20 How Corporations Buy and Sell Patents to Implement Patent Strategy

• Author: Kent Richardson and Erik Oliver
• Pages: 20-62

Published in Landslide, Volume 14, Number 4, 2022. © 2022 by the American Bar Association. Reproduced with permission. All rights reserved. This information or any portion

thereof may not be copied or disseminated in any form or by any means or stored in an electronic database or retrieval system without the express written consent of the

American Bar Association.

20

How Corporations Buy

and Sell Patents to

Implement Patent Strategy

Image: Getty Images

Published in Landslide, Volume 14, Number 4, 2022. © 2022 by the American Bar Association. Reproduced with permission. All rights reserved. This information or any portion

thereof may not be copied or disseminated in any form or by any means or stored in an electronic database or retrieval system without the express written consent of the

American Bar Association.

21

How Corporations Buy

and Sell Patents to

Implement Patent Strategy

By Kent Richardson

and Erik Oliver

I

n 2018, Meta Platforms, Inc. (known as Facebook at

the time of suit) countersued Blackberry for patent

infringement. All the patents Meta used in the litigation

had been acquired from third parties. The parties settled

in January 2021 for an undisclosed amount. It appears

that Meta’s strategy was successful, given favorable court

rulings and the absence of material nancial disclosures

in SEC lings following the settlement.

A similar scenario played out privately when a high-

tech unicorn (a privately held start-up company with a

value of over $1 billion) was approached by a known

corporate patent asserter to take a patent license. This

occurs quite frequently to high-tech unicorns. Let’s refer to

the two companies as UnicornCo and AssertCo. AssertCo

expected to easily walk into a negotiation with an under-

patented UnicornCo and quickly walk out with a patent

license fee. However, UnicornCo had done something

different—it bought patents. It did not just buy patents

Published in Landslide, Volume 14, Number 4, 2022. © 2022 by the American Bar Association. Reproduced with permission. All rights reserved. This information or any portion

thereof may not be copied or disseminated in any form or by any means or stored in an electronic database or retrieval system without the express written consent of the

American Bar Association.

22

for its own technology; it also purchased patents practiced by

companies like AssertCo. AssertCo now found itself in a compli-

cated negotiation facing a counter-assertion demand that put

tens of millions of dollars of its own revenue at risk. In the end,

UnicornCo never paid a license fee. UnicornCo’s investment of

a few million dollars on patents avoided an expected license fee

above $20 million. Overall, the strategy resulted in a very positive

return on investment for UnicornCo.

These examples illustrate one of the primary uses of the patent

market: buying patents to counter-assert and thereby maintain

freedom of action. You can imagine the internal meetings at the

patent asserters in both instances (the CEO admonishes, “You

said they didn’t have any patents to use against us,” and the head

of IP replies, “Umm, we didn’t think they would buy patents . . .”).

This article covers background on the market for buying and

selling patents, how companies decide what to buy or sell, how

companies go about buying and selling, and the future of the market.

Patent Market Basics

What Is the Patent Market?

The patent market is the entire market for buying and selling

“naked” patents—specically, transactions where no other tech-

nology is licensed or transacted. Thus, the market excludes mergers

and acquisitions, patent licensing, and technology licensing. The

size of the patent market is estimated to range from $150 million

to $500 million per year.

The volume of transactions took off when Intellectual Ventures

began buying thousands of patents in the early 2000s.1 Intellec-

tual Ventures spawned an ecosystem of brokers and corporate

sellers that supplied them with patents. By 2012, Intellectual

Ventures had pulled back its buying, but the patent market

ecosystem was well established. Now, both operating compa-

nies and nonpracticing entities (NPEs) regularly purchase and

sell patents to meet their strategic needs.

It is important to understand that the market is not an exchange

(e.g., a stock exchange) or public (e.g., residential real estate in the

U.S. with a multiple listing service website). Rather, it is a quasi-

public market—quasi-public because the market is not perfectly

transparent. If you want to know what packages are available, you

can source them by contacting each individual broker directly, but

doing so is complicated and time-consuming.

Every year, about 600 to 1,000 patent buying opportunities

(called “packages” or “deals”) hit this quasi-public market. Pack-

ages can include one to over a thousand patents. They typically

relate to high-tech products like mobile phones, wireless access

points, social networks, cloud computing, advertising, and nan-

cial payments.

2

Prices for a package range from less than $25,000

to well over $10 million.

Here is an example of a patent package that is currently for

sale. The package lists two patents,

3

and the parent provisional

application, related to an intelligent multimedia streaming system

enabling automatically capturing an event of interest to create

a customized digital stream. The package was marketed with

a description of how multiple cameras help enable the system

to create the digital stream. The package was originally sold by

SRI International to Allied Security Trust (AST)4 in 2020, it was

licensed to several AST members, and it is now being brought

back to the market for resale. The asking price is $50,000. This is

a lower price than you might expect; however, the AST members

include some of the largest companies in the world (which would

likely be interested in these patents), so the remaining unlicensed

market may be relatively small.

To better market packages, sellers or their brokers frequently

provide sensitive information under a nondisclosure agreement.

For example, the packages may include protected information

such as an indication of which claims the sellers believe are being

infringed and by whom, and sometimes detailed claim charts.

Brokers provide information about the bidding process and

expected timing of any transaction.

How Is the Market Tracked?

Brokers and some sellers distribute their available patent pack-

ages to potential buyers and list those deals on selling platforms

(e.g., IAM Market). The sellers send out teasers that contain the

information needed to make an initial assessment of whether a

buyer might be interested. Not all packages get distributed to all

potential buyers, but usually brokers do a good job of distributing

teaser information about their available packages.

With anywhere from 50 to 100 new packages coming to the

market every month, a lot of data capture is needed to keep abreast

of what is available. For example, in one database, 10 years of

public and private packages include more than 250,000 patent

assets across more than 13,000 buying opportunities. When you

add up the asking prices of all these potential deals, the price would

be about $38 billion. Typically, the databases capture information

like the seller, the asset list, the asking price, the technology area,

companies of interest, claim charts, and a variety of other data

points that help manage the deluge of packages. That data can

then be supplemented with information about sales, litigation,

and inter partes review (IPR) history. And, if you were thinking

that these databases are treasure troves of fascinating information

about who bought what, when, for about how much, and what

happened, you would be right.

Tracking and studying this market can be complicated, but

there are more and more academic and business publications

reporting on the market. Brian Love et al. published a ve-year

analysis of the market in 2018.5 Also, economists are using the

data to make determinations about innovation rates.

6

Stanford

professor Mark Lemley published on characteristics of patents

that are bought on the open market and then litigated.

7

Addition-

ally, the authors have published an annual paper on the market

for patents, including pricing and what characteristics of patents

make them more attractive to buyers.8

Why Follow the Market?

For a company actively buying or selling, a primary reason to

follow the market is to bring greater market transparency. Without

Kent Richardson is a partner at Richardson Oliver Law Group,

where he focuses on patent strategy, patent buying, and patent

valuation. He can be reached at kent@richardsonoliver.com.

Erik Oliver is a partner at Richardson Oliver Law Group, where

he focuses on patent strategy, patent buying, and patent

valuation. He can be reached at erik@richardsonoliver.com.