Collapse of the Patent Market? No
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What is the current trend of the brokered patent market, and how can you as a buyer or seller exploit the current patent climate? We look into market pricing, litigation risks, top buyers and more to help you decide your best patent options for 2015.
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Collapse of the Patent Market? No
- 1. Business Sense • IP MattersBusiness Sense • IP Matters 1 Collapse of the Patent Market? No Kent Richardson September 22, 2015 Contact Information: +1 (650) 967-‐6555 info@richardsonoliver.com
- 2. Business Sense • IP Matters Agenda Patent Market Trends and Forecast Introduction to the brokered patent market Is this the time to buy? Market prices for patents today and trends Who is buying and who is selling Financial technology patent market How to Buy Effectively? Corporate patent buying overview What are others buying? What does Intellectual Ventures buy? Attorney-‐Client Privileged & Confidential 2
- 3. Business Sense • IP Matters Brokered Patent Market • Quasi-‐public market for patents supplied by patent brokers and regular sellers • Patents are business assets and trading in them is a natural extension of patent strategy complementing business strategy • If patents can be traded, a value and price can more easily be defined • Patent packages presented from patent brokers and regular patent sellers Why trade in patents? • Market dynamics are not well understood – clients want to answer these questions: • Am I getting a good price? • Are these good deal terms? • Are there better patents available? • Few companies have substantial information about the market, which gives them an advantage • NPEs have more information -‐ Intellectual Ventures, Acacia Why study the patent market? 3
- 4. Business Sense • IP Matters What Is in a Brokered Patent Package? •Contents •List of patents for sale, applicable market, infringement analysis (claim chart), background on the seller •Additional information •Asking price, bid dates, special circumstances (license back, specific encumbrances) Typical package •Confluence Patent Portfolio •Single family (15 US Patents and 7 open applications) relating to social network data aggregation. •2006 priority date. •Received July 2013 •Sold October 2014 •Asking prices: “7 figures” •Multiple claim charts presented for •Apple •Google •Facebook •Purchased by an operating company •Fingerprint Cards AB Example package from Patent Profit (Will Plut) •Receive about 50 packages per month covering a broad range of technologies Package flow 4
- 5. Business Sense • IP Matters Patent Buying Ecosystem 5 Patent Market Buyers •Apple, Amazon, Facebook, Google, Intel, Microsoft, Qualcomm •Intellectual Ventures, Acacia •RPX, OIN, AST, Unified Patents Sellers •SMEs, Cisco, Yahoo!, ATT, Verizon •Intellectual Ventures Brokers •Patent Profit, Epicenter, ICAP •Bankers, law firms, IAM managers •Grow faster than organic growth of portfolio •R&D does not align with counter assertion strategy •Best patents have early priority (8+ years old) •Knowledge about an important market Why buy patents? •About $1B per year in brokered patent opportunities •~600 deals per year How big is the market? You Attorney-‐Client Privileged & Confidential
- 6. Business Sense • IP Matters How Big Is the Market? 6 • Since 2011, we have tracked $4.5B of brokered patent packages + $2.4B of non-‐brokered • Over 2,000 packages with over 63,000 patent assets • 118 technology categories represented from LEDs, Displays, Social Networks, Automotive Robust market – Nearly $7B of patent deals tracked • 566 brokered packages received containing nearly 9,000 patent assets 2015 market remains robust • Source Richardson Oliver Law Group LLP, 2015 Brokered Market Report
- 7. Business Sense • IP Matters Overall Price of All New Packages by Month (2015 Measurement Year) 7 • 2015 measurement year is June 2014 to May 2015 • Source Richardson Oliver Law Group LLP, 2015 Brokered Market Report
- 8. Business Sense • IP Matters It’s a Great Time to Be a Buyer! 8 • 2015 asking price $190K per asset, down from $269K in 2014 • More lower priced deals in 2015 drops the asking prices • Market is becoming more efficient at selling low price packages, plus prices are dropping Asking prices are down $190K • Source Richardson Oliver Law Group LLP, 2015 Brokered Market Report
- 9. Business Sense • IP Matters Claim Charts Drive Pricing • Average asking price per asset dropped by 29% • 2014 Market: $269K to 2015 Market: $190K • Large variance in the asking prices – pricing volatility remains Asking prices per asset • Average asking price per US patent in packages with claim charts dropped by 7% • 2014 Market: $367K to 2015 Market: $341K • 25% better chance of a sale if there is an claim chart Claim charted packages maintain their pricing power Attorney-‐Client Privileged & Confidential 9 All Packages Packages with Claim Charts $K per Asset $K per US Patent $K per Asset $K per US Patent Average $190 $277 $255 $341 Min $17 $30 $23 $42 Max $925 $1,000 $1,000 $1,143 StdDev $183 $249 $233 $271 • Source Richardson Oliver Law Group LLP, 2015 Brokered Market Report
- 10. Business Sense • IP Matters Distribution of Seller Type by Sale Year 10 •Operating companies represent over 60% of the patents on the market •NPEs have substantially increased their sales activities likely as a result of difficulties enforcing their patents •Companies obtaining cross-‐licenses prior to competitors selling their portfolios will continue to benefit Operating companies dominate the market Attorney-‐Client Privileged & Confidential Top Sellers (All Years by Package Count) Alcatel Lucent Allied Security Trust (AST) ATT BAE Systems ETRI Fujitsu HP Italian National Research Council Korea Institute of Science and Technology (KIST) RPX Siemens Sony Corporation Spansion Verizon Xerox Corporation • Source Richardson Oliver Law Group LLP, 2015 Brokered Market Report
- 11. Business Sense • IP Matters Distribution of Buyer Type by Sale Year 11 • NPE buying remains a significant part of the market with Intellectual Ventures leading the buying Operating companies remain strong buyers Attorney-‐Client Privileged & Confidential Top Buyers (All Years by Package Count) Allied Security Trust (AST) Apple Computer Intellectual Ventures LinkedIn Google RPX Open Invention Network (OIN) Qualcomm • Source Richardson Oliver Law Group LLP, 2015 Brokered Market Report
- 12. Business Sense • IP Matters Sales Rate Is Up (a Little) 12 • Represents the percentage of patent packages sold (as recorded in the US Patent & Trademark Office assignment records) • Sales rates remain down sharply from 2009, with estimated 2014 packages slightly higher • Packages sell in the first two years à sales data lags listing data by about 2 years Sales rates are up slightly, but still below 30% Attorney-‐Client Privileged & Confidential • Source Richardson Oliver Law Group LLP, 2015 Brokered Market Report
- 13. Business Sense • IP Matters 2015 Packages by Technology 13 •Heavily skewed towards software and cloud computing •However, there has been a shift away from software patents, likely as a result of US case law •Business process packages continue to come to market High technology patents remain the market’s focus •563 packages received in 2015 sample year •Financial transaction enabling technologies are well represented at 5% of the packages •Example technologies include payments, ecommerce, and financial instruments 2015 Fintech • Source Richardson Oliver Law Group LLP, 2015 Brokered Market Report
- 14. Business Sense • IP Matters 2015 Average Asking Price per US Issued Patent by Tech Category (US$) Attorney-‐Client Privileged & Confidential 14 • Tech pricing is important for making buying decisions • Business processes (Financial Technology) related patents demand price premiums Pricing by tech category • Source Richardson Oliver Law Group LLP, 2015 Brokered Market Report
- 15. Business Sense • IP Matters 15 Focus on Payments: Patents Are Increasingly Important – Through 2012 Traditional financial institutions are becoming more patent savvy Industry patent filings have increased steadily, 55% per year from 2002 to 2012 Payment players are becoming more explicit about their IP position and negotiating deals based on their patent portfolio Increasing patent litigation and licensing threats necessitates the development of strategic patent portfolios to mitigate litigation risk and maintain freedom to operate Innovations from new players are becoming driven by value chain expansion and technology convergence Emerging players and new entrants, such as Google, Apple, and MCX, are expanding into payments with very active patent programs supporting their efforts Mobile phone patent wars have trained emerging payments players in patent strategy including litigation Negative impact of new US case law June 2014 US Supreme Court decision knocks out many software and business process patents (the Alice decision) 18 month delay of publishing filings makes Alice impact on filing rates unknowable Expect steep decline in filings around user experience, financial instruments, business processes Expect increased focus on infrastructure and hardware enabling patent filings 0 100 200 300 400 500 600 2004 2005 2006 2007 2008 2009 2010 2011 2012 Annual PaymentPatent Filings by Traditional FIs Mastercard Visa American Express Chase Bank of America 0 50 100 150 200 250 300 350 400 450 2004 2005 2006 2007 2008 2009 2010 2011 2012 Annual PaymentPatent Filings by Emerging Players Google Amazon eBay Apple ChinaUnionPay Mastercard • Source: Ocean Tomo Payments Analysis, Spring 2015
- 16. Business Sense • IP Matters Alice and Fintech Sales Rates Are Down Relative to Overall Market Sales Rate Alice Impacted Patent Packages Still Selling Better Than Overall Market Fintech Sales Rates Are Down Substantially 16
- 17. Business Sense • IP Matters Agenda Patent Market Trends and Forecast Introduction to the brokered patent market Is this the time to buy? Market prices for patents today and trends Who is buying and who is selling Financial technology patent market How to Buy Effectively? Corporate patent buying overview What are others buying? What does Intellectual Ventures buy? Attorney-‐Client Privileged & Confidential 17
- 18. Business Sense • IP Matters Corporate Buying Program -‐ Overview •Reduce exposure to corporate patent assertions by building a counter assertion portfolio •Examples of active corporate asserters include IBM, Qualcomm, Microsoft •New asserters rise, especially when revenues are down Primary goal: DEFENSE •Buy patents to reduce the risk that those patents can be used against you •Other techniques work here too, buying consortium (e.g. RPX) Secondary goal •Legal patent diligence can cost $5-‐50K, other diligence is cheaper and can filter out many packages •Business rules based buying criteria help you to filter out packages quickly and efficiently •Eliminate low value packages quickly •Over 98% of the packages will not meet your business needs •Not because the packages have low quality patents Biggest challenge is cost of diligence 18
- 19. Business Sense • IP Matters Process Overview – Example Package Filtering 19 ROL package database Search results candidate pool Preliminary human filtering Detailed filtering Test availability and EOU creation Further testing Bidding and buying 2049 451 82 (20-‐40) (10-‐20) (5-‐10) (3+) Actual (or Estimated) Number of Packages Remaining
- 20. Business Sense • IP Matters Effective Filtering of Patents Reduces Costs 20 > 60% packages eliminated because the specific technology does not match the business need Claim analysis and prior art searches are more labour-‐intensive and costly and should be delayed • Source Richardson Oliver Law Group LLP, 2015 Brokered Market Report
- 21. Business Sense • IP Matters IV was buying when the market was down and continued to buy throughout the downturn Assignment data reflects opportunistic purchases from struggling companies Top Buyers –Intellectual Ventures’ First Two Funds 21 • Kent Richardson and Erik Oliver, "What's inside IV's patent portfolio?" IAM Magazine, Issue 66, July/August 2014
- 22. Business Sense • IP Matters Estimated Spend by IV per Year Total Est. Spend $1.7B 22
- 23. Business Sense • IP Matters Who is Selling? Ordered by Number of Patents Sold (at least 30 sold) Top 20 Next 20 Next 20 Next 20 Kodak Nortel Recursion Software Mosaid Digimarc Cubic Wafer Hong Kong Technologies Lapis NXP Genesis Microchip Nippon Steal Casio Raytheon Marconi IP Fujitsu Thales Mangachip Delphi Chunghwa Picture Tubes Alcatel-‐Lucent Telcordia Verizon Sonic Dowling Consulting Transmeta Aplus Flash AT&T Lockheed Martin Spyder Navigations Autocell Katrein-‐Werke Pulse-‐Link Amex Crosstek Capital California Inst of Tech Lightspeed Logic Polaroid Tier Logic Be Here PSS Systems Cypress Semi Mindspeed Technologies Digital Imaging Systems DuPont Daimler Cirrus Logic Ideaflood Lightsmyth Tech France Telecom Kimberly-‐Clark UMC ST Micro Primax Electronics Airnet Communications Microsoft Rockwell Conexant Idelix Software Airip Cooler Master BAE Icefyre Semi Discovision Xerox Sanyo Mitsubishi Motorola Arraycom Nokia Neomagic Triquint Believe Bellsouth Oki Electric Terabeam General Dynamics Entorian IPWireless Exclara 23 Many “blue-‐chip”/household names among sellers of patents to IV Implications? How would something like a cross-‐license impact a future aggregator? • Kent Richardson and Erik Oliver. "What's inside IV's patent portfolio?" IAM Magazine, Issue 66, July/August 2014
- 24. Business Sense • IP Matters IV’s International Asset Distribution 24 IIF portfolio has some international coverage ~10K assets—weak in BRIC • Kent Richardson and Erik Oliver. "What's inside IV's patent portfolio?" IAM Magazine, Issue 66, July/August 2014
- 25. Business Sense • IP Matters IV Buys Patents that Are 5-‐14 Years Old 25 Robust continuation practice Approx. 8% of portfolio today • Kent Richardson and Erik Oliver. "What's inside IV's patent portfolio?" IAM Magazine, Issue 66, July/August 2014
- 26. Business Sense • IP Matters IV’s Technology Market Areas Based on CPC Code Analysis 26 • Kent Richardson and Erik Oliver. "What's inside IV's patent portfolio?" IAM Magazine, Issue 66, July/August 2014
- 27. Business Sense • IP Matters IV Has Not Stopped Buying • Launched around 2014 • Purchased technologies • Media storage • Computer memory • Spansion assets • Rambus assets • Networking • Cable TV III Fund buying • Buying is less aggressive than Fund I and II • Less capital in Fund III • Concern over inflating the price of patent Fewer purchases 27 • Richardson Oliver Q1 2015 Patent Sales Report
- 28. Business Sense • IP Matters Conclusions •$B of patents brought to market every year •Diverse technology areas •Asking prices have dropped to $190K per asset à excellent time to be buying •Sales rates remain relatively low at 30% •Financial technology related patents continue to be available and command a price premium Patent sales market remains robust •Patent buying allows corporations to purchase patents they could not have invented •Priority dates can predate any research and product development of the purchaser •Patent counter assertion purchases drive corporate buying – “We will sue you back, if you sue us” •Managing key diligence questions early drops your cost of finding and buying patents •Focusing patent buying criteria on priority date, specific technologies matters (see IV) •Once bought, continue to develop the portfolio (8% of IV’s portfolio is continuations) Corporate patent buying addresses strategy needs 28
- 29. Business Sense • IP Matters Attorney-‐Client Privileged & Confidential 29 BUSINESS SENSE • IP MATTERS ROL Group has over 60 years of IP strategy and execution experience. We ask the business questions first. We blend in-‐house and large law firm experience to create clear steps for success. We guide companies through unique IP challenges—like buying and selling patents, developing licensing programs, defending against patent assertions, and creating a value-‐driven IP portfolio. We give direction to businesses that share our passion for new ideas, creative problem solving and forward motion. Contact Information: +1 (650) 967-‐6555 info@richardsonoliver.com