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Business Sense • IP MattersBusiness Sense • IP Matters
APLI – Impact of the Patent
Market 2016
Kent Richardson
December 8, 2016
Contact Information:
+1 (650) 967-6555
info@richardsonoliver.com
Copyright 2016 ROL 1
Business Sense • IP Matters
2016 Market Overview
• Asking prices have stabilized
• Sales are down
• Sales rates of 2016 listings decreased significantly
• Total transactions also down, but less so
• Brokered market down to $165M from $233M last year
Market trends
• New sources have expanded buying opportunities
• IAM Market and IP3
New places to buy
• NPEs pulling back from the market
• Purchases by corporations have exceeded NPE purchases
• Even Intellectual Ventures (IV) is affected
• IV no longer buys the most: RPX is the new buying leader
• Alice crushed much of the fintech patent market and impacted software package sales rates
Negative patent decisions having impact
• Litigation risk from sold packages is much higher than previously reported (better source data)
• Reconsider your risk models
• Reconsider membership in defensive aggregators
Litigation
Copyright 2016 ROL 2
Business Sense • IP Matters
Market Context
•Since 2011 we have tracked $7.5B brokered and $3.7B non-brokered patent packages
•Over 3,700 packages with 90,000 patent assets
•Over 100 technology categories represented across hardware, software, communications; including automotive-specific categories
Robust market - Over $11B of patent deals tracked
$0
$2
$4
$6
$8
$10
$12
$14
Cumulative sum of asking prices ($B) - brokered and private market
Cum Sum Asking Price (Entire Market) Cum Sum Total Asking Price (Sold)
Predicted Cum Sum Asking Price (Entire Market) Predicted Cum Sum Total Asking Price (Sold)
Copyright 2016 ROL 3
Business Sense • IP Matters
Patent Market Moves Closer to Mainstream
Bloomberg Publishes Patent Market
Data Participates Move to Optimize
• What is the patent market?
To
How do I participate
effectively?
• Can I address patent
problems by buying patents?
To
How do I find the best
patents the fastest and
cheapest?
Narrative shifting from:
Copyright 2016 ROL 4
Business Sense • IP Matters
What’s Hot in the Patent Market Today
Copyright 2016 ROL 5
Business Sense • IP Matters
Market Context: 2016 Pricing Stabilization
Asking Prices ($K) 2016 2015
Per Asset Per US Patent Per Asset Per US Patent
Average $197.32 $271.44 $190.31 $273.60
Min $16.67 $36.11 $17.24 $183.82
Max $750 $1000 $925 $1000
StdDev $177.44 $217.53 $181.14 $243.54
NumData 431 416 440 431
•Pricing has stabilized – and is taken more seriously by buyers
•Prices are almost exactly the same as last year
•Standard deviations are smaller
•But, sales rate of 2016 listings is significantly below that of a comparable period last year
•Prices vary substantially by package size
Market pricing
Copyright 2016 ROL 6
Business Sense • IP Matters
66%
17%
10%
3% 2% 1%
Distribution of seller type by sale year 2015-2016
Operating company
NPE
Inventor
University/research
Defensive aggregator
Other
Distribution of Seller Type by Sale Year
•Operating companies represent over 66% of the patents
on the market down from 71%
•NPEs increased their sales up last year, this has continued
- 17% up from 16% - likely as a result of difficulties
enforcing their patents
•Cross-licensing prior to competitor patent sales is a
benefit
Operating companies dominate the market
• Source Richardson Oliver Law Group LLP, 2016 Brokered Market Report
Top Sellers by Package Count
Alcatel Lucent
Allied Security Trust (AST)
ATT
BAE Systems, Inc.
British Telecom
Caveo
Elizabeth Dyor
Empire IP, LLC
Harris Corporation
IBM
Imation Corporation
Intel
NEC
Netsocket
Nokia Solutions and Networks (NSN)
Panasonic Corporation
Petnote LLC
QinetiQ Limited
Rockstar
Rovi Corporation
TP Lab, Inc.
Tyco Electronics
Verisign, Inc.
Verizon
VideoMining Corporation
Xerox/PARC
Copyright 2016 ROL 7
Business Sense • IP Matters
48%
34%
15%
3%
Distribution of buyer type by sale year 2015-2016
Operating company
NPE
Defensive aggregator
Other
Distribution of Buyer Type by Sale Year
•NPE buying is down to 32% (from 42%) – but still
significant buying
•We expect that remaining NPE’s are more sophisticated
•Monitoring the market continues to be valuable tool for
fighting the NPE problem
•IV buying dropped to only 13 packages (down from 40)
•How successful are IV’s licensing and sales?
•RPX is top single buyer
Operating companies now top buyers
• Source Richardson Oliver Law Group LLP, 2016 Brokered Market Report
Top Buyers by Package Count
9051147 Canada Inc.
Alliacense Limited Llc
Allied Security Trust (AST)
Beijing Xiaomi Mobile Software Co., Ltd.
Carlow Innovations LLC
Commscope Emea Limited
Domo, Inc.
Empire IP LLC
Facebook, Inc.
Finnavations LLC
Gemalto SA
Google Inc.
Huawei Technologies Co., Ltd.
Intellectual Discovery Co., Ltd.
Intellectual Ventures
Knapp Investment Company
Linkedin Corporation
Marking Object Virtualization Intelligence,
LLC
Microsoft Technology Licensing LLC
Open Invention Network, LLC
Optimum Communications Services, Inc.
Palo Alto Networks, Inc.
Rakuten, Inc.
Red Hat, Inc.
RPX Corporation
Taiwan Semiconductor Manufacturing Co.,
Ltd.
Twitter, Inc.
Uniloc Luxembourg S.A.
Copyright 2016 ROL 8
Business Sense • IP Matters
Private & Public Company Buying and Selling
9Copyright 2016 ROL
0
20
40
60
80
100
120
2012 2013 2014 2015 2016
NumberofPackages
Year
Purchases by OpCos - Public vs Private
Private Predicted Private Public Predicted Public
0
20
40
60
80
100
120
2012 2013 2014 2015 2016
NumberofPackages
Year
Sales by OpCos - Public vs Private
Private Private Predicted Public Public Predicted
•Sell more packages than they buy
Operating companies
•Purchases increasing
•Handful purchase in significant numbers to round out portfolio and manage risk
•Large number of sales, potentially to recoup investments
Private companies
•Purchases/sales fairly constant
•Sales may align with financial headwinds
Public companies
Business Sense • IP Matters
0%
5%
10%
15%
20%
25%
30%
35%
Operating Companies Overall
Patent Owner Litigation Win Rates
Organic Patents Acquired Patents
Litigation Analysis: Varying Outcomes for
Organic vs. Acquired Patents
10
• Acquired patents viable for litigation, model
decreased success rate into acquisition pricing
model
• Operating companies outperform litigants generally
• Organic patents outperform acquired assets
Key points
Copyright 2016 ROL
Pre-publication data from forthcoming paper with Mark Lemley, Kent Richardson, et. al. Not for distribution
Business Sense • IP Matters Copyright 2016 ROL 11
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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APLI - Impact of the Patent Market 2016

  • 1. Business Sense • IP MattersBusiness Sense • IP Matters APLI – Impact of the Patent Market 2016 Kent Richardson December 8, 2016 Contact Information: +1 (650) 967-6555 info@richardsonoliver.com Copyright 2016 ROL 1
  • 2. Business Sense • IP Matters 2016 Market Overview • Asking prices have stabilized • Sales are down • Sales rates of 2016 listings decreased significantly • Total transactions also down, but less so • Brokered market down to $165M from $233M last year Market trends • New sources have expanded buying opportunities • IAM Market and IP3 New places to buy • NPEs pulling back from the market • Purchases by corporations have exceeded NPE purchases • Even Intellectual Ventures (IV) is affected • IV no longer buys the most: RPX is the new buying leader • Alice crushed much of the fintech patent market and impacted software package sales rates Negative patent decisions having impact • Litigation risk from sold packages is much higher than previously reported (better source data) • Reconsider your risk models • Reconsider membership in defensive aggregators Litigation Copyright 2016 ROL 2
  • 3. Business Sense • IP Matters Market Context •Since 2011 we have tracked $7.5B brokered and $3.7B non-brokered patent packages •Over 3,700 packages with 90,000 patent assets •Over 100 technology categories represented across hardware, software, communications; including automotive-specific categories Robust market - Over $11B of patent deals tracked $0 $2 $4 $6 $8 $10 $12 $14 Cumulative sum of asking prices ($B) - brokered and private market Cum Sum Asking Price (Entire Market) Cum Sum Total Asking Price (Sold) Predicted Cum Sum Asking Price (Entire Market) Predicted Cum Sum Total Asking Price (Sold) Copyright 2016 ROL 3
  • 4. Business Sense • IP Matters Patent Market Moves Closer to Mainstream Bloomberg Publishes Patent Market Data Participates Move to Optimize • What is the patent market? To How do I participate effectively? • Can I address patent problems by buying patents? To How do I find the best patents the fastest and cheapest? Narrative shifting from: Copyright 2016 ROL 4
  • 5. Business Sense • IP Matters What’s Hot in the Patent Market Today Copyright 2016 ROL 5
  • 6. Business Sense • IP Matters Market Context: 2016 Pricing Stabilization Asking Prices ($K) 2016 2015 Per Asset Per US Patent Per Asset Per US Patent Average $197.32 $271.44 $190.31 $273.60 Min $16.67 $36.11 $17.24 $183.82 Max $750 $1000 $925 $1000 StdDev $177.44 $217.53 $181.14 $243.54 NumData 431 416 440 431 •Pricing has stabilized – and is taken more seriously by buyers •Prices are almost exactly the same as last year •Standard deviations are smaller •But, sales rate of 2016 listings is significantly below that of a comparable period last year •Prices vary substantially by package size Market pricing Copyright 2016 ROL 6
  • 7. Business Sense • IP Matters 66% 17% 10% 3% 2% 1% Distribution of seller type by sale year 2015-2016 Operating company NPE Inventor University/research Defensive aggregator Other Distribution of Seller Type by Sale Year •Operating companies represent over 66% of the patents on the market down from 71% •NPEs increased their sales up last year, this has continued - 17% up from 16% - likely as a result of difficulties enforcing their patents •Cross-licensing prior to competitor patent sales is a benefit Operating companies dominate the market • Source Richardson Oliver Law Group LLP, 2016 Brokered Market Report Top Sellers by Package Count Alcatel Lucent Allied Security Trust (AST) ATT BAE Systems, Inc. British Telecom Caveo Elizabeth Dyor Empire IP, LLC Harris Corporation IBM Imation Corporation Intel NEC Netsocket Nokia Solutions and Networks (NSN) Panasonic Corporation Petnote LLC QinetiQ Limited Rockstar Rovi Corporation TP Lab, Inc. Tyco Electronics Verisign, Inc. Verizon VideoMining Corporation Xerox/PARC Copyright 2016 ROL 7
  • 8. Business Sense • IP Matters 48% 34% 15% 3% Distribution of buyer type by sale year 2015-2016 Operating company NPE Defensive aggregator Other Distribution of Buyer Type by Sale Year •NPE buying is down to 32% (from 42%) – but still significant buying •We expect that remaining NPE’s are more sophisticated •Monitoring the market continues to be valuable tool for fighting the NPE problem •IV buying dropped to only 13 packages (down from 40) •How successful are IV’s licensing and sales? •RPX is top single buyer Operating companies now top buyers • Source Richardson Oliver Law Group LLP, 2016 Brokered Market Report Top Buyers by Package Count 9051147 Canada Inc. Alliacense Limited Llc Allied Security Trust (AST) Beijing Xiaomi Mobile Software Co., Ltd. Carlow Innovations LLC Commscope Emea Limited Domo, Inc. Empire IP LLC Facebook, Inc. Finnavations LLC Gemalto SA Google Inc. Huawei Technologies Co., Ltd. Intellectual Discovery Co., Ltd. Intellectual Ventures Knapp Investment Company Linkedin Corporation Marking Object Virtualization Intelligence, LLC Microsoft Technology Licensing LLC Open Invention Network, LLC Optimum Communications Services, Inc. Palo Alto Networks, Inc. Rakuten, Inc. Red Hat, Inc. RPX Corporation Taiwan Semiconductor Manufacturing Co., Ltd. Twitter, Inc. Uniloc Luxembourg S.A. Copyright 2016 ROL 8
  • 9. Business Sense • IP Matters Private & Public Company Buying and Selling 9Copyright 2016 ROL 0 20 40 60 80 100 120 2012 2013 2014 2015 2016 NumberofPackages Year Purchases by OpCos - Public vs Private Private Predicted Private Public Predicted Public 0 20 40 60 80 100 120 2012 2013 2014 2015 2016 NumberofPackages Year Sales by OpCos - Public vs Private Private Private Predicted Public Public Predicted •Sell more packages than they buy Operating companies •Purchases increasing •Handful purchase in significant numbers to round out portfolio and manage risk •Large number of sales, potentially to recoup investments Private companies •Purchases/sales fairly constant •Sales may align with financial headwinds Public companies
  • 10. Business Sense • IP Matters 0% 5% 10% 15% 20% 25% 30% 35% Operating Companies Overall Patent Owner Litigation Win Rates Organic Patents Acquired Patents Litigation Analysis: Varying Outcomes for Organic vs. Acquired Patents 10 • Acquired patents viable for litigation, model decreased success rate into acquisition pricing model • Operating companies outperform litigants generally • Organic patents outperform acquired assets Key points Copyright 2016 ROL Pre-publication data from forthcoming paper with Mark Lemley, Kent Richardson, et. al. Not for distribution
  • 11. Business Sense • IP Matters Copyright 2016 ROL 11 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