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Readying a Patent for Sale


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Given that only 30% of patents on the market ever sell, and with many hundreds of patent packages available at any given time, how can you ensure that your offering stands out as attractive to serious buyers?

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Readying a Patent for Sale

  1. 1. Preparing Patents for Sale Kent Richardson’s slides June 23, 20156
  2. 2. Logo 2
  3. 3. Patent Sales as a Patent Monetization Option •Definition: Private or semiprivate sale of groups of related patents and applications •Considerations •Higher value is obtained where at least one value driving patent is included in the group •Direct sales rather than brokered sales will likely be more successful for larger groups of patents 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 3
  4. 4. Why Sell When It Makes the Least Amount of Money? Example Model (NPV Estimated) Mid ($M) High ($M) Low ($M) Sales (Baseline) $ 10 $ 20 $ 5 3rd Party License $ 30 $ 60 $ - Direct License $ 60 $ 120 $ -* 4 • Time to money is fastest • Risk is lowest – what is the impact of no sale versus no license revenue? • Other options negatively impact corporate culture and ecosystem • Rambus as a case study • Least distraction • Least resources needed • Least amount of skills needed • Vibrant and robust market Why sell?
  5. 5. 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 Attorney-Client Privileged & Confidential 5 2-3 months 6-12 months
  6. 6. 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 6
  7. 7. Asking Price $K With EOU Top/Bottom 5% Removed Per Asset Per US Patent % EOU Packages Asking Price vs General Market 134% 123% Average $255.00 $340.58 Min $22.73 $41.67 Max $1,000.00 $1,142.86 StdDev $233.12 $270.98 NumData 167 165 Claim Charts (EOUs) Drive Pricing • Almost no drop in pricing for claim charted packages • 25% better chance of a sale if there is an claim chart Claim charted packages maintain their pricing power Copyright 2012-2016 ROL 7 • Source Richardson Oliver Law Group LLP, 2015 Brokered Market Report
  8. 8. More Than 1,000 EOUs Tell Us What’s Hot 8 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
  9. 9. 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 9 Copyright 2012-2016 ROL