1. Negotiating and Closing Patent Purchase Transactions
in the post-Alice/PTAB Review Era
November 2015
Lillian Safran Shaked, Adv. Partner
E-mail: lillian@shaked-law.com
Website: www.shaked-law.com
98 YigalAlon St. | Tel Aviv 6789141 | Israel | Tel: +972-3-372-1114 | Fax: +972-3-372-1115

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. Reasons to Buy Patents?
 Augment an existing portfolio – without added R&D costs
 Generate licensing revenue
 Build a defensive portfolio
 Attract investors

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. 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. 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. 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.
(http://www.bilskiblog.com/blog/2015/08/alicestorm-summertime-blues-continue.html)
 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
(http://www.uspto.gov/sites/default/files/documents/inter_partes_review_petitions_ter
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%
(http://patentlyo.com/patent/2015/06/america-invents-trillion.html#_ftn1)

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. 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. What’s Changed?
Assets
Players
Pricing
Deal Terms

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. Players
 larger players (both buyers and sellers)
 more capital available
 deal structures – PIPCOs, reverse mergers into shells, SPVs
 bigger portfolio deals

13. Pricing
 lower up front
 bigger back-end
 staggered longer time for payments
 net rather than gross share

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. Timing
 longer time to source, diligence, negotiate, close
 funding in the interim – options
 cost of capital

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. Thank you