Wednesday, 27 May 2015

Google Patent Purchase Promotion Shines a Light on Patent Valuation Problem

On 27 April 2015, Google announced its intention to launch the ‘Google Patent Purchase Promotion’, a scheme it described as “an experimental marketplace for patents that’s simple, easy to use, and fast”. Now closed, the scheme ran for two weeks -– from 8 until 22 May. It will no doubt be some time before we learn exactly what the outcome was, but we can already draw some interesting conclusions.
First, launching a marketplace for patents can be divisive. Google described its motivation thus: “An experiment to remove friction from the patent market.
Others described it as “an attempt to keep potentially troublesome patents away from ‘patent trolls’”, while still others were even less charitable. Gizmodo for instance suggested that the initiative sounded “… less like an attempt to defeat the patent trolls, and more like an effort to compete with them.”
All in all, and rightly or wrongly, there was plenty of scepticism about Google’s motivation. But that doesn’t seem to have dampened interest. In fact, the extent to which patent owners appear to have engaged is a second interesting lesson. According to IAM Magazine, Google has been “inundated” and “overwhelmed” by submissions from patent owners looking to sell. This is further evidence of a potentially vibrant, properly functioning asset market waiting to burst into life.
The fact that a functioning market has not yet come to life outside of Google’ initiative and a few other notable examples,including the Danish Patent Office’s marketplace, can be traced back to a simple issue – and one that is, again exemplified by the Patent Purchase.
That is, according to Black Stone IP Director Matt Moyers, patent owners offering to sell to Google have priced their assets at levels ranging from $1 to $3.5 billion. By any standards, that is an incredible price range for assets that, presumably, their owners think Google might want to buy.
And therein lies the problem. For most owners, putting a price on a patent remains incredibly difficult without expert (and expensive) help. In many ways, Google, rather than removing friction from the patent market, has shone a light on its cause: the fact that a lack of access to data around patent value and risk stands in the way of rational asset pricing – and very few markets survive very long without rational pricing.
Companies like Google have access to advanced patent analytics toolsets, so therefore are in a stronger position to make sound decisions about intellectual property investments such as which patents to buy. The problem here is that a properly functioning market cannot emerge until those tools are more widely available and accessible.