A presentation on the secondary market for patents, buying, selling, pricing, what lawyers need to know to establish a program, and what are the chances of winning with bought patents.
Cyber Laws : National and International Perspective.
Secondary Patent Market: Buyers, Sellers, Pricing and Trends
1. Business Sense • IP MattersBusiness Sense • IP Matters 1
Secondary Patent Market: Buyers,
Sellers, Pricing, and Trends
Erik Oliver
April 12, 2018
Contact Information:
+1 (650) 967-6555
erik@richardsonoliver.com
Copyright 2017 ROL
2. Business Sense • IP Matters
Agenda
Look back
Market dynamics
Prediction
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Brief Introduction
3
Erik Oliver
•Advised clients on nearly $100M in patent purchases/sales
•Example deals: LinkedIn’s purchase of Digg portfolio, Color Labs portfolio sale
•Established LinkedIn’s buying program
•Proprietary database tracking over 120,000 patent assets for sale
•Bloomberg quarterly patent market reports data supplied by ROL Group
•Regular speakers and authors on patent buying and selling
•6 years of publishing market analysis, including price and buyers and sellers
Patent buying and selling
•Recognized as top worldwide IP strategists list for 8+ years (IAM300)
•Former general counsels, patent attorneys, significant in-house experience
•Financial modeling of defensive aggregator solutions
•Advisor and analyst for defensive strategies against Intellectual Ventures and large corporate patent asserters
Defensive strategy
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What’s the Secondary Patent Market?
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Seller Buyer
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What Is in a Brokered Patent Package?
• List of patents for sale, applicable market, infringement analysis (claim chart), background on the
seller
• 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)
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LinkedIn – What You Can Do Over Four Years
2011
0
500
1000
1500
2000
2500
2003
2004
2005
2006
2007
2008
2009
2010
2011
2012
2013
2014
2015
2016
#ofAssets
Portfolio Growth by Priority Year
Organic Portfolio Projected Organic Portfolio
2016
0
500
1000
1500
2000
2500
2003 2004 2005 2006 2007 2008 2009 2010 2011 2012 2013 2014 2015 2016
#Assets
Total Portfolio by Priority Year
Acquired Portfolio Organic Portfolio
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Where Is the Patent Market Today?
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Ten Years Ago
Secondary Market
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2007
IV the
biggest
buyer
Few
brokers
AST and
RPX
Few
capable
buyers
What’s
a good
deal?
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Five Years Makes a Difference
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2012 2017
Sources
Transactions
Pricing
Capabilities
Private Public
Only WSJ
published deals
Quarterly public data
Skewed
Intellectual Ventures
plus select companies
Quarterly public data
SMEs buying
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10. Business Sense • IP Matters
Agenda
Look back
Market dynamics
Prediction
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Deal Flow
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Sellers
Buyers
Direct Sales
>1000 deals per year hit the market
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$0
$2
$4
$6
$8
$10
$12
$14
2011 2012 2013 2014 2015 2016 2017 2018
$12.5B in Patents Offered on the Secondary Market
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Cumulative sum of asking prices of 110,000 plus patent assets in 119 technology categories
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Unsold
Sold
Billions of dollars of unsold patents on the market.
Litigation risks continue to increase
$B
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What’s the Asking Price of a Patent?
$252,367
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Caveats – Sure There Are a Few
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Asking Prices Reported Quarterly
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Source: “Intellectual Ventures Back in Brokered Market in Q4,” Bloomberg BNA, March 10, 2017.
https://www.bna.com/intellectual-ventures-back-n57982085043/
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$K
Listing Year
Average Asking Prices ($K)
USMean
AssetMean
Asking Prices Are Stabilizing
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What’s Hot in the Patent Market Today
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Sales Rates Dropping or Shifting?
Sales Rate by Listing Year
Sales rates by listing year keep falling, even when adding
projected sales
Sales Rate of Inventory by Year
But sales as a percentage of new listings per year are
about the same
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SalesRate
# of Listings
2016 broker sales rate by number of listed packages
SalesRate
2016 Sales Rate 10.8%
Some Brokers Are More Effective Than Others
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Better
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SalesRate
# of Listings
2015 broker sales rate by number of listed packages
SalesRate
2015 Sales Rate 19.5%
And Some Do Amazingly Well
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Valueforbusinesspurpose
Proportion of the patent market
Value Distribution in the Secondary Market
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Goal: Identify high-value patents to
purchase (1-2% of market)
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Sequencing Diligence is Critical
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66%
13%
13%
4%
3% 2%
Distribution of seller type by sale year 2016-2017
Operating company
NPE
Inventor
University/research
Defensive aggregator
Other
Distribution of Seller Type by 2017 Sale Year
Operating Companies Dominate the Market
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Operating companies represent over 66% of the patents on the market, same as last year
NPEs decreased their sales for the first time in 3 years, but not all sales appear in the
brokered market
Cross-licensing prior to competitor patent sales is a benefit
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46%
37%
13%
4%
Distribution of buyer type by sale year 2016-2017
Operating company
NPE
Defensive aggregator
Other
Distribution of Buyer Type by 2017 Sale Year
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Operating companies remain top buyers
NPE buying is ticking back up to 37% from 32%
IV ended their buying program
RPX and AST tied for top single buyer
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Multiple Sellers and Buyers 2016 - 2017
Top Sellers by Package Count
Aaron Emigh
Allied Security Trust (AST)
ATT
Clifford Sweatte
Cypress Semiconductor Corporation
Foxsemicon Integrated Technology, Inc.
Hewlett Packard Enterprise (HPe)
Honeywell International Inc.
Huawei Technologies Co. Ltd.
IBM
Intel Corporation
MITRE Corporation
Panasonic Corporation
Rovi Corporation (Before Tivo acquisition)
RPX
Satyajit Patwardhan
Sergey Mavrody
Siemens
Silent Communication Ltd
Verizon
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Top Buyers by Package Count
Allied Security Trust (AST)
Apple Inc.
Beijing Xiaomi Mobile Software Co., Ltd.
Belisso Llc
Blackbird Tech Llc
Cria Inc.
Empire IP, LLC
Entit Software Llc
Google Inc.
Huawei Technologies Co., Ltd.
Insight Interfaces Llc
Intellectual Ventures
Knapp Investment Company
Kudelski SA
Marking Object Virtualization Intelligence, Llc
Microsoft Corporation
Mobile Synergy Solutions, LLC (Monument Patent
Holdings subsidiary)
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Top Buyers by Package Count
Munitech Ip SARL
Nuance Communications, Inc.
Open Invention Network, Llc
Optimum Communications Services, Inc.
Pathunt Ip Management Limited
Rakuten, Inc.
Regional Resources Limited
RPX
Servicenow, Inc.
Sk Hynix Inc.
Spectrum Patents, Inc.
Taiwan Semiconductor Manufacturing Co., Ltd.
Twitter, Inc.
Uber Technologies, Inc.
Uniloc Luxembourg S.A.
Vector Capital Corporation
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Litigation Analysis: You Can Model Your Risk
Has Litigation Has IPR
Package Type Prior to
listing date
After listing
date
Prior to
listing date
After listing
date
Sold packages 6.3% 14.3% 0.3% 4.5%
All packages 4.2% 5.0% 0.2% 1.4%
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14.3% of sold packages are litigated – time to update models?
4.5% of sold packages are IPRed after listing – very few before they are listed
Both sold and unsold packages are litigated post listing
Defensive aggregator value may be greater than anticipated
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What Happens when You Litigate Bought Patents?
°Operating companies are successful
°33% self-generated vs.
°23% bought
°Conclusion: bought patents work, and factor the spread into your models
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Source: “Patent Purchases and Litigation Outcomes.” Lemley et. al. 2016 Patently-O Patent L.J. 15 (December 2016)
28. Business Sense • IP Matters
Agenda
Look back
Market dynamics
Prediction
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Where Is the Market Going?
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Trends and Predictions
More international sales
Prices – stabilized
Sales rates – remain low
Faster and simpler transactions expand market
NPEs continue to buy – fewer buyers drive this part of the market
More brokers leave
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Learning More – Further Resources
°Richardson Oliver Insights
°New data-business, increasing patent market transparency
°Home page has regularly updated market data
°URL: roipatents.com
°Hosts reports on the market
°“The 2017 Brokered Patent Market – the Fightback Begins.”
Richardson et. al. IAM Magazine (January 2018)
°“An Empirical Look at the ‘Brokered’ Market for Patents.”
Love et. al. SSRN (October 2017) [5 year study]
°URL: roipatents.com/publications/
Attorney-Client Privileged & Confidential 31
32. Business Sense • IP Matters Attorney-Client Privileged & Confidential 32
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