Hello all,

A belated Happy New Year to most of our readers in the world and an early Happy Lunar New Year to our friends in Asia. I hope everyone remains in good health and spirits and fully recharged for the year ahead.

Wow! We really finished 2024 with a bang closing 3 patent transactions literally as the big ball was dropping in Times Square… This pushed us into double-digit transactions to end 2024 and we are already off and running in 2025 with several other deals closing this month alone. This actually provides a good segway for discussing the shifts in the IP market in 2024 that supported some renewed strength, and I’ll dare to make some bold predictions for the year to come. More below.

As usual, as I focus on the macro picture in this newsletter, I want to remind everyone that we track everything that is going on in this world and for those who need their regular dose of news, once again you can follow me on either LinkedIn or Twitter where I post almost daily about some of the most newsworthy events.

Happy reading!

 Louis

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Tangible IP News

As I noted, in December, we closed several transactions, some of which unfortunately we cannot publicize given the emphasis our clients place on confidentiality. But suffice it to say that we helped a Fortune 50 client divest some of its healthcare-related patent portfolio while assisting another client on the buyside acquire strategic assets that will help them turn the tides in their current litigation. We are often retained by buyers to that end when one needs to source and acquire patents anonymously.

In addition, we are pleased to report two other transactions closed in the past month. One saw us successfully broker the sale of the entirety of the AST IP3 2023 portfolio comprising hundreds of assets. We were also retained for the second time by a leader in the lighting area and were able to finalize the sale of some of their assets.

It is noteworthy that 3 out of four of these transactions involved operating companies. Is this a new trend in the secondary market?

I was interviewed last month by Bruce Berman of the Center of Intellectual Property Understanding (CIPU). The full interview is now available here and IP Watchdog also published a nice summary thereof for those who don’t have the time to listen in.

For those who missed our last issue, we were pleased to report that both yours truly and our Sr. V.P. Brokerage Erika Warner were named this year again among the World’s Global IP Leaders. Hurrah to our small but mighty team! See the full announcement here.

We have several portfolios for sale that offer great opportunities to savvy buyers. All of our patents for sale are listed here. Similarly, if you’d like to be added on our distribution list in the future so that you are the first to receive new opportunities, please email us at info@tangibleip.biz.

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Patents Wanted

Calling for high quality portfolios! We represent several buyers looking to acquire high quality portfolios. Some of the areas of interest are included below. Please refer to our Brokerage Criteria to see if your assets qualify. If so, please send the portfolio to info@tangibleip.biz for review.

  • Semiconductor
  • Handset/laptop
  • Wireless wifi5/6
  • Network security
  • Medical device
  • Network hardware
  • Imaging
  • Battery
  • Lights/led
  • Automotive
  • Display
  • IoT

 

The Year 2024 in Review

Each year tends to be a busy one in the intellectual property marketplace; the stakes are high and numerous deep pocket players are at opposing ends of the spectrum pushing their respective agenda with legislators, the courts and even in the boardrooms. To understand how these various forces impacted the market for this delicate asset class known as patents, it is useful to revert for a moment to the 5 key factors that I have identified and studied over the years. These tend to show us how healthy (or not) this industry is and where the arrows are pointing. Here they are again; our regular readers should be familiar with those by now:

  • Noticeable changes in the supply & demand;
  • New case law that may have long-lasting impacts;
  • Changes in the regulatory environment;
  • Recent large damage awards against infringers;
  • Broad availability of funding to support assertion activities.

1. Supply & Demand

With the patent bubble burst in 2013 after the fabled Nortel bidding war and the subsequent acquisition by Google of the Motorola Mobility portfolio for $12.5B, the industry has been plagued with an excess of supply, in turn generating a quasi-permanent buyers’ market. The main acquirer a decade ago, Intellectual Ventures, has become over the years one of the most aggressive sellers; large companies have been asked to slash their patent budgets and released thousands of assets available for sale (instead of simply abandoning those) and many smaller companies’ commercial demises have resulted in distressed sales of their IP assets hitting the market.

On the demand side, the days of acquiring patents for their contemplated (and largely futuristic) strategic value are long gone. Today, only the highest quality assets (less than 1%) are realistically transactable. Additionally, changes in the legal environment (Alice and PTAB) have made holding patents “just in case” increasingly unfeasible for most, while also significantly lowering their valuations.

Having said that, several new players have entered the industry in the past years and have encountered success acquiring and monetizing patents. In parallel, a regular increase in the number of patent lawsuits has forced many defendants scrambling to the secondary market trying to find readily available assets that they can use as a retaliatory tool in that same case.

Finally, the surprising rise of the UPC has given a new life to European patents that were long considered an afterthought when analyzing and valuing a portfolio.

So while the market could always benefit from a boost of pro-patent reform through court decisions or legislative action, it has found a certain point of equilibrium. This equilibrium is not so much about balancing supply and demand but rather about the very high pedigree patents (the 1%) being transacted at premium valuations. A small pool of motivated buyers with easy access to funding are competing for those while the rest of the patent market tends to linger. The fact that we recently received 4 term sheets on the same portfolio is illustrative of this phenomenon.

2. New Case Law

2024 was also a very busy year on the courts’ patent docket with a few cases proving noteworthy.

First, the Supreme Court’s Loper Bright Enterprises v. Raimondo decision overturned the Chevron doctrine, which had required courts to defer to federal agencies’ interpretations of ambiguous statutes for 40 years. Under Chevron, courts had to defer if Congress hadn’t addressed the issue and the agency’s interpretation was reasonable.

This change has significant implications for intellectual property law, particularly affecting:

  1. The International Trade Commission (ITC): Previous cases like Suprema v. ITC that explicitly relied on Chevron deference may now be vulnerable to legal challenges.
  2. The US Patent and Trademark Office (USPTO): Agency guidance and procedures, such as their rules on discretionary denials in post-grant proceedings, could face new scrutiny even if they didn’t explicitly cite Chevron.

While the ruling doesn’t automatically invalidate existing agency interpretations, it does give courts more authority to interpret statutes independently rather than deferring to agency interpretations. This opens the door for potential challenges to various IP-related agency decisions and interpretations in 2025 and beyond.

Unfortunately, however, SCOTUS refused once again to clarify its stance on Mayo/Alice (patent eligibility) and left the confusion it created a decade ago unabated.

Not wanting to be left behind, the Federal Circuit issued a couple of key decisions that should impact the current state of affairs. It has recently shown renewed interest in hearing patent cases en banc in 2024, after a six-year gap.

1. LKQ v. GM Global Technology Operations (May 2024):

The court rejected the previous rigid standard for evaluating design patent obviousness and clarified that KSR International v. Teleflex (2007) had overruled the old standard. It also established that design patents should use the same Graham v. John Deere obviousness standard as utility patents

2. EcoFactor v. Google (September 2024):

This case (which is still pending) focuses on the admissibility of expert testimony for patent damages. It specifically examines how damages experts should demonstrate economic comparability between prior license agreements and hypothetical negotiations. A decision is expected in 2025 and could have a significant impact on how patent damages are calculated.

3. Regulatory Environment

2024 certainly saw no shortage of proposed bills in the US, most of which purported to strengthen patent rights and right some of the perceived wrongs that currently negatively impact the market.   

With the PTAB still invalidating issued patents at a rate around 70-80%, the Promoting and Respecting Economically Vital American Innovation Leadership (PREVAIL) Act, which narrowly passed committee, aims to strengthen patent rights and reform the PTAB process through four main changes:

  1. Raises the burden of proof for invalidating patents at the PTAB to “clear and convincing evidence,” matching federal court standards
  2. Requires consistent claim interpretation across PTAB and district courts by using “plain and ordinary meaning” interpretation
  3. Limits PTAB challenges to only parties directly involved in infringement cases, eliminating third-party challenges
  4. Requires parties to consolidate all their challenges into a single filing, eliminating multiple separate challenges

The bill represents a significant shift toward strengthening patent holders’ rights and aligning PTAB procedures more closely with federal court practices.

The PERA for its part attempts to essentially do away with Alice/Mayo and aims to clarify patent eligibility by specifically defining what cannot be patented, limiting ineligible subject matter to three categories:

  1. Pure mathematical formulas without practical applications
  2. Mental processes performed entirely in the human mind
  3. Natural human genes as they exist in the body

The legislation’s purpose is to eliminate ambiguity in patent eligibility determinations, addressing a persistent challenge in patent law where the USPTO and the Courts do not even apply the same test, thus leading to conflicting results. The approach represents a shift toward defining patent ineligibility through specific exclusions rather than broader interpretative standards. The bill has received positive feedback and appears to have momentum for advancement.

Finally, there is the (Realizing Engineering, Science, and Technology Opportunities by Restoring Exclusive Patent Rights) RESTORE Act which aims at overruling another Supreme Court case (eBay) which made obtaining injunctive relief in the US for patent infringement almost impossible. The RESTORE Act (S. 4840) was introduced by Senators Coons (D-DE) and Cotton (R-AR) in July 2024, with a companion bill in the House introduced by representatives Moran (R-TX) and Dean (D-PA). When introduced, the bill was already cosponsored by Representatives Roy (R-TX), Johnson (D-GA), and Ross (D-NC). A hearing on this bill took place on Wednesday, December 18, 2024 with opposing camps pushing the narrative of their masters. Interestingly enough, the US Inventors organization opposes the bill on the basis that it does not go far enough.

All three bills currently enjoy some bipartisan support in D.C., a rarity in today’s political climate. But the new administration could easily torpedo this apparent momentum for patent rights given who is whispering in President elect Trump’s ear (Elon Musk) and his well-known stance on patent rights.

To the foregoing, we can add the significant developments in Europe with the UPC and, among other things, its impact on SEP patents, injunctions, etc., most of them in favor of patent holders. You can find  good summary of the 10 most salient UPC cases of 2024 here.

Finally, the next USPTO director could have a direct impact on many fronts since he/she is usually seen as a kind of weathervane as to how the current administration is thinking in terms of supporting innovation. Steve Forbes recently published a great op-ed on this very topic which is quite critical of Big Tech and which shows that even this administrative appointment has become politicized as well.

4. Large Damage Awards

While 2024 did not have any billion dollar patent awards as in past years (and the only one that came close at approx. $850M USD was set aside by a judge), there were more verdicts exceeding $100 million, $50 million, and even $10 million in 2024 than in recent years, according to those who track such cases closely. Those smaller awards are less prone to being overturned or significantly reduced. While they don’t make the headlines like their 10 figures counterparts, they still move the needle and seem to be sufficiently high for those who’ve made assertion a business and their funders behind the scenes.

One parallel interesting development in this regard is the recent release (on Christmas Day) by the Chinese government of its 6th Five-Year Reform Outline for the People’s Court in which is calls for an increase of the ”punitive compensation” (likely for willful infringement) in patent cases. China, which once promised to be a friendly environment for patent owners, never fully realized that promise mostly because statutory damages available to the winning party were too low to warrant asserting in the first place unless the Plaintiff was primarily looking for an injunctive relief. This may be about to change, and it could bring back Chinese IP courts front and center.

5. Funding

This is an area that saw a lot of ink spilled this last year. Battles raged in court (patentees avoiding the District of Delaware disclosure requirements) and in Congress, generating enough attention to warrant a full investigation by the nonpartisan U.S. Government Accountability Office (GAO) which issued a well-balanced report last month that debunked a lot of the claims made by those who oppose patent litigation funders (mostly defendants).

While litigation funders have been around for some time supporting patent cases, we may have entered the LF 2.0 era. Most of the amateurs looking for a quick buck when interest rates were low and money was looking for alternatives are now gone. The original players (whose name generally ends in “FORD”) are still here, however, new entrants have started to compete with them. This brings some welcome competition in a field where the patentee has historically had little leverage and where the financial structure oftentimes heavily favors the funder and the law firm asserting a case.

What is a relatively new and positive development is that lit funders are now willing to invest a significant amount upfront to return to the inventor/patentee who is generally cash poor and often times in need of some short-term relief. This, in turn, allows buyers (mostly NPEs) to offer acquisition terms that offer a guaranteed short-term outcome to the seller, in addition to some longer-term shared revenue potential. Litigation funders also, in most cases, fund law firms for at least half of their normal rate, thus allowing tier 1 firms to take cases that they normally have to decline given the inherent risk. This makes the backend revenue sharing and corresponding waterfall extremely onerous for the inventors. But at least those no longer have to roll the dice in order to seek vindication in court for their contributions.

Our Predictions

Which brings us to our predictions for the year to come. Based on the foregoing factors, I believe there is a relatively high ceiling for improvements in the current marketplace, while I see the floor remaining relatively stable. In other words, most of the changes, should they happen, will result in a positive outcome. On the flip side, I do not foresee any catastrophic event that would depress the market further, as most of those have already taken place and have been factored in current valuation. A couple of caveats would include using the Loper Bright decision above to curtail the powers of the ITC, especially its ability to issue exclusion orders which remain the closest thing to an injunction here in the US. Also, the Fed Circuit in Ecofactor might come up with new guidelines on damages calculations that could make even the strongest cases less appealing because litigation costs might exceed recoupable damages. But both of those happening in 2025 would be unexpected and results in relatively low risk as it’s purely speculative for the moment.

The supply will continue to outweigh the demand; but the market only cares about 1% of issued patents and the fact that we see multiple offers on many of our portfolios tells us that there is enough demand for those high-quality patents once you find them.

Should there be some changes regarding patent eligibility and/or injunctive relief, all hell could break loose and patents that are currently not considered transactable would become so overnight. Valuations would also be impacted significantly if the defendant was suddenly at risk of being blocked from selling its goods after the passage of the RESTORE Act. Finally, any reform to the PTAB (through PREVAIL) that lowers the current “kill rate’ (honestly, at 80%, it can only go down) will force predatory infringers to change their approach and should favor earlier settlements based on a more rational approach rather than the current scorched earth policy many have adopted. The UPC will also continue to apply pressure to the US administration who does not want to become even more irrelevant when it comes to IP enforcement. And the fact that weak patents rights are increasingly seen by politicians as a free pass to China makes them more likely to get attention on the hill and a badly needed fix.

Finally, large owners of standard essential patents (SEP) and licensing powerhouses like Nokia, Ericsson, Avanci, Sisvel, InterDigital, etc. will continue to do well by leveraging a more favorable environment in Europe created by the UPC.

All in all, I am for the first time in years, fairly bullish about where the market is going and it will be interesting to see how things continue to evolve during the year. In the meantime, we will continue to track all relevant developments for you and bring those via this column on a monthly basis throughout the year. So don’t go anywhere!