The document outlines various monetization options for patents, including sale, licensing, enforcement, and collateralization, while cautioning against potential pitfalls such as competitor sales and public relations implications. It highlights the importance of understanding target markets and pricing strategies, especially in auctions and private sales, and emphasizes the critical nature of thorough preparation for licensing agreements and enforcement actions. Additionally, it notes the value of using patents as collateral for financing and the necessity of ongoing patent maintenance.

1. Nelson Mullins LLP

2. Primary Options for Monetization
Nelson Mullins Riley & Scarborough LLP
Sale
Licensing
Enforcement
Collateralization

3. Sale of Patent
Pass ownership to another party. Assign all rights to
the other party.
May be part of a bigger business transaction
 Joint development agreement
 Merger / consolidation.
Nelson Mullins Riley & Scarborough LLP

4. Sale – Caveats and Advice (1)
Be careful who you sell your patents to, especially if
party is a competitor.
Consider getting a license under the patents for
sale.
You may be obligated to cooperate in their
enforcement activities.
Nelson Mullins Riley & Scarborough LLP

5. Sale – Caveats and Advice (2)
Consider PR implications.
Consider how loss of the sold patents affects your
overall patent portfolio.
May want to limit transferability of patents.
Consider tax consequences. Do you transfer to a
holding company?
Nelson Mullins Riley & Scarborough LLP

6. Sale - Auction
Nelson Mullins Riley & Scarborough LLP
How
 Can be via organizations that specialize in auctions,
consulting firms or even law firms
Pricing
 Consider setting a reserve price.
 Understand likely value
- Get comparables
- Understand how much bidders are likely to pay
- Values vary greatly by industry, technology and
particular patent.

7. Sale - Auction
Nelson Mullins Riley & Scarborough LLP
Observations
 Bidders may want to review file history, so make
available.
 Bidders may want reps and warranties; Our advice is to
avoid if at all possible.
 Bidders may have questions re. technology, products,
enforcement activities, so be prepared to answer.
 Help create interest – identify potentially interested
parties.

8. Sale - Private Sale
One of the keys to success is identifying viable
targets
How do you determine viable targets?
 Understand scope of patent
 Identify companies that would benefit from owning patent
 Identify companies involved in litigation where patent
could be valuable; Identify who infringes patent
 Identify companies that are interested in growing their
Nelson Mullins Riley & Scarborough LLP
patent portfolio
 Consider non-practicing entities (NPE's)

9. Sale – Private Sale
Nelson Mullins Riley & Scarborough LLP
Other Factors
 Consider whether patents which are for sale are to be
publicized or not.
 Consider press related issues.

10. Licensing
Nelson Mullins Riley & Scarborough LLP
Scale
 Large scale – many targets. Like in a sale, you need to
identify targets.
 Small scale – handful of companies.
Key Considerations
 Any lump sum payments? How much?
- One strategy is low cost lump sum.
- Price below what legal costs, etc. would be to fight.
- Another strategy is a higher lump sum with royalties
Some discounted value of total damage exposure.

11. Licensing
Nelson Mullins Riley & Scarborough LLP
Royalties
 Need to figure out rates
- Look to any industry examples;
- Varies dramatically among industries;
- Look up legal decisions on reasonable royalty;
- Keep tabs of whether abiding by terms of the agreement;
need an accounting per time period.
 What products the royalty applies to and match with
scope of license

12. Licensing
Other Considerations
 Duration.
 Exclusivity.
 Related patents.
 Obligation.
 Control.
 Right to enforce.
 Right to sublicense.
 Termination.
Nelson Mullins Riley & Scarborough LLP

13. Licensing – Observations (1)
Can be very lucrative – e.g., IBM, Microsoft.
Demonstrates return on investment (ROI) while
keeping ownership of patents.
With large scale program
 Need a team to lead effort;
 Need to keep track of all candidates;
 Need to set policies regarding ability to tailor terms and
policies to be used;
 Need to be able to convincingly show why they should
Nelson Mullins Riley & Scarborough LLP
like a license;

14. Licensing – Observations (2)
You will need to have the threat of litigation to get
parties to sign up.
 Be careful regarding declaratory judgment (DJ) motions.
Decide what patents you want to license.
Consider bundling patents.
Get knowledgeable before seeking to license a
Standard Essential Patent (SEP)
 FRAND terms, risks.
Be persistent. Expect most candidates to ignore you.
Nelson Mullins Riley & Scarborough LLP

15. Enforcement
Nelson Mullins Riley & Scarborough LLP
File an action in
 U.S. Federal District Court;
 International Trade Commission (ITC) – prevent
importation.
Understand costs
 $1 - $2 million a year for moderate cases.
 Substantially more for large cases (tens of millions )
 May get someone to handle on a contingency basis
- lay out percentages;
- lay out triggers;
- lay out control provisions.

16. Enforcement - Observations
Do your homework on infringement before filing suit
 Understand risks
- Invalidation of patents
- Counterclaims
- Duration of operation
Be prepared to settle case.
Your choice of counsel is critical to your result.
May take years to see money, but verdict can be
substantial.
Nelson Mullins Riley & Scarborough LLP

17. Collateralization
Use patents as collateral to secure financing.
Valuable business assets.
Make sure it is worth risking the patents.
Understand your obligation to maintain patents until
obligation is satisfied.
Nelson Mullins Riley & Scarborough LLP

18. Info
Lewis Lee
Patent Attorney @ Nelson Mullins
lewis.lee@nelsonmullins.com
Nelson Mullins Riley & Scarborough LLP