaire investor Carl Icahn, the biggest owner of Motorola Mobility Holdings (MMI) shares. Icahn recently stated in an amendment to his 13D SEC disclosure that he believes that Mobility should generate more value from its portfolio of some 17,000 patents, especially in wake of the Nortel sale.

“The Reporting Persons believe that the Issuer’s patent portfolio, which is substantially larger than Nortel Networks’ and includes numerous patents concerning 4G technologies, has significant value. In addition, there may be multiple ways to realize such value given the current heightened market demand for intellectual property in the mobile telecommunications industry.”

Over a two-day period ending July 21 Mobility’s share price shot up 12.4% to $25.19. It was as high as $27.68 after the Icahn comments, marking an approximately 23% move.

In a formal response, Motorola management defended itself vaguely saying “Motorola Mobility’s Board of Directors and management team continuously reviews the Company’s strategic direction and opportunities that it believes are in the best interests of the Company and all of its stockholders.”

* * *

In fairness to Mobility’s management, monetizing a complex IP portfolio is not as simple as calling for an auction and recording bids. Also, it is not merely a numbers game: “My 4G portfolio is bigger than yours.”

Still, former TWA, Marvel, and Clorox investor Icahn is well-aware, entrenched value is dangerous to shareholders and wasteful to all. (Full disclosure: an Icahn-led group retained my firm Brody Berman Associates, to conduct investor relations for Marvel Entertainment after its bankruptcy filing.) He is also aware of the power of perception and supply and demand.

The high cost of R&D and freedom to operate are motivating the current market. So is the pain of litigation. Companies humbled by patents they do not own are a healthy sign. Without significant damage awards and the occasional injunction this would unlikely be the case. Despite what some economists might think, recognizing the value of invention rights is a plus for innovation, business and even consumers.

*     *     *

Eventually the mobility patent speculation will come back down to earth, as will the recent panic selling in the broad market. Remaining will be the machinery for intensely competitive (and sometimes collaborative) patent acquisitions that has been set in motion. Companies holding the right assets are enjoying the ride.

Image sources: ipfrontline.com, endgaget.com, pulse2.com 


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