Secondary Patent Market: Buyers, Sellers, Pricing and Trends
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This panel will discuss the current state of the secondary patent market, who’s buying, who’s selling, and at what price? It will look at what happens to patents after a sale, including the chance of winning on a bought patent. It will examine both standalone sales and the relatively invisible marketplace in which patents contribute significant value to a deal, including M&As, technology spinouts, JVs, tech-transfers, and exclusive field-of-use licenses.
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Secondary Patent Market: Buyers, Sellers, Pricing and Trends
- 1. Business Sense • IP MattersBusiness Sense • IP Matters 1 Secondary Patent Market: Buyers, Sellers, Pricing, and Trends Kent Richardson December 14, 2017 Contact Information: +1 (650) 967-6555 kent@richardsonoliver.com Copyright 2017 ROL
- 2. Business Sense • IP Matters Agenda Look back Market dynamics Prediction Copyright 2017 ROL 2
- 3. Business Sense • IP Matters What’s the Secondary Patent Market? 3 Seller Buyer Copyright 2017 ROL
- 4. Business Sense • IP Matters What Is in a Brokered Patent Package? • List of patents for sale, applicable market, infringement analysis (claim chart), background on the seller • 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) 4Copyright 2017 ROL
- 5. Business Sense • IP Matters LinkedIn – What You Can Do Over Four Years 2011 0 500 1000 1500 2000 2500 #ofAssets Portfolio Growth by Priority Year Organic Portfolio Projected Organic Portfolio 2016 0 500 1000 1500 2000 2500 2003 2004 2005 2006 2007 2008 2009 2010 2011 2012 2013 2014 2015 2016 #Assets Total Portfolio by Priority Year Acquired Portfolio Organic Portfolio 5Copyright 2017 ROL
- 6. Business Sense • IP Matters Where Is the Patent Market Today? 6Copyright 2017 ROL
- 7. Business Sense • IP Matters Ten Years Ago Secondary Market 7 2007 IV the biggest buyer Few brokers AST and RPX Few capable buyers What’s a good deal? Copyright 2017 ROL
- 8. Business Sense • IP Matters Five Years Makes a Difference 8 2012 2017 Sources Transactions Pricing Capabilities Private Public Only WSJ published deals Quarterly public data Skewed Intellectual Ventures plus select companies Quarterly public data SMEs buying Copyright 2017 ROL
- 9. Business Sense • IP Matters Agenda Look back Market dynamics Prediction 9Copyright 2017 ROL
- 10. Business Sense • IP Matters Deal Flow 10 Sellers Buyers Direct Sales >1000 deals per year hit the market Copyright 2017 ROL
- 11. Business Sense • IP Matters $0 $2 $4 $6 $8 $10 $12 $14 2011 2012 2013 2014 2015 2016 2017 2018 $12.5B in Patents Offered on the Secondary Market 11 Cumulative sum of asking prices of 110,000 plus patent assets in 119 technology categories Copyright 2017 ROL Unsold Sold Billions of dollars of unsold patents on the market. Litigation risks continue to increase $B
- 12. Business Sense • IP Matters What’s the Asking Price of a Patent? $252,367 12Copyright 2017 ROL
- 13. Business Sense • IP Matters Caveats – Sure There Are a Few 13Copyright 2017 ROL
- 14. Business Sense • IP Matters Asking Prices Reported Quarterly 14 Source: “Intellectual Ventures Back in Brokered Market in Q4,” Bloomberg BNA, March 10, 2017. https://www.bna.com/intellectual-ventures-back-n57982085043/ Copyright 2017 ROL
- 15. Business Sense • IP Matters $K Listing Year Average Asking Prices ($K) USMean AssetMean Asking Prices Are Stabilizing 15Copyright 2017 ROL
- 16. Business Sense • IP Matters What’s Hot in the Patent Market Today 16Copyright 2017 ROL
- 17. Business Sense • IP Matters Sales Rates Dropping or Shifting? Sales Rate by Listing Year Sales rates by listing year keep falling, even when adding projected sales Sales Rate of Inventory by Year But sales as a percentage of new listings per year are about the same 17Copyright 2017 ROL
- 18. Business Sense • IP Matters SalesRate # of Listings 2016 broker sales rate by number of listed packages SalesRate 2016 Sales Rate 10.8% Some Brokers Are More Effective Than Others 18Copyright 2017 ROL
- 19. Business Sense • IP Matters SalesRate # of Listings 2015 broker sales rate by number of listed packages SalesRate 2015 Sales Rate 19.5% And Some Do Amazingly Well 19Copyright 2017 ROL
- 20. Business Sense • IP Matters Valueforbusinesspurpose Proportion of the patent market Value Distribution in the Secondary Market 20 Goal: Identify high-value patents to purchase (1-2% of market) Copyright 2017 ROL
- 21. Business Sense • IP Matters Sequencing Diligence is Critical 21Copyright 2017 ROL
- 22. Business Sense • IP Matters 66% 13% 13% 4% 3% 2% Distribution of seller type by sale year 2016-2017 Operating company NPE Inventor University/research Defensive aggregator Other Distribution of Seller Type by 2017 Sale Year Operating Companies Dominate the Market 22 Operating companies represent over 66% of the patents on the market, same as last year NPEs decreased their sales for the first time in 3 years, but not all sales appear in the brokered market Cross-licensing prior to competitor patent sales is a benefit Copyright 2017 ROL
- 23. Business Sense • IP Matters 46% 37% 13% 4% Distribution of buyer type by sale year 2016-2017 Operating company NPE Defensive aggregator Other Distribution of Buyer Type by 2017 Sale Year 23 Operating companies remain top buyers NPE buying is ticking back up to 37% from 32% IV ended their buying program RPX and AST tied for top single buyer Copyright 2017 ROL
- 24. Business Sense • IP Matters Multiple Sellers and Buyers 2016 - 2017 Top Sellers by Package Count Aaron Emigh Allied Security Trust (AST) ATT Clifford Sweatte Cypress Semiconductor Corporation Foxsemicon Integrated Technology, Inc. Hewlett Packard Enterprise (HPe) Honeywell International Inc. Huawei Technologies Co. Ltd. IBM Intel Corporation MITRE Corporation Panasonic Corporation Rovi Corporation (Before Tivo acquisition) RPX Satyajit Patwardhan Sergey Mavrody Siemens Silent Communication Ltd Verizon 24 Top Buyers by Package Count Allied Security Trust (AST) Apple Inc. Beijing Xiaomi Mobile Software Co., Ltd. Belisso Llc Blackbird Tech Llc Cria Inc. Empire IP, LLC Entit Software Llc Google Inc. Huawei Technologies Co., Ltd. Insight Interfaces Llc Intellectual Ventures Knapp Investment Company Kudelski SA Marking Object Virtualization Intelligence, Llc Microsoft Corporation Mobile Synergy Solutions, LLC (Monument Patent Holdings subsidiary) Copyright 2017 ROL Top Buyers by Package Count Munitech Ip SARL Nuance Communications, Inc. Open Invention Network, Llc Optimum Communications Services, Inc. Pathunt Ip Management Limited Rakuten, Inc. Regional Resources Limited RPX Servicenow, Inc. Sk Hynix Inc. Spectrum Patents, Inc. Taiwan Semiconductor Manufacturing Co., Ltd. Twitter, Inc. Uber Technologies, Inc. Uniloc Luxembourg S.A. Vector Capital Corporation
- 25. Business Sense • IP Matters Litigation Analysis: You Can Model Your Risk Has Litigation Has IPR Package Type Prior to listing date After listing date Prior to listing date After listing date Sold packages 6.3% 14.3% 0.3% 4.5% All packages 4.2% 5.0% 0.2% 1.4% 25 14.3% of sold packages are litigated – time to update models? 4.5% of sold packages are IPRed after listing – very few before they are listed Both sold and unsold packages are litigated post listing Defensive aggregator value may be greater than anticipated Copyright 2017 ROL
- 26. Business Sense • IP Matters What Happens when You Litigate Bought Patents? °Operating companies are successful °33% self-generated vs. °23% bought °Conclusion: bought patents work, and factor the spread into your models Attorney-Client Privileged & Confidential 26 Source: “Patent Purchases and Litigation Outcomes.” Lemley et. al. 2016 Patently-O Patent L.J. 15 (December 2016)
- 27. Business Sense • IP Matters Agenda Look back Market dynamics Prediction 27Copyright 2017 ROL
- 28. Business Sense • IP Matters Where Is the Market Going? 28Copyright 2017 ROL
- 29. Business Sense • IP Matters Trends and Predictions More international sales Prices – stabilized Sales rates – remain low Faster and simpler transactions expand market NPEs continue to buy – fewer buyers drive this part of the market More brokers leave 29Copyright 2017 ROL
- 30. Business Sense • IP Matters Attorney-Client Privileged & Confidential 30 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
Editor's Notes
- Private and public deals tracked by the ROL Group Graph shows the cumulative asking price of sold and unsold assets. Where no asking price is provided by the seller, the average asking price is used.
- Results varied by entity type (average across all types was 21% success bought vs. 28% self-generated) Data set focused on patents that were litigated with the suit brought in 2009-2010 and taken to a substantive decision Different types of entities had different results with bought patents (e.g. PAEs 11%, failed startups 22%, inventor-started companies 33%) Overall Bought patents work, you just need to factor the probabilities into your models Litigation not the only reason to make purchases