Hello and happy summer,
With the first half of 2021 already in the books, this felt like the perfect time to pause for a moment and review the current IP market landscape.
As our readers know, I focus on 5 criteria that have been fairly reliable predictors over the years of the market health and direction. Those are:
- 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.
I have commented in detail as to how some of those criteria shifted in the past few months based on current events. You can go back to our previous columns for background. Where I will focus today is the market quantitatively. In other words, what are the rate of transactions in the patent space, who is buying, etc., as we often come across patent owners who have a skewed view of the reality based on a few catchy headlines.
More on these topics 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.
Tangible IP News
In Tangible IP news, we will officially be announcing shortly the closing of yet another transaction involving the successful sale of a 72 asset 3GPP and WiMAX patent portfolio originating from Korea Telecom Corporation. With this deal, we have now passed the rare milestone of having successfully brokered over 4000 patent assets since our inception less than a decade ago. Now onto the 5000 mark! Finally, we still have a handful of other portfolios in various stages of closing.
Again, 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.
We also take this moment to wish everyone here in the US a very happy (and safe) Thanksgiving. It may not resemble years past, but we will get through this pandemic and they will still sell turkeys next summer.
As we indicated in our last issues, we are letting our readers know the areas where we have buyers willing and ready to acquire patents. Our VP Brokerage, Erika Warner, is the point of contact for those. You can also reach her at firstname.lastname@example.org.
Currently, we formally represent several buyers with interest in the following technology areas:
Digital Marketing – Point of Sale – including coupons/rebates/data scoring/analytics
Digital Advertising patents with relevance to main social media players
NOTES: Evidence of Use is preferred (if available), with at least 3-5 years of life remaining. US assets are most critical though foreign counterparts are nice to have.
5G SEPs with claim charts drafted to the standard
We are also always interested in reviewing Semiconductor patent portfolios as we have a wide variety of buyers interested in reviewing patents in this sector.
Mid Year Review
People often ask me if there is such a thing as a “patent market”. The most honest answer I can provide is “It really depends”. If you define a “market” as having a certain number of transactions (public or private) around an asset class, then yes, there definitely is one. But if you define a market as being characterized by a liquid ecosystem where buyer and sellers can easily value assets and where transaction data is widely available for comparisons (like the MLS system), then you are sadly headed for disappointment. And unfortunately, the last years have only made things worse by introducing a high level of uncertainty over the very validity of the title that patent owners are trying to transact upon. So, if no one really knows if an asset is valid, and by extension how much it is worth, it remains very difficult for a market to grow organically. Add to this that the financial information for most transactions remain secret, you never really benefit from previous deals to better inform the next ones.
AST: The member-driven cooperative has been monitoring the secondary patent transactions market since 2007. Over the years, AST has worked with over 6,000 patent sellers and 500+ brokers, and has the most comprehensive database of over 13,000 patent purchase opportunities offered on the secondary market. They also have the excellent taste of retaining Tangible IP as their exclusive broker for reselling the patents they acquired in 2020 through their IP3 program. 😊
If we look at patent packages presented to them year to year, 2021 is geared to be a record year.
This data can mean only one of two things:
- the increase of offerings reflects a vibrant market or
- it rather reflects an oversupply of patents for sale which is not matched by an equal increase in demand.
It cannot be both.
Based on our own data, experience and talking with buyers and sellers every day, we believe this increase is more a reflection of the general unbalance between supply and demand. Many operating companies have taken to making subsets of their patent portfolios available for sale. However, buyers, albeit in greater number than in past years, seek to overcome a borderline impossible threshold to invalidity risks. This results in too many sellers chasing deals and too many buyers chasing the perfect patents… like ships passing in the night. Unfortunately, these two groups rarely find a middle ground. This in turn leads to transactions, when they occur, that are often largely back ended as buyers prefer to share the risk (and the reward) with the patent owners/inventors given the current ecosystem. This in turn feeds the litigation trough, since the only way to share revenues is to assert the patents against infringers.
And this is true regardless of the technology area, although software-related patents have taken the brunt of the damage done by Alice (aka the “abstract idea” invalidity argument). Not surprisingly, this has created some movement toward other areas of technology where the Alice rejection rate is significantly lower (e.g. MedTech). See data below.
But just how much of those actually translate into sales? This is where the latest data from ROL helps. It covers Q1 and Q2 (partially) of 2021.
It is clear from these numbers that, at least so far, transactions in 2021 appear to be in line with prior years. It is also clear that NPEs still account for the lion’s share of transactions, far ahead of operating companies and defensive aggregators combined. But look at the numbers: 50-100 transactions per quarter is not exactly the epitome of a vibrant market!
What is encouraging though is the increase in operating companies that are tiptoeing back into the game and are using brokers to help them identify and acquire good assets.
According to ROL, they are seeing a surge of buyside analysis that should normally translate into more transactions in the near future. This is also consistent with our experience, as we have had several exclusive buy side engagements in 2021 for large corporations, whereas we used to almost exclusively represent sellers. Our clients are serious buyers with very clear buying criteria and budget on hand. The challenge, once again, is to find among the thousands of patents offered for sale, those that will please very selective shoppers.
But I sure hope ROL is right here and 2022 is geared to be a bumper crop year, as I REALLY want to buy that boat! 😉