On September 15, IAM Market presented its first ever informative one-hour webinar, Readying a Patent Portfolio for Sale: What You Need to Know to Be Successful, where IP strategist Kent Richardson discussed at length the process of preparing patent portfolios for sale and avoiding common pitfalls that could derail your effort.
What was discussed:
•The three different monetisation options, and the pros and cons of each
•What a value driver patent is, and why having value drivers improves your chance of selling at the best price
•How claim charts (also called ‘evidence of use’) drive pricing
•The seller's due diligence list – make sure you cover all the bases before you sell
•The importance of marketing collateral in making the sale, and what pieces you should provide
•And much more...
Read through these slides and come away with valuable tips and insights for readying your own patent portfolio for sale.
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Housekeeping
With so many attendees, we have a few housekeeping rules to
make this event a pleasant experience for all:
• If you are on the phone for event audio, we are muting all
attendees for the complete duration of the webinar.
• There will be time at the end of the webinar for Q&A. If you
wish to ask a question, please use the ‘Chat’ functionality and
send it to ‘Staff’.
• We will be running 4 polls during the webinar. Results will be
shared at the end of the presentation in aggregated form only.
• The webinar will be recorded, and the recording will be made
available to you within the next week.
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Today’s Speakers
• Moderator: Joff Wild, Editor in Chief, IAM
• Been a journalist covering IP since 1992
• Has reported on IP for The Times, The Financial Times, The Wall Street
Journal etc.
• Developed the idea for IAM and has been its editor since it launched in
2003.
• Editor in chief of the IP Division, part of Globe Business Media Group
• Speaker: Kent Richardson, Partner, ROL Group
• Advises on patent strategy, patent buying and selling.
• Helped clients close on more than $70M in patent purchases/sales
• Former VP IP at Rambus, part of the team that helped grow revenue
from $100-200M over 4 years
• Part of the IAM Strategy 300 for 7 years
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What Is a Patent Package?
Definition – the materials a buyer needs to evaluate whether
a group of patents might be worth buying
Signals that the patents are available for sale, that the seller is
willing to sell, that there is a process to which the seller has
committed
Typically a PowerPoint deck or written marketing material
describing the patents, the relevant markets, and provides the
contact information for the seller (or seller’s representative)
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Patent Sales as a Patent
Monetization Option
•Definition: Private or semiprivate sale of groups of related patents and applications
•Considerations
•Fastest, but not fast, time to money
•Good for smaller groups of patents, smaller deal sizes
•Best and only monetization option for many organizations
•Minimal cost
Sales
•Definition: 3rd party takes ownership of the patents. Company receives a portion of any proceeds after costs are removed
•Considerations
•Minimal costs to engage
•Proceeds are net of costs… See Hollywood movie financials
•Legal environment continues to make this model more difficult. Acacia Research stock is down nearly 50% YoY
•Example partners include Acacia, Longitude Licensing, Conversant
3rd party licensing
•Definition: Company directly licenses the portfolio. Company builds licensing plan, value proposition, closes the licenses. Company
takes the risk of any litigation
•Considerations
•Easily the highest return and expected value
•Longest time to money
•Highest costs (litigation, building team, impact on current products)
Direct licensing
•There are a number of other structures including partnering and debt financing
Other Structures
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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)
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Copyright 2012-2016 ROL
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Why care about the
Patent Package?
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• The market is opaque
• Who is buying, what type of patents are hot, what is the price, what
are selling best practices?
• 70% of the patent packages do not sell
• Some of the success factors relate directly to the sales package
What are the challenges in selling patents
• Buyers receive 1000 packages per year, about 5 per working day
• “If I don’t like this package, there will be another one tomorrow”
• How do your patents stand out…in a good way?
Buyers are busy
“When I’m selling my car on Craig’s List, I don’t list it as ‘CAR’.”
Michael Pierantozzi, HPe
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How Big Is the Patent
Market?
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$0.00
$1,000.00
$2,000.00
$3,000.00
$4,000.00
$5,000.00
$6,000.00
$7,000.00
$8,000.00
$9,000.00
$10,000.00
$11,000.00
$12,000.00
Total Asking Prices ($M) - Brokered and Private Market
Total Asking Price (Entire Market) Total Asking Price (Sold)
• Since 2011, we have tracked $7.2B of brokered patent packages + $3.7B of non-brokered
• Over 3,600 packages with over 87,000 patent assets
• 108 technology categories represented from LEDs, Displays, Social Networks, Automotive
Robust market – More than $11B of patent deals tracked
• 780 brokered packages received containing nearly 14832 patent assets
• Big uptick in listed packages from IAM Market and other sources
• Sales from the newly listed packaged are expected to be visible in 2017
2016 market remains robust
Source Richardson Oliver Law Group LLP, August 2016
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Sales Process – Readying
the Package
•Assist in closing
sale
6. Monitor
bidding and
select buyer
•Looks like a
smaller
investment
banker process
5. Bring
package to
market
•Value
proposition
properly
articulated
•Test package for
completeness
4. Complete
package
•Market analysis
•Value drivers
•Overall package
information
3. Build value
proposition
•Allow seller to
test brokers for
potential
working
relationship
•Subset of
brokers selected
from over 50
potential brokers
2. Direct or
brokered sale
•Each value driver
patent is
grouped with
related patents
to build a
compelling
potential patent
package
•Value drivers
have Evidence of
Use (EOU)
1. Finalize
groupings
around value
drivers and
supporting
patents
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2-3 months
6-12 months
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Identifying Value Driver
Patents?
• Patents with claim charts against high volume, high revenue
products/services
• Claim charts may include assumptions
• Often referred to “Evidence of Use” or “Indications of Use”
(EOU and IOU)
Value drivers
• Relates to why buyers buy
• Focus your bundles around value drivers
• Focus the marketing materials
• Pricing and chance of sale improve
Why value drivers
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Why Care About the
EOU?
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•“I don’t care what the seller says. I’m going to skip their package and look directly at the
patents.” – Patent Buyer at large corporation
•BUT
•Data says differently
•41% more likely to sell with EOU, 23% less likely to sell without EOU than the average
sales rate
•Asking pricing premium of 34%
How much does the EOU matter?
•Buyers do not accept the sellers EOUs. They will rebuild them, but the existence of the
EOU matters
•Signals which of the patents and which specific claim matters
•Signals which product(s) matter
•Takes the abstract discussion of “here are some patents applicable to this market” to
“here is the claim infringed by that product” – much more specific and valuable
What’s going on?
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More Than 1,000 EOUs
Tell Us What’s Hot
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Who and
what gets
targeted?
Over 1,000 EOUs reviewed
5 years of data
Hot
companies Apple
Google
Microsoft
Samsung
Hot
technologies Communications and smartphones
Social
Wearable, storage, RFID, mail
Hot products
iPhone, Galaxy
Bing
YouTube
Xbox, TiVo
Source: Richardson Oliver Law Group, LLP
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Contents of a Package
• What is being offered
• “5 issued US patents in 2 patent families are offered for sale”
• Applicable market and technology description
• “$4B annual market for white light LED light bulbs”
• Patent list
• Complete patent list including full patent families
• Status of patents in the list
• Bonus: patent family indicator, priority date, INPADOC ID, expiration date, key
patent highlighted
• Excel spreadsheet – 1 asset per row
• Contact information
• Who is the contact person for more information
• Who is the seller
• Sale process
• Bid due date, explanation of the process
• Disclaimers **
Minimum viable package
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Contents of a Package
• EOU available or provided
• Providing EOUs can be tricky – be prepared to provide EOU outlines, track
NDAs, representations regarding notice and damages
• Use a data room if necessary
• Pricing information
• History of the seller/inventors/commercialization
• Additional marketing and technical material
• What problem is present in the market and how does the invention
address that problem
• Companies identified as potentially infringing
• Technical references
Best practices package
• Citation and ranking analysis
Can be included
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What Else Do You Need?
•OCR’d copies of the patents and file wrappers
•Consider including prosecution of any international patents and any unissued applications
Patents and file wrappers
•Exact asking prices, ranges, “mid seven figures”
Pricing
•Licenses and other encumbrances – not all will be listed at the PTO
•Covered in NDA
•Use whitelists and blacklists
•Whitelist – these companies are not licensed
•Blacklist – none of these companies can be licensed
•Triple check this – after failed EOUs, it’s the next most common impact to your credibility
Encumbrances
•Check them ahead of time
Assignments
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Presales Diligence
Necessary
Can you sign the representations
and warranties?
Chain of title check
Complete assignments
Encumbrances identified – the
biggest ones at least
Good ideas
Inventors were
employees
Government funding
Standards bodies
Small entity status
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Conclusions and Final
Thoughts
•Market analysis
•Sales process
•Technology assessment
•Legal diligence
Multidisciplinary skill set needed
•You may only get one bite at the apple
Good checklists and templates help
•Managing the sales process, contacts, feedback, pricing
Sales job isn’t done
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… Remember not to list your valuable patent package as “PATENT”
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2016 Market Pricing
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Asking Price $K
Top and bottom 5 data points from
each set removed
Per Asset Per US Patent
Average $197.32 $271.44
Min $16.67 $36.11
Max $750.00 $1,000.00
StdDev $177.44 $217.53
NumData 431 416
• Prices are down stabilizing
• Prices vary substantially by package size
Market pricing
Copyright 2015 ROL
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Value Life of a Patent
• Mark Lemley litigation research
• Jonathan Retsky, Motorola internal study
• Kent Richardson, Rambus portfolio analysis
Most valuable patents are ~12 years old
• 4-5 years
Patents take a long time to obtain
• 8 years before volume production of products using the inventions
• $XB markets take time to develop
But volume production takes longer
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Characteristicsof More
Valuable Patents
• > 8 years old
Age
• >$1B
• Many companies
• Few patents
• Demonstrated use in the market
Market
• Open continuations
• Many cited patents
• Clear demonstration of further patent development in the family
• International coverage
• Clear claims
• Varying scope of claims
Prosecution
• Ability to quickly see if someone is using the patented technology
Visibility
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OurCo’s Ecosystem of
Patent Risk
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Patent threats come from OurCo’s near
ecosystem
What is OurCo’s business ecosystem?
Competitors
CustomersSuppliers
Partners
OurCo
Corporate asserters
OurCo’s potential patent
risk
Copyright 2015 ROL
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Contact us
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IAM Market
IAM Market – Asia:
Daniel Cole
Business Development Director, Asia
dcole@GlobeBMG.com
+852 3956 1600
IAM Market – Rest of the world:
Gavin Stewart
Managing Director, IP Division
gstewart@GlobeBMG.com
+44 20 7940 4863
Kent Richardson
Partner
kent@richardsonoliver.com
+1 650 967 6555
ROL Group