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Negotiating and Closing Patent Purchase Transactions in the post-Alice/PTAB Review Era


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Attendees will learn what the buzz words “patent monetization” actually mean and what entities in fact monetize patents (operating companies/NPEs).
Attendees will further hear different reasons for the buying and selling of patents.
The webinar will then present a few of the changes that have occurred in the market over the last couple of years (including, the Alice decision, PTAB/IPR proceedings, fee shifting) and the effects these changes have had on the market.
In particular, we will discuss how such changes have affected the way patent purchase transactions are sourced, negotiated and drafted.
Lastly, we will offer up some tips for how to successfully buy/sell patents in today’s market.

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Negotiating and Closing Patent Purchase Transactions in the post-Alice/PTAB Review Era

  1. 1. Negotiating and Closing Patent Purchase Transactions in the post-Alice/PTAB Review Era November 2015 Lillian Safran Shaked, Adv. Partner E-mail: Website: 98 YigalAlon St. | Tel Aviv 6789141 | Israel | Tel: +972-3-372-1114 | Fax: +972-3-372-1115
  2. 2. What is Patent Monetization?  The generation of revenue or the attempt to generate revenue by selling or licensing patents  Can be conducted by operating companies or non-operating companies
  3. 3. Reasons to Buy Patents?  Augment an existing portfolio – without added R&D costs  Generate licensing revenue  Build a defensive portfolio  Attract investors
  4. 4. Reasons to Sell Patents?  Patents are a liability as well as an asset  Patents in someone else’s hands may generate more revenues than in your hands  Bring in needed cash  Core/non-core patents
  5. 5. What is the “Alice” decision? Alice Corp. v. CLS Bank International  2014 decision of the Supreme Court - considered as a decision on the patentability of software patents and business method patents  Computer-implemented, electronic escrow service used for facilitating financial transactions based on anticipated future actions  Implementation of an “abstract idea” on a computer - not enough to transform that idea into patentable subject matter  Post Alice - patents with abstract or obvious claims or claims subject to prior art not eligible for patent protection despite the operation through or use of electronic means (such as a computer)
  6. 6. What is the PTAB Review/IPRs Era?  The Leahy–Smith America Invents Act (the “AIA”) made significant changes to the U.S. patent system: o Instituted post-grant opposition proceedings (“reexaminations”)  A reexamination is a process whereby a third party can have a patent reexamined by a patent examiner to verify that the subject matter it claims is patentable  Provides patent challengers an expanded base on which to attack patents  Cost for a company to file and prosecute an IPR to a decision by PTAB is between $200,000 and $500,000
  7. 7. Statistics:  Since Alice in 141 Federal Court decisions – 104 patents were found invalid and 4,672 of 6,519 claims were found to be invalid. (  In nearly three years following the first IPR having been filed, 71% of all patent claims reviewed were invalidated by the PTAB and 100% of all CBM claims were invalidated ( minated_to_date%2001%2015%202015.pdf)  From 2012-2014, patent sales (in dollars) dropped by 84%, the number of patents sold dropped by 59% and the average price dropped by 61% (
  8. 8. What is Fee Shifting?  On February 5, 2015, Rep. Robert Goodlatte introduced a proposed amendment to the AIA – Award attorneys’ fees and litigation-related expenses absent finding that “conduct was reasonably justified or that special circumstances make an award unjust.”  Courts already have the authority to penalize parties bringing non-meritorious claims of patent infringement and to compensate those unjustly targeted  In Octane Fitness v. ICON Health & Fitness, the Supreme Court held that district court judges possess broad discretion to award attorneys’ fees in patent infringement litigations
  9. 9. Effects?  First stage - confusion and uncertainty – patent transaction market shuts down  Second stage – patent prices fall drastically, little movement of patents  Third stage – financial players emerge to pick up the pieces, offer both funding for deals, funding for litigation and insurance (fee shifting), patent syndicates emerge
  10. 10. What’s Changed? Assets Players Pricing Deal Terms
  11. 11. Assets  type of assets (system, hardware, software)  more homework and better preparation needed to be done by sellers (claim charts, internal due diligence)  bigger portfolios (more patents, continued prosecution, foreign assets)
  12. 12. Players  larger players (both buyers and sellers)  more capital available  deal structures – PIPCOs, reverse mergers into shells, SPVs  bigger portfolio deals
  13. 13. Pricing  lower up front  bigger back-end  staggered longer time for payments  net rather than gross share
  14. 14. Deal Terms  due diligence  document production (declarations)  reps and warranties (back-to-back, risk sharing)  standing issues (exclusive rights, no reversion assignment)  cooperation post-closing (access to inventors)  indemnification  limitation of liability (from payments to investment)
  15. 15. Timing  longer time to source, diligence, negotiate, close  funding in the interim – options  cost of capital
  16. 16. How to Succeed? Use consultants, brokers, prosecution counsel, licensing counsel, financing partners:  Understand the market  Understand who are your potential buyers/sellers  Diligence the assets in advance (both the actual assets and similar assets)  Set reasonable expectations  Consider interim financing  Have patience
  17. 17. Thank you