Tag Archives: patent sales
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

GoogPatSales

Google’s patent buying program, an apparent success, is thinly reported

Better than one-in-four of the patents offered to Google for purchase as a result of its Patent Purchase Promotion in May were acquired by the search engine.

The only article we could find about IP buying experiment’s results appeared in IEEE Spectrum, which is published by a professional association of engineers. IP CloseUp has learned that IEEE Spectrum obtained the purchase data directly from Google. A Google search did not reveal other media coverage of the results.

The magazine article, “Google Tries to Keep Patents Out of the Hands of Trolls,” states that the search engine purchased 28% of the patents offered to it. This buy-rate seems high considering the poor quality of most patents being offered to most buyers. It is comparable to that of Intellectual Ventures in the early years (2003-2006) when it bought much of what it was shown, but typically at about $40,000 per patent.

“Google’s Patent Purchase Promotion,” reports IEEE Spectrum, “which the company says received ‘thousands’ of submissions during a three-week window [May 8 – May 27], may prompt similar experiments in keeping patents out of the hands of what it considers the bad guys of intellectual property.”

The experimental program was an attempt to intercept patents that individual inventors, operating companies, and others may have otherwise sold to organizations that don’t make products but rather use the patents to extract license fees from operating companies, which do… The program offered a chance for anybody to sell patents to Google “at a price set by the patent holder.”

“Google wound up buying 28 percent of the offered patents that it deemed relevant to its business, according to Kurt Brasch, the company’s senior product licensing manager,” reported the magazine.

GoogPatSales

The median price of the patents sold to Google, excluding those offered at US $1 billion or more, was $150,000, and the compant paid prices ranging from $3,000 to $250,000.

IP Watchdog and others are less certain about whether the program is designed to thwart trolls and enhance innovation, or to improve Google’s patent position.

The IEEE Spectrum article can be found here.

A summary of Google’s Patent Purchase Program can be found here.

 

Image source: IEEE Spectrum

 

 

patpkgssoldUntitled

Patent values are hit by uncertainty; operating co buying overtakes NPE

Three things are needed to succeed today in patent licensing: more capital, more patience and more good patents, which are in increasingly short supply. 

Uncertainty is the glue that binds weaker patents to cheaper ones.

Patent reliability is poorer than ever, in part because invalidating bad patents is now somewhat less arduous and costly. The courts are awarding fewer and lower damages awards, and defendants with time on their side and cash in their pockets, can play an even longer waiting game.

Increased uncertainty has encouraged more patent holders, mostly those operating companies that generate their inventions and rights internally, to consider purchases that they may not have previously. At “buyers’ market” prices, who can blame them? It will be interesting to see how uncertainty in the patent system will affect future R&D strategy and domestic patent filings.

With asking prices per asset trending down, and brokered patent sales lower, the percentage of packages sold is actually up significantly, as is opco buying.

The top buyers in 2015 Q1 according to Richardson Oliver Law Group, which tracks brokered patent transactions, were RPX, a Canadian numbered company, and Intellectual Ventures, for their Intellectual Investment Fund 3. These buyers accounted for 42% of all of the packages purchased in 2015 Q1 and RPX alone accounted for 28%. Other, much smaller buyers in Q1 include Apple and Philips.

patpkgssoldUntitled

Listings are Down; Sold Packages Up

ROL indicates that patent deal listings (patent and application packages) are down 20% from 4Q 2014 to 1Q 2015, but that packages sold are up 88%. In an article in IAM earlier this year by ROL (see The brokered patent market 2014,), it was shown that corporate buyers have overtaken NPEs in 2013 and 2014, comprising 46% for the market versus 38% for NPEs.

Asking prices for US-issued patents monitored have fallen from $577,000 in 2012 to $360,000 in 2014, a fall of 37.6%. ROL’s latest broker sales stats can be found here.

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“Uncertainty rules,” my latest Intangible Investor, the July IAM Magazine looks at why confusion over new patent hurdles and lower damages awards is creating an opportunity for some companies to buy patents at lower prices and settle disputes more favorably. Subscribers can get it here.

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Don’t expect to see patent uncertainty to wane anytime soon.  Many operating companies and at least some NPEs will be sad to see it go.

 

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Image source: Richardson Oliver Law Group

patentROT-1367253811579

Article Traces Rise of a Phone Patent over 11 Years and 4 Owners

From Mitsubishi to Apple, to an NPE and finally RPX, one IP asset, several objectives.

It’s a hard-knock life for some patents, so says an insightful article appearing in the current IEEE Spectrum that provides a behind-the-scenes look at the road traveled by a single smart phone patent as it was sold and resold, mostly to well-known holders. Spectrum is the magazine of Institute of Electrical and Electronics Engineers, the largest professional organization for the advancement of technology.

“The Troubled Life of Patent No. 6,456,841,” by veteran technology reporter Tam Harbert, traces the path of an invention by a Mitsubishi Electric Corp. engineer,  covering the alert sent to a cellphone user of incoming messages by displaying an icon on the screen. The U.S. patent was issued in September 2002, and for nine years, writes Harbert, led a very quiet life. In 2011, with the smartphone wars heating up, the patent became more interesting, and so did its ownership history.

In March 2011 Mitsubishi transfers the patent and 11 others to Apple. In August 2011 Apple turns over all 12 patents to Cliff Island, a company controlled by Digitude Innovations, which had slide_1previously acquired hundreds of chip-related patents, some from AMD.  Digitude was established around 2008 by Altitude Capital Partners, a successful patent investment and monetization firm. (ACP was at one time a Brody Berman Associates client.) 

In December 2011 Digitude sues 9 mobile phone and tablet companies for patent infringement, but not Apple. In May-June Digitude drops its suit and ITC complaint and sells the ‘841 patent and some 500 others to  RPX (NASDAQ: RPXC), a defensive patent aggregator for $46 million. RPX is in the business of deflecting patent litigation for its clients, mostly large technology companies. 

It would not be right for me to give away the entire story, which is summarized with good humor in a slide show which you must watch.

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Why did the ‘841 patent take this seemingly strange path?

Harbert is an excellent reporter with keen instincts and an open mind — exceedingly rare in media coverage of intellectual property.  I’ve served as a resource to her on stories in the past, and she asked if I could provide some perspective for this one, which you can read here.slide_2

Is it possible that the ‘841 patent could be on the move again? You never know who may have the greatest demand for a given IP asset at a particular time, and how best to maximize it.

From my perspective, Apple knew it had purchased something worthwhile. However, to deploy the asset most effectively it needed to transfer it to another, more flexible entity. Enter Cliff Island with its AMD chip patents and a greater ability to sue infringers and sell to them. For Apple it was likely less about the cash return the patent provided than the strategic advantage. The sale to RPX may have bought the consumer electronics giant some temporary patent peace that could not have otherwise been achieved.

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Expect to see more collaboration between one or more operating companies and NPEs in the future as patent monetization models continue to evolve and more businesses seek new ways of protecting their market share and generating revenue on their IP rights.

The unexpected turns taken by the “Icon” patent on its long road have provided uncharacteristic return. I wish that could be said about every patent.

 Illustration source: http://spectrum.ieee.org/ 

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

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.

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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 

Patent Portfolio Sale

Nortel Wireless Sale: Unprecedented

Interesting story today in TelecomTV by Peggy Albright about bankrupt Nortel’s disposition of IP assets.

“Even the process Nortel is going through to determine the disposition of its IP assets is unusual. Normally a company’s executive leadership has the ultimate authority over what to do with its IP. And normally a company would conduct its licensing negotiations with the utmost secrecy.

But in this case, Nortel does not have autonomy to make unilateral decisions and the process is being played out in the public domain through the courts. “Right now, Nortel’s advisers are going through their patents one by one to determine the portfolio’s value. That process should be completed this spring.”

It’s unprecedented for a wireless patent portfolio of this size (several thousand patents) and reputed quality to come to market. It will be interesting to see how much cash it generates for creditors.

Caught and Released

MOSAID Buys AST Patents

MOSAID a well-know Canadian NPE that owns approximately 2,000 semiconductor, communications and related patents disclosed on March 3 in a regulatory filing that it acquired patents from Allied Security Trust, the defensive patent aggregator. Trust members include H-P, Google, Cisco, Verizon and other large operating companies. See statement below.

“Subsequent to quarter end, MOSAID purchased a portfolio of Power Control and Memory Management patents from Allied Security Trust of New Jersey. The portfolio consists of five U.S. patents and foreign counterparts. MOSAID received full title to the portfolio for an undisclosed non- material amount, paid immediately. Licensing revenues are not subject to revenue sharing arrangements with the seller.”

MOSAID is based in Ottawa, Canada.


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