The setting is familiar: a large corporate asserter uses its patents against a smaller, high-growth company with no patents. Companies like Qualcomm, IBM, Nokia, and Microsoft regularly assert their patents. This case study describes how one of our clients included patent buying into their patent strategy to successfully defended against a corporate assertion by acquiring patents in the open market.

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You Need Defensive Patents But
You Don’t Have Any. Now What?
A Case Study
The setting is familiar: a large
corporate asserter uses its
patents against a smaller,
high-growth company with
no patents. Companies like
Qualcomm, IBM, Nokia, and
Microso regularly assert
their patents. This case study
describes how one of our
clients included patent
buying into their patent
strategy to successfully
defended against a corporate assertion by acquiring patents in the open market.
When the corporate asserter arrived at our client’s door, the asserter wanted: (1) to obtain
both a cross-license and revenue from a patent license and (2) to increase our client’s
purchases of the asserter’s products. Our client had virtually no patents of its own. To shi the
negotiation, the decision was made to purchase defensive patents (counter-assertion
patents). The reasons were that invalidating the asserter’s 10,000+ patents would be expensive
and would take too long. Also, putting revenue from the asserter’s products and services at
risk would change the dynamic of the negotiations to our client’s benefit.
By Kent Richardson & Erik Oliver & Hannes Forssberg Malm
August 6, 2017
Print Article

2. We designed a buying program and were able to help our client acquire patents that
significantly reduced the royalties owed. In the process, we also built an return on investment
(ROI) model that helped the IP team communicate the financial value of the strategy to their
executive and financial teams. The rest of this article will review the process used (see Figure
1) and the results in more detail.
Figure 1. Buying program model
Step 1. Identify target technology areas and market segments
Our goal wanted to acquire patents where the asserter’s products and services clearly
infringed. A successful purchase would change the dynamics of the negotiation because the
asserter would now owe a balancing payment to our client. We analyzed the asserter’s
business and identified technology areas and market segments that had high revenue and
high growth. We prioritized these areas because infringement here would have the greatest
impact on the asserter.
Had our client had a patent portfolio, we could have supplemented our analysis by mapping
each company’s portfolios against the other’s. Overlapping patent portfolio areas might then
indicate technology areas for potential buying. However, we recommend some caution when
using the overlaps. Patent portfolio overlaps are not the same as infringing revenue and we
wanted to buy patents where the asserter makes the most revenue.
Step 2. Source relevant patent packages
With a well-defined technology filter, our client still needed a process for sourcing relevant
patent packages. ROL Group continuously gathers data on available brokered packages in the
market. The filter and the information on the already available packages allowed us to set up a

3. search, and it allowed our client to e iciently get a list of relevant deals in the marketplace.
Careful design of the sourcing process and filters reduced the costs. Additionally, the client
could see what other companies, including the corporate patent asserter, had bought in the
focus technology areas. The client greater insight into what patents and patent packages
might work the best in a counter-assertion.
We then began sourcing new packages, but this takes time. So, we continuously sourced new
packages (step 2) while evaluating and modeling previously received packages (steps 3 and 4).
Step 3. Sequence the evaluation of the patents
Detailed patent assessment and diligence are vital parts of the acquisition process, but it is
also a costly part of that process. We worked with our client to sequence the diligence to
reduce overall costs (see Figure 2). The diligence process was split into substeps: general
technology filters, targeted technology filters, patent validity and prior art analysis, and
building and testing EOUs (evidence of use or claim charts). At each stage, we asked whether,
given everything that we know about the patent at this stage, it could still be used e ectively
in negotiations. If yes, the patent moved on to the next stage of diligence.
The criteria we used at each stage were company-specific and included factors such as specific
technology area, deal price, remaining life of the patents, country coverage, and specific
product infringed. By applying technology filters first (stage 3a and stage 3b), we reduced the
number of packages undergoing the more detailed reviews in stage 3c and stage 3d by more
than 75%. Thus, the client could spend time and financial resources focusing on packages
with patents most likely to present a strong infringement case against the asserter.

4. Figure 2. Importance of sequencing patent-buying diligence
Step 4. Assess the value of the patents and communicate the
value to the executive team
In the next step, we built an ROI model to help our client present the financial return for patent
purchase. The ROI model compared the expected return from buying di erent packages. The
ROI model also supported better communications between the IP, financial, and executive
teams.
Building a good ROI model is a key component of a successful counter-assertion strategy
because it facilitates management’s understanding of the transaction and eases approval of
the purchase.
Step 5. Buy the patents
In the final step, we bought the patents. Relative to corporate M&A, patent purchasing is
straightforward. In this case, the seller was a smaller company with no licenses and no
significant encumbrances. The representations and warranties were negotiated to ensure that
the client could use the patents for counter-assertion.
For pricing, we used our database of over 90,000 patents across more than 4,000 patent

5. Tags: defensive patent portfolio, patent, patent infringement, Patent Licensing, patent
portfolio, patent portfolio creation, patent portfolios, patent strategy, patents
Posted In: Guest Contributors, IP News, IPWatchdog Articles, IPWatchdog.com Articles, Patent
Business & Deals, Patents
Edward Heller August 7, 2017 7:58 am
I assume you asked the asserter to identify even one valid patent that your client infringed.
1.
Kent Richardson August 7, 2017 12:01 pm
The corporate patent asserter typically comes in with somewhere between five, and ten claim
charted patents. They will present those claim charts to the infringer. In this case, the corporate
asserter had five charts presented. The most I’ve presented was 15 with a total of 77 patents mapped.
2.
Edward Heller August 7, 2017 2:32 pm
Kent, thanks.
3.
packages to help determine a market price for the patents. You can find our annual reports
here. Typically, purchases close within 30 days of making the formal o er to the seller.
Conclusions: Now what?
Our client bought a package of patents from the brokered patent market. The purchased
patents forced the corporate asserter to rethink its plans and reduce its royalty demands. The
purchase resulted in a positive ROI; specifically, the savings in royalties vastly exceeded the
cost of the patents.
Buying patent packages in the brokered market for counter-assertion is a patent strategy that
works. By following a clear process, you can e iciently purchase relevant patents with strong
infringement cases against large corporate asserters. The purchases should focus on the
asserter’s high-impact technology areas and market segments.
There are currently 8 Comments comments. Join the discussion.

6. Back in the day, at least some of them would ask a company to pay a royalty based on arguments
related technology overlap and their large pile.
xtian August 7, 2017 4:54 pm
Was the purchase price greater than a) a reasonable royalty for those patents or b) the cost to file a DJ
on those patents?
4.
33333g3g2g August 7, 2017 5:26 pm
As a follow up to #4, if you found “valid” patents (that is, you concluded they are valid a er prior art
and validity analysis) that a major corporate entity like IBM or Microso “clearly infringed”, then those
patents could very well be worth more than the value of your client (i.e., in the hundreds of millions
of dollars range). Why would someone sell them so cheap?
5.
Kent Richardson August 7, 2017 6:40 pm
The purchase price was less than 10% of the proposed license price. The savings ended up being
about 5X the purchase price.
6.
Je Lindsay August 7, 2017 9:51 pm
Outstanding case study, especially in light of the cost savings. Well done! More companies need to
consider this kind of approach. Seems like the key must be working with the right partner with
relevant experience, data, and connections to do this so e iciently and rapidly.
7.
xtian August 9, 2017 12:08 pm
Kent@6
You must have had a good business-minded client. I have seen CEOs who would rather (I guess out of
spite) pay for a $65K invalidity opinion rather than fork out a $10K nuisance license…..
8.