Tag Archives: patent value

Patent transactions are flat; U.S. asking prices firm at $250K per

The number of patent sales in the 4Q 2016 remained about the same, but the median asking price of sellers of U.S. patents was higher than in recent quarters.

According to data compiled by Richardson Oliver Law Group, a Silicon Valley firm that tracks patent transactions, five of the ten most active sellers were Asian companies, and the most active buyers were led by a variety of operating companies, defensive aggregators, and NPEs. In general, corporate buyers were more active than NPEs.

The median asking price of U.S. patents in the 4Q was $250K; all patents, $150K (see graph below).

As a trend, operating companies represent a higher percentage of overall patent purchases when looking at a five-year sample. The sale of software assets lagged hardware, but not by much, 180 to 234, for some an encouraging trend.  

“Buyers are becoming more comfortable with software risk and understanding what may and may not be ineligible under Alice,” said Kent Richardson, Managing Partner of ROL. 

Sales are flat, which Richardson believes can be interpreted as a sign of relative health, given how badly the case law has gone against patent owners. “Arguably, there should be fewer deals on the market and fewer sales. We won’t know for sure for another 12 months, but it looks like sales rates are climbing back to where they were a couple of years ago.”

Cloud-related inventions are more likely to be technically challenging in terms of patentability, compared with, say, user interface patents. Infrastructure inventions are much more likely to pass an Alice test.

“As a test, we are defaulting to ‘Would it be patentable to the Europeans?’,” concludes Richardson. “It’s not a perfect measure, but it works.”

Available Assets Down, Packages Up

The number of patent assets available in the market dropped 13.2 percent to 2,478 new assets in the fourth quarter from the previous quarter.

The number of patent packages listed rose 3.5 percent to 147 from the third quarter. (This could mean that fewer, better quality patents are being offered for sale.) However, 2,855 assets listed in the third quarter were offered in a smaller number of patent packages.

The median asking price per new asset (U.S. and global) listed by patent brokers was $150,000 in the fourth quarter. That reflected increases of 38 percent from the previous quarter and 80 percent from the fourth quarter of 2015.

Brokers matched buyers and sellers for 28 deals on packages of related patents during the quarter, according to ROL data. Those deals totaled 637 assets, comprising 395 granted or pending U.S. patents, while the remaining amount represented granted or pending foreign patents.

By comparison, 565 assets were sold in 35 brokered patent deals during the third quarter of 2016. In the fourth quarter of 2015, 554 assets sold in 33 patent packages.

For information about Richardson Oliver Law Group, go here.

Image source: RichardsonOliverLaw; Bloomberg/BNA

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/

Apella-Lounge-Daytime-e1439319412266

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 

Patent quality puzzle is dissected in new WIP0 magazine article

A good patent is becoming increasingly harder to find.

In the current issue of WIPO Magazine my article, “The puzzle that is patent quality,” looks at how the importance, market value and reliability of a patent can vary with perspective, as well as its right to exist.

Patent quality may start with validity but it does not end there.

“[With patents] the discussion is typically about validity, not the quality of an invention or its market value,” I write. “When someone speaks of a ‘good’ patent they could be referring to one or more characteristics: the patent’s likelihood of being upheld if enforced (litigated), the importance of coverthe invention it excludes others from practicing; or its relative value (in terms of protecting profit margins or generating direct licensing revenue) to a particular holder at a given time.”

Defining a patent that is worthy of scrutiny, and provides a degree of certainty, is no easy feat.

More work is needed on the legal and market implications of patent quality, as is a better system for determining patent quality and value earlier and more efficiently for a broader range of technologies. The uncertainty associated with patents costs companies billions and dissuades innovation and investment.

The August issue of WIPO Magazine is available here. My piece begins on p. 16.

For the slightly shorter web version go here.

Image source: iplawleaders.com; wipo.int.

2014 Patent Verdicts Suggest the Best IP Rights Remain Valuable if More Difficult to Monetize

While $50 million-and-up patent verdicts were up in the first half of 2014, there were only two wins higher than $131M and none from NPEs.

The uncertainty brought about by legislation and the courts has not put a damper on patent wins, but it likely has influenced them by putting an unofficial ceiling on some.

If first half 2014 wins are any indication, patent enforcement has moved more to a middle ground with higher but less spectacular wins among a broad range of technologies. Med tech, pharma and high-tech all participated.

Interestingly, not a single NPE was among them, suggesting that despite their increased activity and asset quality they, or those that defend against them, are electing to settle before trial.

As reported in IP Law 360, many of the large verdicts this year involve patent cases between competitors (operating companies), where the stakes and dollar amounts involved can be high. Others involve non-practicing entities, and the well-publicized reluctance of many companies to settle with such companies might lead to some sizable awards, said Lex Machina general counsel Owen Byrd.

“Clearly, some defendants are gambling and playing hardball and losing, when in the past they might have settled,” he said.

“While cases that result in nine-figure patent damages awards make headlines, Apple-vs-Samsung-lawsuit2they represent only a tiny fraction of all patent litigation, since most cases settle,” said the publication.

“Less than 2 percent of patent cases involve an award of compensatory damages, and while $15 billion in patent damages has been awarded across the U.S. since 2000, the 10 largest awards make up more than half of that total, Lex Machina found.”

The $50M+ awards for the first half of 2014. (Some of these are likely to be appealed.)

Edwards Lifesciences v. Medtronic – $393M

ViaSat v. Space Systems – $283M

Alfred E. Mann Foundation v. Cochlear Corp. – $131M

Apple v. Samsung – $120M ($2.2B sought)

Mylan v. SmithKline – $107M

Power Integrations v. Fairchild Semiconductor – $105M

SimpleAir v. Google – $85M

 

Click here for the subscriber content from IP Law 360.

 

Image sources: creatprint.com; http://blog.laptopmag.com/  

New Patent Sector Index: PIPCOs Trail the S&P 500 over 3-Yr Period

Despite their increased size and capital most small public companies that rely significantly on patent licensing have yet to prove they can compete with other equity investments.

A recent report by, “PIPX Intellectual Property Sector Index,” from Dr. Kevin Klein of Freescale Semiconductors, a provider of embedded procession solutions, shows that the stock of most PIPCOs have under-performed the benchmark S&P 50 equity index over the past 11 quarters.

(For a more in-depth analysis see “Let the Shake-Out Begin” in the July IAM magazine, out this month. My piece can be found under The Intangible Investor (for subscribers), here. For a comparative listing of public IP companies, including news and performance data, visit the IP CloseUp 30, here.)

The PIPX IP Sector Index is designed to provide a measure of the general health of the PIPCO sector by comparing the relative value of key companies over time.  

PIPX IP Sector Companies   Market Cap
(5/1/14)
Acacia Research (ACTG) 775M
InterDigital (IDCC) 1.40B
Neonode (NEON) 203M
Parkervision (PRKR) 439M
Pendrell (PCO) 429M
Rambus (RMBS) 1.37B
RPX (RPXC) 866M
Tessera (TSRA) 1.16B
Unwired Planet (UPIP) 250M
Vringo (VRNG) 351M
VirnetX (VHC) 807M
Wi‐LAN (WILN) 371M

Bigger Question 

The bigger question is how many IP monetization models do we need, and which ones are best adapted for long-term success?

As much as half of the 30 or so public IP licensing companies are likely to merge, be taken private or otherwise disappear over the next few years. That’s bad news for some investors, good for others.

Says Dr. Klein: “The lower returns and higher volatility of the PIPX as compared to the broad market imply that there are challenges facing investment in intellectual property licensing as the business evolves and matures.

“This of course could be due to short-term factors over the 33 months the PIPX Index is tracked, such as a deflating patent bubble. However, it may also be a sign that there are some underlying characteristics of this business that may need to be addressed or better understood to help make intellectual property licensing a more comfortable investment for the broader market.”

The value of companies in the IP space like Tessera and Rambus increased, while Acacia and RPX declined (see below).

The entire PIPX IP Sector Index can be viewed here.

pic3   pic2   pic1 (1)

 

 

Illustration sources: The PIPX IP Sector Index; Seeking Alpha.

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.

*     *     *

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.

Leading Brands Increasingly have the Most Valuable Patents

Patent portfolios associated with strong positive reputation appear to enjoy better performance, or so it seems.

It is no coincidence that many of the world’s best known and most valuable brands have other IP traits in common: Their reputation for quality, innovation, and consistency not only facilitates product sales and shareholder interest, but to enhance the value of their patents, trade secrets and authored content.

At the same time known expertise in securing and managing intellectual property rights and handling patent disputes (e.g. Microsoft (5), IBM (3), Intel (8) and Philips (41)) can add value to overall brand reputation. Good patents held by high-profile brands often appear to be worth more.

It is clear that the reputation of high-value brands for quality and reliability can help to a good patent portfolio to perform even better.

Interbrand’s “best brands” survey for 2012 includes many of the usual world-class names. Note how many of these brand giants are also patent powerhouses in their own right. Nine of the top ten have significant portfolios, and at least five out of the top ten very large ones. For 2012’s top 36 brands see the chart below. For the 100 best with an explanation of each, click here.

*     *     *

In an article for Managing Intellectual Property that I wrote in 1998 with Dr. James E. Woods, an economist, we suggested that associating patents and patent strategy with positive reputation frequently results in enhanced value both for the patents and trademark. A well-known business brand that does not hold least some relevant patents and a strategy to generate return on them, is likely leaving value on the table.

Smart companies are learning how to use brand equity and reputation to leverage their reputation for innovation and importance of their invention rights. Perceived value plays a significant role in intellectual asset management, and a strong brand can make a good patent portfolio even better. Valuable IP rights, notably trademarks and patents, feed off of each other.

Intel Inside® was part of an aggressive advertising campaign launched by Intel (8) in 1991 to stimulate demand for its (patented) Pentium® processor. Whether there was a qualitative difference between it and comparable devices was unclear. Heavy branding in 130 countries via a five note, tone-based, jingle, served to provide the Pentium with margins up to three times higher than its competitors’. Without it the patent on the Pentium would have meant far less.

Functionally, Intel’s PC processor was not that different form AMD’s less costly one, but its venerable branding from an aggressive retail advertising campaign, paved the way to ubiquity. It’s no accident that a semiconductor maker is the eighth most valuable brand in the world, ahead of BMW (12) and Tiffany (70). Does anyone outside of a small circle of techies, lawyers and investors know who Micron is?

Of the Interbrand’s top ten, the only company that I am aware of that is without a respected patent portfolio is McDonald’s (7). Coincidence or intelligence?

Businesses with extensive patent holdings and reputation for generating return on innovation, benefit from branding their IP success. Nortel and Hitachi  are a examples of patent-rich businesses whose IP success and value may have been somewhat undervalued because of their clear brand identify. IP without brand recognition, I believe, leaves money on the table for well-known companies that fail to take advantage of leveraging their intangible assets.

Consumer products companies Disney (13), Nestle (57), L’Oreal (42), and Gillette (16), all have significant numbers of meaningful patents. (Global cosmetics maker L’Oreal, for example, has received 500 to 700 patents per year for the past decade, or about 6,000 patents.) Iconic eBay (36) has very few patents and seem to be uncertain what to do with those they hold. Google (4), until its purchase of Motorola (unrated), and rival Facebook (69) were in a similar boat. Both have yet to leverage their IP rights and strategy in context of their name recognition. Recently, AOL did leverage its reputation for early Internet success with a billion dollar sale to Microsoft. How these transactions are perceived publicly has become increasingly important.

*     *     *

Apple (2), second only to “low tech” Coca-Cola (1), which supports it renowned trade secret with numerous patents, also has not done enough to leverage its highly valuable brand in context of its small patent portfolio. Spending a fortune to defeat Samsung (9) in a very public suit helped to enhance its perceived patent value and validate its strategy.

Large public companies with complex assets have the ability to leverage them in innovative ways: Patents certainly can benefit from the glow provided by a top brand, even those that are essentially geared to consumer products, like P&G’s (41,000 global patents).

At the same time, even the most highly regarded trademarks (brands) can enhance their importance though association with other valuable intangibles, such as patents. Branding patents is a win-win; so are brands with patents.

Illustration source: BrandMagazine.com

Rumored Investor Stake Fuels RIM IP Asset Speculation

Icahn Interest May Enhance Patent Value or Inflate It –

Patent portfolios are making some investors smarter, others richer and companies confused.

They also are making the job of technology stock analysts more difficult.

Blackberry maker Research in Motion (RIMM) shares were up 6% last week on speculation that activist investor Carl Icahn is interested in the company. Icahn’s interest in RIMM, let alone an actually stake in it, may pave the way for a sale of some or all of company’s assets, especially its patents. At a minimum it has had a positive affect on its share price and IP value.

Icahn recently encouraged Motorola Mobility (MMI) in public filings and statements to seek more value from its patent portfolio resulting in a sale recently to patent-hungry Google (GOOG) for $12.5b. Mobility has 17,000 patents, many in the lucrative 4G LTE space.

Earlier in September activist shareholder, Jaguar Financial Corp publicly urged RIM to consider a sale of the company or a sale of its patents in order to maximize shareholder value. RIM shares are down 30% since the beginning of September.

*      *     *

Not surprisingly, it is easier to price and sell an IP-centric company like RIM than to value and sell all or some of its patents. It really depends on who is interested and how do they plan to use the patents. It also depends of timing. Without the patents for leverage, RIM’s future may be even more limited than it is currently.

Of late, a broad range of smart investors like Icahn and Jaguar, as well as Nortel buyers Apple, Microsoft, Ericsson, et al. and Motorola Mobility acquirer Google can have a significant impact on significant IP holders’ shares. We are still at the early stages of understanding how patents can influence a business’ performance and market value. But the perception that a company may have valuable IP rights – or is not using them properly – is a powerful tool.

Last week Jeffries & Company equity analyst Peter Misek provided an unusually thoughtful look at the actual value of patents in RIM’s portfolio. Misek wisely retained experts to look at what is actually in the portfolio, what the rights cover and who owns them, not just the quantity.

“In valuing the essential LTE patent portfolios of major players in the wireless space, we utilized outside industry experts that included physics PhDs, wireless engineers, patent legal specialists, and former patent office employees.

“Our work began by first screening tens of thousands of patents and then determined a level of essentiality based on individually examining over 1,400 patents related to LTE.”

Misek concluded that RIM has a lot more patents covering security than highly lucrative 4G LTE inventions.

Jefferies & Company believes that the patents are worth about (only) $1b if RIM continued to practice them, but would be valued at as much as $2.5b if the company is sold outright now where they can be used by others.

What I believe Misek is saying is that because of RIM’s weakening market share it is good but far from ideal patents are worth significantly more to others than itself.

___________________________________________________________________
Exhibit 2: Essential LTE Patents: Detail

Patent Holder % Ownership of Essential LTE Patents,
Estimated Value ($M)

LG                           23%         7,907
Qualcomm               21%         7,329
InterDigital               9%           3,279
Motorola                  9%           3,279
Nokia                       9%           3,086
Samsung                 9%           3,086
ZTE                          6%           2,121
Nortel                       4%           1,350
ETRI                        2%              771
TI                             2%              771
Ericsson                  2%              579
NSN                         2%              579
RIM                          1%              386
Freescale                1%              193
Huawei                     1%              193
NEC                         1%              193

Source: Jefferies & Co.
___________________________________________________________________

The Nortel auction set the stage for IP value recognition as well as patent price inflation.

Prices for “must have” patents clearly are in a class by themselves. Perceived need and costs of R&D and patent litigation figure into the calculus; so does a business’ ability and appetite to fend off enforcers. “Nice to have” and “need to have” have very different connotations both in the IP world and on Wall Street.

Some on Wall Street, like Peter Misek, are finally making an informed attempt to put patent value into shareholder perspective. Let’s give them credit for trying.

 Illustration source: tacticalip.com


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