Tag Archives: patent transactions
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IP Dealmakers’ event Nov. 17-18 will focus on new opportunities; IP CloseUp readers can save $200

IP Dealmakers Forum is one of the more anticipated IP events of the year, especially for those engaged in patent licensing, sales, and M&A transactions. It also of signficant interest to investors. 

This year‘s event will feature a new track, Dealmaker Deep Dives, a shorter, more targeted discussions with experts taking an in-depth perspective on a specific set of issues. Each session includes extended time at the end for Q&A so the audience can really take advantage of the speakers’ expertise.

IP CloseUp readers go here for a promo code that provides a $200 discount.

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Seizing Opportunities

“With the doom and gloom over patent licensing, the last couple of years we wanted to make sure the event was addressing the many new opportunities in the market,” said Forum director Wendy Chou, “In conversations with our board of advisers, past attendees and current IP holders, we were able to identify transaction areas that are being overlooked.”

Session titles include:

       – Seizing Opportunities to Invest in China’s Developing IP Market

       – Defining the IP Landscape in IoT: Strategy, Standards & Licensing

      – Trade Secrets — What IP Investors Need to Know

There also will be a panel on “efficient infringement,” a timely topic that grew out of attendee conversations during Q&A last year. The session is called:

Building a Better IP Market: Efficient Transactions vs. Efficient Infringement

  • A look at past attempts and business models
  • What does an efficient IP market look like?
  • Identifying challenges to progress

In terms of format, IP Dealmakers Forum (IPDF) has moved from all panel discussions to a mix of panels with patent holders, deal experts and investors taking an in-depth perspective. In 2016, as in past years, there is a strong lineup of speakers with a diverse mix of senior executives representing corporations, licensing companies, public and private market investors, law firms and other strategic advisors.

One-to-Ones

Face-to-face meetings continue to be a highly utilized aspect of the event, where attendees can schedule 30 minute sessions with one or more other attendees at any time during the event. A total of more than 425 meetings were scheduled over the past two IPDF, and the producers expect an even better response in 2016.

The IP Dealmakers Forum is organized by The IP Investment Institute, LLC and its partners Wendy Chou and Eric Salvarezza.

For the full IPDF agenda, go here.

To register, go here. There are still some remaining seats.

IP Marketplace

The IP Dealmakers Forum explores the challenges and opportunities in the changing IP marketplace. Lack of IP transaction data, information, and transparency pose serious challenges to market efficiency. However, they can create opportunities for investors who know how to leverage news, manage risks and connect with the right players.

IPDF attracts senior IP market participants from the finance, legal and business communities.

Image source: ipdealmakersforum.com

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IP Dealmakers Forum will host 200+ patent monetization bigs in NY

The second annual IP Dealmakers Forum, December 7 – 8, will bring together leaders from the finance, legal and business communities to discuss the issues affecting patent licensing, sales and value, and to facilitate transactions.

New this year is a separate workshop for institutional investors that focuses on understanding IP as an asset class. This invitation-only, closed-door workshop will address the characteristics, market size and scope of patents as business assets, discuss practical investment issues, and examine the current investment universe. For additional information, go to here.

Luncheon Keynote

This year’s luncheon keynote is Edward Jung, co-founder and Chief Technology Officer of Intellectual Ventures, which holds more than 70,000 patents.  After leaving Microsoft where he was Chief Architect, Jung founded IV in 2002. As CTO, Jung sets strategic technology direction and new business models for the company. He holds more than 750 patents worldwide with has an additional 1,000 pending in the areas of biomedicine, computing, networking, energy, and material sciences.

The keynote topic is Driving Deals Through the Patent Storm”ip-dealmakers-logo-2015

Other speakers, at the New York event which will be held at the Apella event center overlooking the East River, include chief or senior executives from leading IP holders, both NPEs (non-practicing entities) and operating companies, institutional investors, financial institutions and PIPCOs (public IP licensing companies), including

France Brevets, Techquity, EverEdge IP, Finjan, Royal Philips, Gerchen Keller Capital, Fortress, IP Bridge, Northwater Capital, Wood Creek Capital, Allied Minds, WiLAN, American Express, nXn Partners, Bridgestone Americas, Swiss Alpha, Freescale Semiconductor, Ericsson and Marathon Patent Group.

For this year’s IPDF agenda and speakers, go here.

IP CloseUp readers can still save $200 on Forum registration by using promo code “IPCloseUp_Special”.  A special landing page has been created for IP CloseUp reader registration: http://www.ipdealmakersforum.com/ipcloseup/

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Actionable Insights 

“The program is dedicated to providing attendees with actionable insights from successful dealmakers,” says Wendy Chou, co-founder and producer of IP Dealmakers Forum. Session topics include:

  • Boom or Bust: The Public IP Market One Year Later
  • All About Patent Quality – How to Invest in Powerful Patents
  • New IP Businesses, Investing for Innovation & Growth
  • The Evolution of IP Litigation Funding & Insurance Markets
  • 2016 Presidential Election Perspectives on Patents
  • How IP Drives Corporate Reinvention, M&A and Investments

Last year’s inaugural event connected diverse intellectual property monetization experts with public and private market investors, and was attended by approximately 200 investors, IP executives, and advisors. Due to popular demand, expanded space will be provided in 2015 for private one-on-one meetings.

Changing Times

“These are changing times,” said Ashley Keller, co-founder of Gerchen Keller Capital, and a scheduled speaker at this year’s Forum. “As the market shifts, understanding the increased importance of due diligence expertise, the changing perceptions of risk and valuation, and the sources and expectations of those with investment capital, is a prerequisite for anyone who intends to succeed in this arena.”

Image source: IP Dealmakers Forum 

The future of IP will be examined at the 10th IP Summit in Berlin

Uncertainty is putting pressure on patents, trademarks and copyrights. All are facing more scrutiny and a challenging future.  

Scrutinizing these fundamental issues on December 3rd and 4th in Berlin will be more than 600 IP holders, executives and investors attending the Intellectual Property Summit. Organized by Premier Cercle, it will be the tenth edition of the popular conference, held previously in Paris and Brussels.

This year’s Summit will attempt to deconstruct global IP trends and explore the future of IP rights – patents, trademarks, copyrights and trade secrets – as business assets. There will be 100 speakers from Europe, North America and Asia.

Plenary topics include:

  • What is the future of IP in the 21st century?
  • Is your nation ready for open innovation?
  • More IP rights or better enforcement?
  • The future of injunctive relief in Europe?

On Friday, December 4 at 2:20 (14.20), your intrepid IP CloseUp editor, BB, will moderate a panel on Patent Quality – Always Challenging; Never Simple. Panelists will include:

>Valencia Martin Wallace  Deputy Commissioner for Patent Quality  USPTO / US

>Daniel G. Papst    Managing Director  PAPST LICENSING Gmbh & Co. KG / DEU

> Christian Vejgaard   European Patent Attorney  ERICSSON / SWD 

Chair : Bruce Berman Principal  BRODY BERMAN ASSOCIATES / US  

11A Patent Quality – Always Challenging; Never Simple
Defining patent quality
– What is a good patent?
– Distinguishing validity from invention quality and value
– Establishing more reliable patents
– The impact of poor quality

The patent quality session will be followed by a session on patent transactions on which IBM, Samsung, Chipworks and Unified Patents and are scheduled to participate.

This year’s IP summit partners include IP CloseUp and Brody Berman Associates. 

For the full agenda go here.

To register go here.

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Image source: premier cercle; i-mop.biz

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Does Google’s patent buying experiment put it in competition w/ Intellectual Ventures and RPX?

On Friday May 8 Google will launch a two week experiment in acquiring patents from mainly small businesses and inventors.

Directly, or indirectly, the Patent Purchase Promotion (PPP) will be competing with NPEs and other operating companies for patent ownership.

The announcement raises questions: Is Google taking a page the play book written by IV and RPX (NASAQ: RPXC)? Is it aggregating patents for its own defensive use, the good of all operating businesses, or for potential investors/partners?

Has the company conceded that because it could not beat the patent-buying trolls it needs to kind of “join them,” or at least, compete with them?

It’s difficult to say what Google (NASDAQ: GOOG) is trying to accomplish. By its own admission, there is a lot of fine print in its agreement. The company’s LoT (License on Transfer) agreement, originally launched about 18 months ago, has generated mixed results, and PPP may be merely another arrow in Google’s IP quiver.

The company may be relying on inexperienced sellers to mis-price their assets, as did IV early in its buying cycle. No doubt some will ask for far too much. But, as IV learned ten years ago, there is no shortage of desperate sellers who will accept little or nothing in a down market for patents that could be quite valuable. With the market depressed and IV not buying the way it used to, the timing could be good for PPP to step 303170893_idu9a-m-300x199in. If Google can secured patents at a good price before NPEs do, it can improve its and other businesses’ defense against patent assertion.

Ars Technica wrote:

“As a way to combat the pernicious effects of patent trolls, Google announced Monday that it would be buying up patents from any inventor or entrepreneur who wants to sell.”

Google’s Patent Purchase Promotion is a radical change for a company that traditionally has been suspicious of patent buyers and sellers. For FAQs go here. The purchase program ends May 22. Decisions will be made no later than July 22.

Beginning on May 8 a copy of the actual PPP agreement can be found here.

Maturing IP Strategy

Google appears to be growing as an IP holder and user, and it is not surprising that it would want to take advantage of its formidable brand and cash position to strategically acquire patents that may be harmful to it and others at below market prices.

Whether or not Google will use acquired patents for defensive purposes only is unclear. (The company reserves the right to use the patents it acquires however it sees fit.)

Richard Lloyd wrote in a thoughtful piece about Google’s possible motivation in the IAM blog last week:

“The more you think about it,” he said, “the more it raises questions around why a patent owner with a high-quality asset who understands the IP market would consider this option, even under current tough conditions.

“Instead, the likelihood is that if Google does come across something interesting it will be offered by a party that may not fully appreciate what it owns and needs some money quickly; and that probably means a smaller, cash-strapped business with little access to specialist IP knowledge.”

A page torn from IV’s playbook?

This sounds very much like IV’s M.O. back eight or ten years ago: Gobble up decent (if not good) patents for others to pay access to or for the company to enforce, if necessary. It will certainly expand Google’s rapidly growing patent portfolio and provide access to IP rights out of its core search technology.

PPP may be nothing more than getting a leg up on the competition, whether they be opcos or NPEs. We will have to wait and see.

Image source: allthingsd.com; apexbeats.com

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Mobile & Other Patents will Play a Role in Pantech Bankruptcy Sale

Expect a transaction to yield some clues about which smart phone-related patents are interesting, what they are worth and to whom.

Struggling South Korean handset maker, Pantech, announced this week that it is up for sale. Pantech’s financial troubles could be other technology companies’ gains, especially if they are interested in cracking the lucrative Korean smart phone market.

A Pantech sale for all or parts of the company also will test the volatile market for US cell phone patents many businesses and NPEs still covet.

After filing the equivalent to Chapter 11 bankruptcy  earlier this year patent-rich Pantech, which sells in the US through AT&T, Verizon and others, announced recently that it was for sale.

Envision IP published a report yesterday that provides a snapshot of Pantech’s patent portfolio. While the size of the portfolio is only a fraction of Samsung’s (60,000 total US patents) and LG’s (30,000), the patents it contains, a number covering signal transmission, appear to be similarly valid based on citation analysis.

Pantech currently owns 291 US patents, with 269 utility patents and 22 design patents. Pantech also owns 2,654 foreign patents, with the 2,239 of these being Korean patents, and 211 European patents.

“In terms of reverse and forward citations, the portfolios of all three companies are relatively comparable,” said Maulin Shah of Envision IP. “The citation analysis indicates that Pantech’s patents, on average, are technically as strong as Samsung’s patents from a validity standpoint, based strictly on the reverse citation count.  With regards to how

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innovative Pantech’s patents are to the mobile device sector, the patents appear slightly less fundamental than both LG and Samsung’s patents, based strictly on the forward citation count.”

Korean network carrier SK Telecom has been considered the front-runner for the bid. Other Korean conglomerates such as Samsung, LG and Hyundai Motor Group have also been mentioned as potential buyers. (In 2013 Samsung acquired a 10% stake in the struggling company.)

No US or European buyers have been named.

“The possibility of a foreign company nabbing Pantech is also very real,” reports CNET. “Earlier in April, an Indian consumer electronics giant, Micromax, had considered buying a sizeable stake in Pantech. Chinese handset makers Huawei, Lenovo and Xiaomi could all benefit from acquiring Pantech, forging entry into the nigh-impenetrable Korean handset market.”

Image source: pantechusa.com; envisionip.com

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LES Hot Topic: “Public IP Cos, Their Impact and Business Models”

Licensing Executives Society session at annual meeting in SF will also look at PIPCOs’ profile, performance and future.

This year’s LES annual meeting in San Francisco, it’s 50th, will provide many timely sessions, including one on the future of PIPCOs – public IP (licensing) companies.

Moderated by your dedicated IP CloseUp reporter, Bruce Berman, it features the CEOs of two prominent public IP companies, Joe Beyers, or Inventergy (INVT) and Doug Croxall of Marathon Patent Group (MARA). Additionally, Mark Argento, Senior Equity Analyst at Lake Street Capital, with round out the panel with a discussion of what Wall Street expects of PIPCOs and what they will need to do to succeed.

Readers of IP CloseUp are still eligible for a $100 discount if they use the IP CloseUp discount code: IPCU14 when registering here.

Alternatively they can click on the LES box on the right of the IPCU home page.

Please stop buy if you are there and say hello. We enjoy meeting our readers and those interested in the future of IP, especially those ROI-focused patent holders, both NPEs and operating companies.

See below for a preview.

Workshop 6: Hot Topic – “Public IP Companies – Industry Impact and Business Models”

“Public IP Companies (PIPCOs) have doubled in number since 2012 and some have grown in size. They are causing many patent holders to rethink monetization strategy and infringers to develop new defensive strategies. Most of the PIPCOS are small companies that rely on quality patents to generate revenue and value. This workshop will focus on how a range of publicly held IP licensors, some of which are operating companies, employ innovative business models to in order to generate significant returns on their patents.

“This session will define PIPCOs, discuss how they impact IP rights, especially patents, and identify what they mean for innovation in the years ahead. The session also will address what the future might hold for PIPCOs, especially in light of the America Invents Act and the introduction of Inter Partes Reviews by the UPSPTO.

“The panel will consist of CEOs from two important PIPCOs: Doug Croxall from Marathon Patent Group (NASDAQ: MARA), who has worked closely with Erich Spangenberg and IPNav, and Joe Beyers of Inventergy (NASDAQ: INVT), former Vice President of IP Licensing at Hewlett-Packard and Chairman at Allied Security Trust.

Also joining will be Mark Argento, Senior Research Analyst and an IP specialist at Lake Street Capital. Bruce Berman, CEO of Brody Berman Associates and author of “The Intangible Investor” will moderate. The presentations and discussion will include what their access to the capital markets means to licensing, as well as the uneven PIPCO performance to date. Other topics will include the investing community’s understanding of licensing companies and their impact on the IP eco-system.”

Moderators:
Bruce Berman, CEO, Brody Berman

Speakers:
Mark Argento, Senior Research Analyst, Lake Street Capital Markets
Joe Beyers, Chairman and CEO, Inventergy
Doug Croxall, CEO, Marathon Patent Group

 

Image source: lesusacanada.org

The Microsoft logo is seen at their offices in Bucharest

Bold IP Moves Enable Microsoft to Lead in Patent Performance

The inability to dominate in its product lines has not prevented Microsoft from crafting a purposeful IP strategy that has generated billions in patent licensing and enables it to participate other technology businesses’ success.

Microsoft is not you typical technology company. The software business has taken more heat over the past 20 years for what it has not achieved than practically anyone.

While missteps in product development and market strategy have slowed Microsoft’s once meteoric growth and hampered its shares, the time and research spent developing new ideas and protecting them are not without a silver lining.

Microsoft has emerged as a study in smart IP management, and what an evolved business can achieve when it understands the power of selected IP rights and how to deploy it. Not only has MSFT (NASDQ), a laggard with just 300 patents and applications a decade ago, established a formidable portfolio of more than 40,000 patents and a successful licensing program generating about $2 billion annually and likely to generate more, it has displayed a marked ability to move swiftly and deploy its huge cash position when the IP opportunity arises.

“Microsoft: Bold Moves and Intriguing Results,”  will appear as the next Intangible Investor in the January IAM Magazine, out this week. The piece looks at how Microsoft, which has failed to dominate in games (Xbox), operating systems (Windows) or search (Bing) has managed to carve out a formidable niche in IP asset management. A few of the more notable Microsoft IP moves are listed below.

Notable Microsoft IP deals, disputes and investments:

– Purchase/License:
From AOL 925 patents and applications, plus 300 licenses for $1.056M (2012)

– Sale:
To Facebook, 650 patents from the AOL deal for $550M (2012)

– License:
For Adaptix patents from Acacia with Samsung (2012)

– License:
74 smartphone patents from Acacia (2010)

021109_2115_PercentofPa1– License:
To majority of Android smartphone manufacturers for up to $10 per unit (2007-2013)

– Acquisition/License:
From Nokia for $7.2B for its mobile phone and services business. Includes, all of some 30,000 Nokia patents for $2.17B over ten years and licensing income from some Nokia licensees (2013)

– Purchase:
Paid approximately $800M for its participation in Rockstar Consortium’s 6,000
patent Nortel portfolio: with Apple, RIM, Sony, Ericsson and EMC. (2011.)

– Suit Filed re: Above:
Rockstar Consortium US LP and Netstar Technologies LLC vs. Google, 13-893. (November)

– MS has been involved in five of the ten largest patent damages suits (see PwC Patent Litigation Study, figure 2c). It has prevailed in three, settled one, and lost at the United States Supreme Court in another.

– Successful Defense:
Eolas (U. of California) v. MSFT; in a decade-long quest for $500 plus in patent damages.

– Successful Defense:
Alcatel-Lucent v. MSFT, reversed $1.53 billion verdict on appeal (2008)

– Unsuccessful Defense:
i4i v. MSFT, $290 loss at Supreme Court (2011)

– Successful Suit:
Won $14.5M in a case against Motorola Mobility/Google for violating FRAND (2013)

– Plaintiff (settled):
Against Barnes & Noble, Foxconn, and Inventec for patent infringement over the retailer’s
Android-based Nook e-readers and tablets manufactured by Foxconn and Inventec (2010)

– Investment:
In 2011, Microsoft announced that it would invest $300M in B&N’s Nook business for a 17.6
percent stake, which ended their patent litigation

– Investment:
Approximately $1B into Intellectual Ventures fund giving it access to IV’s patents (2002)

– Investment:
1.6% of Facebook (2009)

Transactions compiled by Brody Berman Associates

Image source: reuters.com; patentlyo.com

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Rockstar’s Deal with Spherix Could be a Game-Changer for IP Investors

The emerging public IP company space took an an unexpectedly positive turn last week.  

Rockstar Consortium, with a portfolio of more than 4,000 communications patents, has struck a deal with a tiny public patent monetization company, Spherix (SPEX), that is certain to increase the already growing interest in public IP-centric companies, or PIPCOs. 

Spherix, with a market cap of only $5M, said in an announcement that it has entered into a deal with Rockstar, one of the world’s leading patent holders, to acquire a suite of patents. The announcement did not specify the patents being acquired, or the number, nor did it disclose the terms of the transaction. The press release did state that Rockstar has agreed to become a shareholder in Spherix, and that Spherix intends to bring its first enforcement action on the Rockstar portfolio within 30-60 days. 

Rockstar has said that it has been actively licensing its portfolio, but, to date, has not filed any suits. It could be using Spherix as a privateer, or third-party, to do its nasty bidding. However, a rockstar-consortium-247x180successful patent monetization executive close to IP CloseUp told me that would be unlikely, “because without shell companies obscuring ownership, as some patent holders have been known to do, the source of the IP rights in this case is fairly clear.” Rockstar may be merely testing the waters to see how public ownership will affect its portfolio value and licensing potential, and if access to the capital markets can make a difference.

IP CloseUp readers will recall that Rockstar bought most of the patent portfolio from bankrupt Canadian telecom company Nortel for $4.5 billion in 2011. The transaction constitutes what is probably the most expensive patent acquisition ever. The genesis of it was thought to be a collective move against technology rival and Android champion Google. Rockstar is owned by Apple, Microsoft, Ericsson, Blackberry, Sony and EMC.

It’s important to remember that Apple, with a $2.6 billion investment, owns some 58% of Rockstar and, presumably, had some input in the Spherix deal. There may be something on Apple’s agenda that makes the Spherix deal particularly attractive. Time will tell us if this is in fact the case. A few weeks ago in IP CloseUp I wrote about an IEEE Spectrum story that showed how Apple was involved in acquiring a Mitisubishi-originated patent that was eventually turned over to an NPE, presumably more for competitive leverage than cash.

The IAM blog wrote that “On the face of it, then, what we have here is a classic privateering arrangement; but it is possible there is more to it than that. As a Spherix shareholder it is not only assertions of its own patents that Rockstar will benefit from, but also of other portfolios Spherix owns and may acquire in the future.” 

IAM also reported that Anthony Hayes is expected to become CEO next month. Previously a partner at law firm Nelson Mullins Riley & Scarborough, Hayes “was one of the people behind JaNSOME IP Management, a New York-based IP advisory and monetization outfit launching a $30 fund that would invest ‘in global opportunities in the patent market’. Whether his move to Spherix is fund-related, or whether Hayes has cut his links with JaNSOME is not clear.”

60710_spherixSpherix announced a restructuring in December 2012 when it effectively became an IP monetization company. In Seeking Alpha, Adam Gill reports that “[Spherix] had no patents to speak of before this Rockstar deal, but its wholly owned subsidiary Nuta is about to merge with North-South Holdings, which brings $2 million in cash and a portfolio of 222 patents acquired from Harris Corporation (HRS), another company known to have a robust patent portfolio.” Details on that deal can be found here.

*     *     *

It will be interesting to see if other large patent holders, including operating companies, will seek to test the patent licensing market the via the public equity one.

There is nothing to stop a public company that owns IP rights from taking an equity position in another one, putting it in a better position to monetize its IP rights. In fact, this may be a more efficient and financially rewarding for shareholders.

If I am not mistaken, a 5% or greater stake in a public company is subject to a 13D filing with the S.E.C., disclosing the owner. It could be Rockstar directly or a representative, or Rockstar could own its stake through several entities. We’ll have to wait and see how this plays out.

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Both Spherix (SPEX) and Global Options Group (GLOI), which began trading on Monday after announcing a deal with the group that holds the Walker Digital patents, have been added to the IP CloseUp 30

Illustration sources: thecarecompany.com; techweek.co.uk; sepherix.com 

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Selling Prices of NPE-Owned Assets Lag Despite High Quality

Some buyers prefer to pay a premium for a large but still vague patent portfolio than for a handful of proven rights.

“So, sue me,” seems to be the attitude of operating companies when confronted with SME or NPE-held patents that may read on their products and command high potential damages awards or settlements.

Strategic buyers are currently willing to pay a significant premium to market to operating companies for large portfolios (e.g. Google-Motorola) at a market-acceptable price-per-patent. A few extraordinary patents owned by NPEs appear to hold less interest, even if they are more valuable or have been upheld in court. The current acceptable price per patent seems to be under $1 million.

While cost should never trump quality for buyers of significant portfolios, buyers are showing that size and reputation for innovation does matter when it comes to what some companies are willing to pay. Also, no one wants to be accused of overpaying of having to play catch-up because of R&D miscalculations or legal oversights. For cash-rich and increasingly IP-savvy companies like Google and Apple, it is possible to become patent-competitive quickly, unlike Microsoft, which took a decade or more.

imgresThe effect is that many successful IT businesses are acquiring larger portfolios or families when they may currently require only a handful of patents for leverage. A few are able to slice and dice and resell or license parts from the portfolio to mitigate the acquisition cost and facilitate ROI.

A good example is Microsoft’s $1.1 billion acquisition of 925 AOL patents in April. A large part of that portfolio was re-sold to Facebook for $550 million leaving MS with key licenses and 275 patents. Microsoft paid $1.3 million per patent.

Acacia Technologies purchased ADAPTIX from private equity firm Baker Capital for $160 million in January for its 230 patents, some focusing on lucrative 4G inventions. The patents (acquired for approximately $695K each) were then licensed both to Microsoft and Samsung. The licenses may have enabled the purchase.

“Large patent holders have more liberty to generate sales than NPEs,” an IP industry deal-maker told IP CloseUp.

“Most NPEs buy small, focused and typically overlooked litigation-quality patents that need to be enforced to extract full value. For operating businesses, asset and seller reputation helps to command a higher purchase price, but what matters more than who is selling is the quality of the patents, focused evidence of use [what the patents, in fact, read on] and perceived pricing fairness. Currently, few large buyers consider enforcement an option.”

PatentFreedom’s database depicts the largest NPE holders. Of them InterDigital has sold for $375 million to Intel, or $220K per patent. Surprisingly few of even the largest NPEs have sold to an operating company. NPEs typically need to enforce patents to realize a significant return on them.

Defensive aggregator RPX bought NPE Digitude’s portfolio of what were AMD patents for $48 million. Altitude Capital Partners was a Digitude investor.

Jiaqing “Jack” Lu, PhD, CFA is the Chief Economist and a Senior Director for IP Market Advisory Practice (IPMAP) at the Applied Economics Consulting Group, Inc. In his article, “There is No Patent Bubble, Nor NPE Mania,” he notes that “some observers noticed that both the Nortel-Rockstar and Motorola-Google deals were concluded on a $750K per patent basis. Therefore, as the story goes, market price per patent was about $750K per patent.”

Dr. Liu goes on to show that “[The] average prices of the deals with non-NPE parties are two to three times of the prices of those with at least one party being a NPE. Especially, NPE buyers seem to pay average prices that are closer to what non-NPEs are paying, while NPE sellers are likely to receive the lowest prices among all market players.”

*     *     *

Operating companies are buying bigger portfolios at higher cost for multiple reasons, not just direct income.  High portfolio cost is less troubling to them than the perceived proper average cost per patent, as if buying in bulk can explain efficiency. Keeping the right patents out of the hands of the wrong holders (competitors or NPEs) also is meaningful to these buyers.

Strategic buyers are making it clear that it in some cases overpaying for a portfolio of assets or family of patents, including patents they are not likely to need or have little market value, is not always a bad thing if it facilitates their needs. It is somewhat important for them to obtain patents they need or may require (or that others do) without looking like they are desperate or are mitigating R&D or legal oversights.

Typically, less than 5% of an IT patent portfolio has any value. The percentage in an acquisition, I understand, is only slightly higher.

Seldom do we see a large company pay say $100 million or more for six extraordinary NPE-held patents. Even if they are worth ten times that, and even if they can be used against competitors. Their value will need to be proven repeatedly, a task most operating companies are unwilling, or unable, to perform, despite the brand presence they may add. .

One likely impediment for operating companies in acquiring NPE-owned patents is the difficultly of securing board-level buy-in, especially if enforcement is not an option. Another is the perception that litigation-tested patents are unseemly. Some of these businesses believe it is easier to buy a whole company (Motorola) than the 100 or so assets they believe they require for leverage.

It is only a matter of time when a financial buyer (i.e. hedge fund. private equity firm) buys an expensive patent portfolio, or IP-rich IT business, to keep it out of the hands of a party that needs the rights but does not act swiftly.

With some repackaging an investor with sufficient capital and vision can re-sell the portfolio, or company, to the right operating business for a hefty profit. It requires both smarts and guts. The investor would need to understand the assets thoroughly, as well as the demand. It also would need to be willing to enforce them, if necessary.

Illustration source: lexisnexis.com

Canadian Boy

O Canada, Ontario Rocks When it Comes to Patent Holders, Advisors

Ottawa, Toronto and Waterloo together comprise a leading center for valuable patents and IP expertise.

To most people Ontario conjures an image of ice hockey and maple leaves, not intangible assets. But the province bordering the U.S. on the north is among the most abundant areas globally for invention rights, strategists and investors.

Among the notable patent businesses in Ontario are UBM Tech Insights outside of Ottawa, an information services and consulting firm for technology companies that wish to leverage their IP assets. Chipworks, also in the Ottawa area, specializes in reverse engineering products like computer chips to identify infringement and difficult to identify prior art.

Canadian BoyAnother Ottawa company, MOSAID Technologies Inc.,  is a leading intellectual property management company. MOSAID, with 5,400 patents, monetizes IP in the areas of semiconductors and communications, and develops semiconductor memory technology. MOSAID was taken private in 2011 for $590 million by Sterling Partners, a U.S. private equity firm. Like UBM, and Chipworks, MOSAID has offices worldwide.

WiLAN (NASD: WILN) is an Ottawa-based, publicly traded IP licensing business. In 2011, it failed in an attempt at a hostile bid to acquire MOSAID. Both MOSAID and WiLAN (3,000 plus patents) are built on a tradition of R&D, and sell or have sold products, file patent applications, and acquire them from others.

Waterloo-based Research in Motion which makes the Blackberry, once the leading smart phone in the world.  Research in Motion (NASD: RIMM), has an extraordinary portfolio of some 3,600 patents said to be worth over a billion dollars.

Nortel, based in outside of Toronto in the western part of the province, in Mississauga, Ontario, filed for bankruptcy protection in 2009.  In 2011 it sold 6,000 of its patents for $4.5 billion to the Rockstar Consortium, comprised of Apple, Microsoft, Research in Motion, Ericsson, EMC and Sony.

Rockstar, located in Ottawa, is run by John Veschi, former Chief IP Officer of Nortel, and is actively licensing its lucrative portfolio. Recently Apple bought 1,024 patents from it.

In a case that made international headlines Toronto-based i4i, Inc., a leader in the design and development of collaborative, XML-based content solutions and technologies, won a patent infringement decision against Microsoft for damages in excess of $300 million. It was appealed to the U.S. Supreme Court, which rarely hears appeals of patent disputes, and affirmed 8 to 0.

Also Toronto-based, Northwater Capital (Northwater Patent Funding or NW IP Fund), helped to finance the i4i dispute against Microsoft. Northwater is a private investment company with offices in Toronto and Chicago. Northwater invests proprietary and client capital in intellectual property based investments, green energy endeavors and proprietary trading.

Canadians active in U.S. IP activities include Terry Dalzell (Quinn Pacific), Kent Richardson (former head of IP for Rambus), Kevin Rivette, formerly of IBM and Boston Consulting and Boyd Lemna, Senior Vice President of Licensing at Personalized Media Communications. Peter Misek at Jefferies & Company (and prior to that JP Morgan), one of the leading equity analysts in IT and storage, is from Toronto. (Apologies to the many people not mentioned.)

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What’s up with Canada? At one time the cheap Canadian dollar was attractive to U.S. businesses that required expertise-intensive reverse engineering, such as patent defendants and some plaintiffs. With the Canadian and U.S. dollars now worth about the same, there is still good reason to rely on Canadian IP talent.

Canadians appear to be less conflicted than their U.S. neighbors about monetizing intangibles, their own and others’, and they have many with the right combination of technical, legal and business experience to do so — a hat trick if there every was one.

Illustration source: youthsareawesome.com

Kodak Bankruptcy Funding is Contingent on Patent Sale

Report says that funding will hinge on a $500 million deal.

A story from Reuters that appears today in The NY Times online and was originally reported by the Wall Street Journal states that Kodak (EKDKQ: OTC) will receive up to $793 million in loans from bondholders to emerge from bankruptcy if it can sell its much-discussed patents for at least $500 million.

Kodak has been trying to sell its patent portfolio for over a year and held an auction in September that generated tepid response.

WSJ reported that Kodak “remains in talks for a patent sale with potential buyers including Apple Inc and Google Inc.”

After an estimated initial range of $2.4 billion to $2.6 billion dollars, and weak patent auction bidding reported at about $150 million to $250 million, it would be hard to believe that Kodak and its advisers did not already have a buyer or buyers in place for the 1,100 patent portfolio, which over the years generated much revenue but is said to be severely encumbered.

A sale at $500 million would suggest the patents on average are worth $550,000 each.

Illustration sources: printerinkcartridgesblog.com; thedroidguy.com

“Patent Transactions in Transition” will be Addressed in Toronto

Evolution of IP Deals from Simple Licenses to Complex Portfolio Sales and M&A will be a Focus at LES Conference

The rapid evolution of patent transactions will be the focus of a presentation and discussion at the LES North America meeting in Toronto, Canada.

Patents have fared best among IP as financial assets, and today can be leveraged in different ways. Invention rights played a critical role in Google’s acquisition of Motorola ($12.5 billion, 17,000 patents, 6,000 applications) and in Nortel’s bankruptcy sale to the Rockstar Consortium for $4.5 billion. Buyers included Apple, Microsoft, Ericsson, RIM, Sony and EMC.

Patents have certainly played a part in the smart phone wars, with some of the largest damages awards granted in this area. (See Apple v. Samsung.)

The evolving role of patent transactions, or “Patent Transactions in Transition,” will be the focus of a workshop moderated by IP CloseUp’s Bruce Berman (of Brody Berman Associates)  at the Licensing Executives Society annual meeting on Tuesday, October 16 at 2:00. It’s session 3E. The LES meeting this year is being held at the Sheraton Centre Hotel, 123 Queen Street West.

Panelists will include Myron Kassaraba, partner, Pluritas, LLC, one of the leading patent transaction firms; Dan Henry, Senior Vice President, Business Development, WiLAN (NYSE:WILN), a publicly held IP licensing business; and Sanjiv Samant, Managing Director, Technology, for Canaccord Genuity (TSX:CF, LSE:CF), a global full-service investment bank.

This year’s LES attendees are invited to attend what should prove to be a timely session. Lively panel and audience q&a is expected.

Image source: tynax.com

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