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Collapse of the Patent Market? No

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What is the current trend of the brokered patent market, and how can you as a buyer or seller exploit the current patent climate? We look into market pricing, litigation risks, top buyers and more to help you decide your best patent options for 2015.

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Collapse of the Patent Market? No

  1. 1. Business  Sense  • IP  MattersBusiness  Sense  • IP  Matters 1 Collapse  of  the  Patent   Market?  No Kent  Richardson September  22,  2015 Contact  Information: +1  (650)  967-­‐6555 info@richardsonoliver.com
  2. 2. Business  Sense  • IP  Matters Agenda Patent   Market   Trends  and   Forecast Introduction  to  the  brokered  patent  market Is  this  the  time  to  buy?  Market  prices  for  patents  today  and  trends Who  is  buying  and  who  is  selling Financial  technology  patent  market How  to  Buy   Effectively? Corporate  patent  buying  overview What  are  others  buying?  What  does  Intellectual  Ventures  buy? Attorney-­‐Client  Privileged  &  Confidential 2
  3. 3. Business  Sense  • IP  Matters Brokered  Patent  Market • Quasi-­‐public  market  for  patents  supplied  by  patent  brokers  and  regular   sellers • Patents  are  business  assets  and  trading  in  them  is  a  natural  extension  of   patent  strategy  complementing  business  strategy • If  patents  can  be  traded,  a  value  and  price  can  more  easily  be  defined • Patent  packages  presented  from  patent  brokers  and  regular  patent  sellers Why  trade  in  patents? • Market  dynamics  are  not  well  understood  – clients  want  to  answer  these   questions: • Am  I  getting  a  good  price? • Are  these  good  deal  terms? • Are  there  better  patents  available? • Few  companies  have  substantial  information   about  the  market,  which  gives   them  an  advantage • NPEs  have  more  information  -­‐ Intellectual  Ventures,  Acacia Why  study  the  patent  market? 3
  4. 4. Business  Sense  • IP  Matters 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) •Receive  about  50  packages  per  month  covering  a  broad  range  of  technologies   Package  flow 4
  5. 5. Business  Sense  • IP  Matters Patent  Buying  Ecosystem 5 Patent   Market Buyers •Apple,  Amazon,   Facebook,   Google,  Intel,  Microsoft,   Qualcomm •Intellectual  Ventures,   Acacia •RPX,  OIN,   AST,  Unified   Patents Sellers •SMEs,  Cisco,  Yahoo!,   ATT,   Verizon •Intellectual  Ventures Brokers •Patent  Profit,  Epicenter,  ICAP •Bankers,  law  firms,   IAM   managers •Grow  faster  than  organic  growth  of  portfolio •R&D  does  not  align  with  counter  assertion  strategy •Best  patents  have  early  priority  (8+  years  old) •Knowledge  about  an  important  market Why  buy  patents? •About  $1B  per  year  in  brokered  patent  opportunities •~600  deals  per  year How  big  is  the  market? You  Attorney-­‐Client  Privileged  &  Confidential
  6. 6. Business  Sense  • IP  Matters How  Big  Is  the  Market? 6 • Since  2011,  we  have  tracked  $4.5B  of  brokered  patent  packages  +  $2.4B  of  non-­‐brokered • Over  2,000  packages  with  over  63,000  patent  assets • 118  technology  categories  represented  from  LEDs,  Displays,  Social  Networks,  Automotive Robust  market  – Nearly  $7B  of  patent  deals  tracked • 566  brokered  packages  received  containing  nearly  9,000  patent  assets 2015  market  remains  robust • Source  Richardson  Oliver  Law  Group  LLP,  2015  Brokered  Market  Report
  7. 7. Business  Sense  • IP  Matters Overall  Price  of  All  New  Packages  by  Month   (2015  Measurement  Year) 7 • 2015  measurement  year  is  June  2014  to  May  2015 • Source  Richardson  Oliver  Law  Group  LLP,  2015  Brokered  Market  Report
  8. 8. Business  Sense  • IP  Matters It’s  a  Great  Time  to  Be  a  Buyer! 8 • 2015  asking  price  $190K  per  asset,  down  from  $269K  in  2014 • More  lower  priced  deals  in  2015  drops  the  asking  prices • Market  is  becoming  more  efficient  at  selling  low  price  packages,  plus  prices   are  dropping Asking  prices  are  down $190K • Source  Richardson  Oliver  Law  Group  LLP,  2015  Brokered  Market  Report
  9. 9. Business  Sense  • IP  Matters Claim  Charts  Drive  Pricing • Average  asking  price  per  asset  dropped  by  29% • 2014  Market:  $269K  to  2015  Market:  $190K • Large  variance  in  the  asking  prices  – pricing  volatility  remains Asking  prices  per  asset • Average asking  price  per  US  patent  in  packages  with  claim  charts  dropped  by  7% • 2014  Market:  $367K  to  2015  Market:  $341K • 25%  better  chance  of  a  sale  if  there  is  an  claim  chart Claim  charted  packages  maintain  their  pricing  power Attorney-­‐Client  Privileged  &  Confidential 9 All  Packages Packages  with  Claim  Charts $K  per  Asset $K  per  US  Patent $K  per  Asset $K  per  US  Patent Average $190   $277   $255   $341 Min $17   $30   $23   $42 Max $925   $1,000   $1,000 $1,143 StdDev $183   $249   $233 $271 • Source  Richardson  Oliver  Law  Group  LLP,  2015  Brokered  Market  Report
  10. 10. Business  Sense  • IP  Matters Distribution  of  Seller  Type  by  Sale  Year 10 •Operating  companies  represent  over  60%  of  the  patents  on  the  market •NPEs  have  substantially  increased  their  sales  activities  likely  as  a  result  of  difficulties   enforcing  their  patents •Companies  obtaining  cross-­‐licenses prior  to  competitors  selling  their  portfolios  will   continue  to  benefit Operating  companies  dominate  the  market Attorney-­‐Client  Privileged  &  Confidential Top  Sellers  (All  Years by  Package  Count) Alcatel  Lucent Allied  Security  Trust  (AST) ATT BAE  Systems ETRI Fujitsu HP Italian  National  Research  Council Korea  Institute  of  Science  and  Technology   (KIST) RPX Siemens Sony  Corporation Spansion Verizon Xerox  Corporation • Source  Richardson  Oliver  Law  Group  LLP,  2015  Brokered  Market  Report
  11. 11. Business  Sense  • IP  Matters Distribution  of  Buyer  Type  by  Sale  Year 11 • NPE  buying  remains  a  significant  part  of  the  market  with   Intellectual  Ventures  leading  the  buying Operating  companies  remain  strong  buyers Attorney-­‐Client  Privileged  &  Confidential Top  Buyers  (All  Years  by  Package  Count) Allied  Security  Trust  (AST) Apple  Computer Intellectual  Ventures LinkedIn Google RPX Open  Invention  Network  (OIN) Qualcomm • Source  Richardson  Oliver  Law  Group  LLP,  2015  Brokered  Market  Report
  12. 12. Business  Sense  • IP  Matters Sales  Rate  Is  Up  (a  Little) 12 • Represents  the  percentage  of  patent  packages  sold  (as  recorded  in  the  US  Patent  &  Trademark   Office  assignment  records) • Sales  rates  remain  down  sharply  from  2009,  with  estimated  2014  packages  slightly  higher • Packages  sell  in  the  first  two  years  à sales  data  lags  listing  data  by  about  2  years Sales  rates  are  up  slightly,  but  still  below  30% Attorney-­‐Client  Privileged  &  Confidential • Source  Richardson  Oliver  Law  Group  LLP,  2015  Brokered  Market  Report
  13. 13. Business  Sense  • IP  Matters 2015  Packages  by  Technology 13 •Heavily  skewed  towards  software  and  cloud  computing   •However,  there  has  been  a  shift  away  from  software  patents,  likely  as  a  result  of  US  case  law •Business  process  packages  continue  to  come  to  market High  technology  patents  remain  the  market’s  focus •563  packages  received  in  2015  sample  year •Financial  transaction  enabling  technologies  are  well  represented  at  5%  of  the  packages •Example  technologies  include  payments,  ecommerce,  and  financial  instruments 2015  Fintech • Source  Richardson  Oliver  Law  Group  LLP,  2015  Brokered  Market  Report
  14. 14. Business  Sense  • IP  Matters 2015  Average  Asking  Price  per  US  Issued  Patent   by  Tech  Category  (US$) Attorney-­‐Client  Privileged  &  Confidential 14 • Tech  pricing  is  important  for  making  buying  decisions • Business  processes  (Financial  Technology)  related  patents   demand  price  premiums   Pricing  by  tech  category • Source  Richardson  Oliver  Law  Group  LLP,  2015  Brokered  Market  Report
  15. 15. Business  Sense  • IP  Matters 15 Focus  on  Payments:  Patents  Are  Increasingly   Important  – Through  2012 Traditional  financial   institutions  are   becoming  more  patent   savvy Industry  patent  filings  have  increased  steadily,  55%  per  year   from  2002  to  2012 Payment  players  are  becoming  more  explicit  about  their  IP   position  and  negotiating  deals  based  on  their  patent   portfolio Increasing  patent  litigation  and  licensing  threats   necessitates  the  development  of  strategic  patent  portfolios   to  mitigate  litigation  risk  and  maintain  freedom  to  operate Innovations  from   new  players  are   becoming  driven   by  value  chain   expansion  and   technology   convergence Emerging  players  and  new  entrants,  such  as  Google,  Apple,  and   MCX,  are  expanding  into  payments  with  very  active  patent   programs  supporting  their  efforts Mobile  phone  patent  wars  have  trained  emerging  payments   players  in  patent  strategy  including  litigation Negative   impact  of  new   US  case  law June  2014  US  Supreme  Court  decision  knocks  out  many  software  and   business  process  patents  (the  Alice  decision) 18  month  delay  of  publishing  filings  makes  Alice  impact  on  filing   rates  unknowable Expect  steep  decline  in  filings  around  user  experience,  financial   instruments,  business  processes Expect  increased  focus  on  infrastructure  and  hardware  enabling   patent  filings 0 100 200 300 400 500 600 2004 2005 2006 2007 2008 2009 2010 2011 2012 Annual PaymentPatent Filings by Traditional FIs Mastercard Visa American Express Chase Bank of America 0 50 100 150 200 250 300 350 400 450 2004 2005 2006 2007 2008 2009 2010 2011 2012 Annual PaymentPatent Filings by Emerging Players Google Amazon eBay Apple ChinaUnionPay Mastercard • Source:  Ocean  Tomo  Payments  Analysis,  Spring  2015
  16. 16. Business  Sense  • IP  Matters Alice  and  Fintech  Sales  Rates  Are  Down  Relative   to  Overall  Market  Sales  Rate Alice  Impacted  Patent  Packages  Still   Selling  Better  Than  Overall  Market Fintech  Sales  Rates  Are  Down   Substantially 16
  17. 17. Business  Sense  • IP  Matters Agenda Patent   Market   Trends  and   Forecast Introduction  to  the  brokered  patent  market Is  this  the  time  to  buy?  Market  prices  for  patents  today  and  trends Who  is  buying  and  who  is  selling Financial  technology  patent  market How  to  Buy   Effectively? Corporate  patent  buying  overview What  are  others  buying?  What  does  Intellectual  Ventures  buy? Attorney-­‐Client  Privileged  &  Confidential 17
  18. 18. Business  Sense  • IP  Matters Corporate  Buying  Program  -­‐ Overview •Reduce  exposure  to  corporate  patent  assertions  by  building  a  counter  assertion   portfolio •Examples  of  active  corporate  asserters  include  IBM,  Qualcomm,  Microsoft •New  asserters  rise,  especially  when  revenues  are  down Primary  goal:  DEFENSE •Buy  patents  to  reduce  the  risk  that  those  patents  can  be  used  against  you •Other  techniques  work  here  too,  buying  consortium  (e.g.  RPX) Secondary  goal •Legal  patent  diligence  can  cost  $5-­‐50K,  other  diligence  is  cheaper  and  can  filter  out   many  packages •Business  rules  based  buying  criteria  help  you  to  filter  out  packages  quickly  and   efficiently •Eliminate  low  value  packages  quickly •Over  98%  of  the  packages  will  not  meet  your  business  needs •Not  because  the  packages  have  low  quality  patents Biggest  challenge  is  cost  of  diligence 18
  19. 19. Business  Sense  • IP  Matters Process  Overview  – Example  Package  Filtering 19 ROL   package   database Search   results   candidate   pool Preliminary   human   filtering Detailed   filtering Test   availability   and  EOU   creation Further   testing Bidding   and  buying 2049 451 82 (20-­‐40) (10-­‐20) (5-­‐10) (3+) Actual  (or  Estimated)  Number  of  Packages  Remaining
  20. 20. Business  Sense  • IP  Matters Effective  Filtering  of  Patents  Reduces  Costs 20 >  60%  packages  eliminated  because  the  specific  technology  does  not  match  the  business  need Claim  analysis  and  prior  art  searches  are  more  labour-­‐intensive  and  costly  and  should  be  delayed • Source  Richardson  Oliver  Law  Group  LLP,  2015  Brokered  Market  Report
  21. 21. Business  Sense  • IP  Matters IV  was  buying  when  the  market  was  down  and  continued  to  buy  throughout  the  downturn Assignment  data  reflects  opportunistic  purchases  from  struggling  companies Top  Buyers  –Intellectual  Ventures’  First  Two   Funds 21 • Kent  Richardson  and  Erik  Oliver,  "What's  inside  IV's  patent  portfolio?"  IAM  Magazine,  Issue  66,  July/August  2014
  22. 22. Business  Sense  • IP  Matters Estimated  Spend  by  IV  per  Year Total  Est.  Spend  $1.7B 22
  23. 23. Business  Sense  • IP  Matters Who  is  Selling? Ordered  by  Number  of  Patents  Sold  (at  least  30  sold) Top  20 Next  20 Next  20 Next  20 Kodak Nortel Recursion  Software Mosaid Digimarc Cubic  Wafer Hong  Kong  Technologies Lapis NXP Genesis  Microchip Nippon  Steal Casio Raytheon Marconi  IP Fujitsu Thales Mangachip Delphi Chunghwa  Picture  Tubes Alcatel-­‐Lucent Telcordia Verizon Sonic Dowling  Consulting Transmeta Aplus  Flash AT&T Lockheed  Martin Spyder  Navigations Autocell Katrein-­‐Werke Pulse-­‐Link Amex Crosstek  Capital California  Inst  of  Tech Lightspeed  Logic Polaroid Tier  Logic Be  Here PSS  Systems Cypress  Semi Mindspeed  Technologies Digital  Imaging  Systems DuPont Daimler Cirrus  Logic Ideaflood Lightsmyth  Tech France  Telecom Kimberly-­‐Clark UMC ST  Micro Primax  Electronics Airnet  Communications Microsoft Rockwell Conexant Idelix  Software Airip Cooler  Master BAE Icefyre  Semi Discovision Xerox Sanyo Mitsubishi Motorola Arraycom Nokia Neomagic Triquint Believe Bellsouth Oki  Electric Terabeam General  Dynamics Entorian IPWireless Exclara 23 Many  “blue-­‐chip”/household  names  among  sellers  of  patents  to  IV Implications?  How  would  something  like  a  cross-­‐license  impact  a  future  aggregator? • Kent  Richardson  and  Erik  Oliver.  "What's  inside  IV's  patent  portfolio?"  IAM  Magazine,  Issue  66,  July/August  2014
  24. 24. Business  Sense  • IP  Matters IV’s  International  Asset  Distribution 24 IIF  portfolio  has  some  international  coverage  ~10K  assets—weak  in  BRIC • Kent  Richardson  and  Erik  Oliver.  "What's  inside  IV's  patent  portfolio?"  IAM  Magazine,  Issue  66,  July/August  2014
  25. 25. Business  Sense  • IP  Matters IV  Buys  Patents  that  Are  5-­‐14  Years  Old 25 Robust  continuation  practice Approx.  8%  of  portfolio  today • Kent  Richardson  and  Erik  Oliver.  "What's  inside  IV's  patent  portfolio?"  IAM  Magazine,  Issue  66,  July/August  2014
  26. 26. Business  Sense  • IP  Matters IV’s  Technology  Market  Areas Based  on  CPC  Code  Analysis 26 • Kent  Richardson  and  Erik  Oliver.  "What's  inside  IV's  patent  portfolio?"  IAM  Magazine,  Issue  66,  July/August  2014
  27. 27. Business  Sense  • IP  Matters IV  Has  Not  Stopped  Buying • Launched  around  2014 • Purchased  technologies • Media  storage • Computer  memory • Spansion  assets • Rambus  assets • Networking • Cable  TV III  Fund  buying • Buying  is  less  aggressive  than  Fund  I   and  II • Less  capital  in  Fund  III • Concern  over  inflating  the  price  of   patent Fewer  purchases 27 • Richardson  Oliver  Q1  2015  Patent  Sales  Report
  28. 28. Business  Sense  • IP  Matters Conclusions •$B  of  patents  brought  to  market  every  year •Diverse  technology  areas •Asking  prices  have  dropped  to  $190K  per  asset  à excellent  time  to  be  buying •Sales  rates  remain  relatively  low  at  30% •Financial  technology  related  patents  continue  to  be  available  and  command  a  price   premium Patent  sales  market  remains  robust •Patent  buying  allows  corporations  to  purchase  patents  they  could  not  have  invented •Priority  dates  can  predate  any  research  and  product  development  of  the  purchaser •Patent  counter  assertion  purchases  drive  corporate  buying  – “We  will  sue  you  back,  if   you  sue  us” •Managing  key  diligence  questions  early  drops  your  cost  of  finding  and  buying  patents •Focusing  patent  buying  criteria  on  priority  date,  specific  technologies  matters  (see  IV) •Once  bought,  continue  to  develop  the  portfolio  (8%  of  IV’s  portfolio  is  continuations) Corporate  patent  buying  addresses  strategy  needs 28
  29. 29. Business  Sense  • IP  Matters Attorney-­‐Client  Privileged  &  Confidential 29 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

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