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It's Not Just About the Patent: Patent Market Factors

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We present a proposal for evaluating the total infringed market (TIM) and serviceable infringed market (SIM), and analogies to metrics used in product marketing.

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It's Not Just About the Patent: Patent Market Factors

  1. 1. IT’S NOT JUST ABOUT THE PATENT: PATENT MARKET FACTORS KENT RICHARDSON GM THINKFIRE SILICON VALLEY PATENT MONETIZATION CONFERENCE LAW SEMINARS INTERNATIONAL JANUARY 29, 2009
  2. 2. Copyright ThinkFire Services USA, Ltd. 2009 Two Sets of Market Factors • Scenario • I have a set of patents I want to sell/buy. I know what the encumbrances are and where the legal problems are. What market factors do I need to think about? • Two sets of factors determine price Patents’ Market: market for products using the patents Patent Transactions Market: market for buying/selling patents
  3. 3. Copyright ThinkFire Services USA, Ltd. 2009 The Patents’ Market: Meet the “IMs” – TIM & SIM • Product marketers use • TAM: Total Available Market • SAM: Serviceable Available Market • Patent marketing on our own terms • TIM: Total Impacted Market • SIM: Serviceable Impacted Market • Why new terms? Avoiding exec confusion
  4. 4. Copyright ThinkFire Services USA, Ltd. 2009 TIM: Total Impacted Market • TIM = total annual revenue of all products worldwide that use the patented technology • How big can the pie be? • Thoughts on TIM • Derived from top down market analysis • Helpful data sources iSupply, Dataquest… • This is (hopefully) a big number • Useful in first order valuation and relative rankings
  5. 5. Copyright ThinkFire Services USA, Ltd. 2009 SIM: Serviceable Impacted Market • SIM = total annual revenue of all impacted products where license revenue is available • SIM is like SAM • SAM – who will really buy the delivered product at the specified price and terms • SIM - who can the patent owner really license? • SIM determines value for the specific buyer
  6. 6. Copyright ThinkFire Services USA, Ltd. 2009 SIM: Serviceable Impacted Market 6 • Theory: SIM = TIM - Excluded Revenue • Excluded revenue includes revenue from • Existing licensees • Low probability patent enforcement countries • Companies with below threshold revenue • No assertion possible for other reasons • Practice: SIM = ACo Impacted Revenue + BCo Impacted Revenue + … • ACo… are revenues of actual licensable companies • Bottoms up build of which companies use the patented technology and where they derive revenues • SIM can be ZERO
  7. 7. Copyright ThinkFire Services USA, Ltd. 2009 SIM: SIM Factors for a Patent Enforcement Buyer 7 • Buyer’s product • Buyer’s abilities: resources, experience, commitment • Patent strength • Price and terms • Total $ being sought • Capture with flat fee, or cliff with running royalties • MFN’s • Go to market • How to enforce? • Existing business relationships • Supply chain point? • Reasons to take license • Specific product revenue impact • Jurisdictions - overlap of patents with prospective licensee product revenue/shipment • Ability to pay license • Finances • Reasons to not take license • Licensing history • Licensing competition – royalty stacking • Industry licensing practices Patent Buyer Factors Future Licensee Factors
  8. 8. Copyright ThinkFire Services USA, Ltd. 2009 Patent Transactions Market: Wow, What a Mess!!!! How big?Who buys? Who sells? Why do companies transact? Whatishappeningtoprices? Quality – where are we? How do we show quality? Legal environment impact? Financial debacle fallout? What is the time to money? New models? What sells?New kinds of deals?
  9. 9. Copyright ThinkFire Services USA, Ltd. 2009 Patent Transactions Market: Survey Says… 9 • 2009 Forecast • $800M bare patents transactions – flat YOY • IV continues to dominate & remains “Bold & Mysterious” • “The Year of the Buyer” • Deal flow spike since August • 3.5x number of deals in the market compared with two years ago – Intellectual Ventures • Defensive buying cutting back • Financial debacle impact • Other solutions exist: IV, RPX, OIN, AST • Patent litigation drop in Q408
  10. 10. Copyright ThinkFire Services USA, Ltd. 2009 Patent Transactions Market: Survey Says… 10 • Some good news for sellers • New buyers entering the market • Direct line of sight to value – more of these buyers • IV, RPX, OIN, AST • Licensing companies • “Specific solutions” patents are still hot - companies defending against specific assertions • See “Recession and Evolution: The Patent Transactions Market at a Crossroads”, IAM Magazine, March 2009
  11. 11. Copyright ThinkFire Services USA, Ltd. 2009 Conclusions 11 • Patents’ Market • Total Impacted Market and buyer specific Serviceable Impacted Market (TIM & SIM) determine value • Patent Transactions Market • 2009 Year of the Buyer
  12. 12. Copyright ThinkFire Services USA, Ltd. 2009 12 Silicon Valley Office Kent Richardson GM ThinkFire Silicon Valley 650 Castro Street, Unit 120-250 Mountain View, CA 94041 Phone 650.967.6555 Email: krichardson@thinkfire.com

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