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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

More patent holders (and buyers) are valuing perception over reality

Lack of certainty and the high cost of monetizing patents are motivating some businesses to acquire impressive looking patents, not necessarily valid or essential ones.  

A reputation for innovation or R&D prowess has become a far more valuable asset since the American Invents Act was passed a few years ago.

IBM, among others, has sold unproven patents for tens of millions of dollars to the likes of Alibaba, Twitter, Facebook and Google, attesting to the power of source brand when it comes to invention rights.

In all but a handful of instances, no one gives a hoot about what an IT patent is really worth in the marketplace or even whether it is valid. There Perception-Realityis nothing new about securing batches of patents for affect, especially if it is unlikely that they will be enforced and subject to the scrutiny of litigation.

With licensing revenue down and patent sale prices 30% or more lower, there is little motivation for an alleged infringer to take a licence or settle a dispute.  The search is on to identify alternative methods of profiting from IP. Drawing upon a portfolio or family’s implied value can have more meaning than its actual worth — which is becoming increasingly more difficult to establish.

As Good as Gold

In the current (November) IAM The Intangible Investor looks at “Perception is reality for some patent holders.”

A golden reputation for innovation is easier to establish than value for most individual rights. Thus, a patent portfolio or family in conjunction with a recognizable brand can constitute a formidable pairing. “Perceived patent value” holders, those with a
reputation for innovation, may be in a better position to profit today than business that actually hold valid and infringed patents. Proven patents need to survive the PTAB and perform in court, and require capital to monetize; a reputation for IP can be built over time and managed.

We may recall the Intel Inside® advertising campaign of a decade or more ago that touted the branded processor inside the PC. It not only encouraged product sales but provided the company with the ability to license at a premium the patents covering the component.

There was less a qualitative difference in the microprocessor (vs. say AMD’s) than an implied one based on Intel’s consciously cultivated, and largely deserved, reputation for innovation. 4If issued patents are even less reliable than in the past, then invention rights that appear to be good are the biggest winners. It is no coincidence that the most significant R&D spenders also happen to be among the world’s most valuable brands and significant patent holders. The top ones exceed or are just under $10 billion in annual R&D spend.

Reputation, whether it is deserved or not, makes buying decisions easier — a welcome relief to at least some cash-rich buyers in the market for coverage who cannot wait for patents to issue.

The full IAM piece, “Perception is reality for some patent holders,” can be found here.

Image source: askskipper.com; wparesearch.com

Value of Microsoft’s Facebook Stake Drops Below $1B

MS Supports FB’s Success; Promotes It’s Own

Facebook has been shedding market value like a wet collie its winter coat.

With Facebook’s share price down to just $72.7B as of May 22 from $104B three days after its IPO, Microsoft does not appear to be too concerned. Its $1.2B stake has decreased just a few hundred million. (Who remembers that MS owns 1.6% of FB’s shares?)

The competitive auction for 850 AOL patents and patent applications won by Microsoft a few weeks ago now comprise the core of FB’s growing patent portfolio. And, both Facebook and Google have been buying significant numbers of patents from IBM.

With $70B in 2011 revenues Microsoft’s Facebook shares may be a veritable blip on its financial radar. Still, it raises interesting questions.

Facebook was reputedly steaming that it did not have a real opportunity outbid Microsoft in the AOL patent sale. Microsoft stated that it wanted to partner with Facebook to acquire the patents but that AOL was said no to team bidding, possibly because of potential anti-trust issues.

With MS’s help Facebook wound up with hundreds of patents that will equip it against Google and any potential competitors like Twitter and LinkedIn. This no doubt pleased Microsoft as well, who also goes head-to-head against Google in markets than include the search engine, email and mobility, and is no doubt concerned about Twitter.

In 2007, Microsoft beat out major players like Google to buy a 1.6% equity stake in Facebook for $240 million. At the time, Facebook was valued at $15 billion. Five years later, Facebook’s valuation has soared — giving Microsoft a stake worth more than $1 billion at the time of the IPO. But rest assured, it’s not investment income that Microsoft is after.

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Even Microsoft lacks sufficient capital to afford Facebook at its inflated pre-IPO price — but it doesn’t need to own the social networking leader to succeed. All it may really need is patience. 

A growing Facebook is a boon to Microsoft and a threat to Google. However, FB’s post-IPO share price has quickly fallen some 20% below its offering. Many tech high-flyers, even the few that prosper, often find their stock going through dramatic peaks and valleys. Facebook’s early falling stock price has caught many off guard.

It remains to be seen if this dip in Facebook’s uncharacteristically high offering price will permit MS to buy more shares now or in the future, and whether the purchases will be for investment or strategic purposes. (I believe that Goldman Sachs, lead banker on MS’s IPO, has a major stake in FB.) Microsoft probably has all the FB shares it needs for now. It likely only needs a few percent more for a board seat, Department of Justice scrutiny permitting. My guess is that at the right time and price MS may quietly accumulate more shares.

If Facebook continues to secure IP rights intelligently, as it has, it will continue to be attractive to MS as a partner, investment or surrogate. Remember it’s not necessarily the patents a company owns that count; it’s the ones it controls.

If good performance does not lift Facebook’s stock back to IPO levels, Microsoft won’t cry. It will be the likely winner.

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The New York Times Deal Book is running series of interactive images that illustrate post IPO performance of major tech companies like Google, Microsoft and Apple.  It’s surprising how volatile their shares can be in the early years. Apple, BTW, was down 25% from its offering price three years following it. (If we had only known then what we know now.)

Illustration source: technobaboy.com; tmz.com  

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