Curious as to whether the IP market is trending up or down? You can use vector-based analysis on a series of indicators, or you can follow the money.
One may ask, “Is the flow of money coming in, directly or indirectly, to make acquiring and asserting enforceable patents easier?” On these two counts, the trends are definitely positive.
First, Tangible IP’s status as one of the leading brokerage firms internationally gives it a clear vantage point. We are regularly contacted by new buyers who were not even in this market a year ago. Those newcomers have specific needs and are ready to pay cash for the right assets. That’s right: cash!
Others are former veterans of established publicly traded IP companies (PIPCOs) who are re-inventing themselves under new entities and without the shackles of legacy. Either way, most are now non-practicing entities or NPEs (a person or company who holds a patent for a product or process but with no intention of developing it), which makes the willingness to pay a cash component all the more refreshing—and points to a risk analysis that is more optimistic than in years past.
Another interesting and no less important development is the increasing ease with which one can obtain financing for a patent assertion campaign (and at much better terms than the previous number of years).
Historically, litigation-backed financing firms have required a 2X-3X multiple for every dollar invested in a campaign, with the first dollars of revenue returning to the financer. In addition to the previous, many times they also received an additional coupon (interest) on any recoveries above and beyond their already very generous return. Those days seem to be mostly gone, with the arrival of several smaller entities flush with cash that are willing to finance the right cases at a much lower cost to the borrowers (which may be either the patent owners or the law firms representing them).
Actually, this has become quite a cottage industry, to a point where 175 people congregated in New York City in mid-September in what was the first iteration of the Litigation Finance Dealmakers Forum.
In a sense, the latter phenomenon explains the former. If you can secure financing at much lower rates, you can afford to pay inventors and other patent owners upfront or through some hybrid deal structure that is not exclusively back-ended, as was the case in the past 3-5 years.
For me, these metrics suggest there is significantly more liquidity out there to enforce good patents. This should convince infringers that the “scorched earth” approach may not be as effective moving forward if the other side is still standing strong after a long battle. In my view, any factor that will bring people to the table and accelerate the transactability of this asset class should be welcome.
A couple of months ago, I wrote a philosophical piece called “the Soul of Patents” that generated quite a few comments (mostly positive). I noted that innovation, if left unchecked, can become a source of evil or abuse. One example of this is an Amazon patent describing how to put workers in cages over robots.
Well, you will be relieved to read that an Amazon executive recently admitted that putting employees in cages upright all day long while they are being driven by robots was “a bad idea” after all.
On the other hand, one can only cringe at seeing that Purdue, the pharmaceutical company responsible for flooding the United States with the highly addictive painkiller OxyContin, has now patented a new drug to treat opioid addiction. Really?
For most people, this will be another good reason to look at alternative treatments for pain management. The leading one is cannabis. Which brings us to this interesting question: Should pot be patented? With the rise of cannabis (both medical and recreational) as a multibillion dollar industry, there is a now a race to the patent office and it appears the pot patent war has already started.
Buyers and sellers
Historically, patent transactions that are successfully brokered take place in either the first or fourth quarter of the year. Nothing like the end of the year to act as a forcing function before the budgeted dollars turn into pumpkins. Use them or lose them, right?
In many cases, a signed agreement is sufficient to book the expense in a given year even if the actual closing happens in January. Accordingly, Q2 is often a soft quarter—and this year was no exception in the industry, with IAM magazine reporting that the number of transactions in that quarter was the lowest in two years. Among the top buyers was Longitude Licensing, which was acquired by Vector Capital in 2016. RPX led in the number of deals, acquiring 101 assets in five separate transactions.
Top sellers were Intellectual Ventures and Panasonic. No surprise there, as this continues an established trend. More surprisingly, companies such as GE and Shell are now making assets available for sale, and Google reported its first sale on the secondary market, unloading lithium battery assets it acquired from Motorola in 2012.
Winners and losers
It was another successful day in court for Finjan, which seems to have found the winning formula among many beleaguered NPEs. Parker Vision announced that the United States Court of Appeals for the Federal Circuit issued its decision affirming the lower-court Patent Trial and Appeal Board’s 2017 ruling that certain method claims of Parker Vision were not proven by Qualcomm to be unpatentable. This sets up the company for a much stronger case during the next chapter in court. On the other end of the spectrum, shareholders of Walker Innovation (a subsidiary of NPE Walker Digital) approved the liquidation and dissolution of the company. …
We often talk about the parties doing the deal but rarely about those supporting them. A recent study showed that the market for IP service providers is vibrant and some of these companies are fetching, in some cases, unicorn-like valuations.
Just last year, CPA Global (which had only $12 million in sales in 2015 and no profit) was sold to private equity firm Leonard Green & Partners for more than $3.1 billion! No wonder these firms are multiplying. And with the advances in AI in patent analytics, these providers should be able to operate with a much smaller workforce than in the past. …
Hits to the helmet are no longer allowed on the field in the NFL, but they still are in court—as Riddell found after it unsuccessfully tried to invalidate a rival’s helmet design patent. …
On a more serious note and another blow to basic medical research, the federal circuit ruled that Acorda’s patent for a multiple sclerosis treatment was invalid. Although we all understand the role played by generic drugs to bring costs down over time, how can there be generics if there is no original patented drug left to copy?
Monkey Media reported having licensed its video family of patents to Samsung. Sadly, this came after a protracted legal battle. RPX Corp., the defensive aggregator now owned by private equity firm HGGC, said it has completed a patent licensing agreement with Realtime Data LLC for an undisclosed sum.
I’ll see you in court
The PTAB is still the forum of choice for those on the receiving end of a patent assertion lawsuit, and inter partes review petitions are still filed in large volume. The latest included petitions against two NPEs controlled by Fortress Investment Group, INVT SPE and Uniloc. …
IP Edge (through subsidiary Comtech), launched a new litigation campaign against Black, Dialogic, Digi International, Synaptics and Westermo Data over enterprise-grade networking and/or communications products. These patents were acquired from Panasonic. Therefore, anyone who says there is a fundamental distinction between operating companies and NPEs when it comes to monetizing patents should pause and reflect on the fact that most Fortune 500 companies have resorted to this “privateering” model in years past. In that regard, the recent lawsuit from Facebook against Blackberry is even more interesting as it is reported that Facebook acquired five of the six patents it is now asserting from various third parties, and it is doubtful that it is practicing those itself. Certain people have asked whether this makes Facebook a patent troll. ...
There was also some unusual activity in the semi-conductor space, when Seoul Semiconductor filed an infringement lawsuit against retailer chain Fry’s Electronics. … We also saw a flurry of new suits filed around medical devices, drones and wireless services.
From the bench
There have been no major decisions that may affect IP market trends. We are still seeing many decisions from the PTAB invalidating patents that are being overturned by the federal circuit. But we are still getting a few head-scratching decisions that perpetuate the ambiguity as to what exactly is patentable subject matter.
On the legislative front
The much maligned PTAB was in the hot seat again when a study by law firm Robins Kaplan revealed that large technology companies file a high percentage of duplicative IPRs against the same patent owners, in what looks like a war of attrition strategy. The study exposed Microsoft as the top abuser, with 59 percent of its IPRs found to be duplicative. Apple was second with 56 percent, followed by Samsung (38 percent), Google (38 percent) and LG (34 percent).
Putting a limit of one IPR per patent seems like an easy and logical fix. New rules are needed at the PTAB to help restore some faith in the system. They should have been included in the latest set of United States Patent and Trademark Office/PTAB Standard Operating Procedures that was released in September.