Wednesday, 20 April 2016

The Yahoo patent portfolio: what price a reasonable valuation?

"The Yahoo Patent Portfolio: What is the market price today?" This is the question posed by the Richardson Oliver Law Group trio of Kent Richardson, Erik Oliver and Michael Costa, in a piece hosted by IP Watchdog last week. You can read their article here. Richardson, Oliver and Costa take issue with Business Insider's estimate of the likely sale price of up to US$ 3 billion, taking a route which is obvious to anyone with an ounce of common sense but rarely pursued by financial analysts -- the route of adding available IP-related data to such other information as the market might be kind enough to provide. 

Taking this route, the authors push down the estimated street price of Yahoo's patent portfolio from the sky-high US$ 3 billion figure to a far more realistic US$ 772 million (with a best case price of US$ 1.15 billion and a worst case scenario of just US$ 393 million). Before demonstrating how a swift analysis of Yahoo’s portfolio and the patent market casts a shadow of limitation on the patents' street price they comment, in words that echo the endlessly repeated sentiment of Aistemos's weblog, LinkedIn discussion group and Twitter account:
"We often see patent prices stated without any data to back up the analysis. We think this needs to change".
They go on to make some thoroughly sensible points and list a number of relevant factors that only a traditionally blinkered market analyst could ever be surprised at, closing with the following words which readers should cut, paste, and send to as many non-believers as they can identify, demanding confirmation that their message has been received loud and clear:
"We are often frustrated by wild or anecdotal reports of patent prices and sales. Business decision makers seek real data to support informed patent buying, selling and pricing. We think our industry needs more data and more analysis. Board members, CEOs, CFOs are all looking for intellectual asset management guided by both experience and data. Wild projections on patent values hurt us all; data-driven decision making brings business credibility to the industry of intellectual asset management. Our goal in putting this post together was not to show that Yahoo’s portfolio should be a specific price. Our goal was to show that with a few pieces of data, the price can be bounded and the factors impacting that price understood.

...  The important point for investors and potential purchasers is that market data can help you understand how to think about the price of Yahoo’s [or indeed anyone else's] portfolio, what additional questions you might have when evaluating it, and where to look for more information".
IP data analysis is a discipline with a well-accepted set of methodologies, parameters and reliable data sources. It has taken the valuation of patent portfolios well beyond the smoke-and-mirrors approach that appears to characterise some of the competing techniques. While its predictive accuracy cannot be guaranteed, it at least makes use of relevant data in a relevant and objectively verifiable manner. IP analytics is a world away from alchemy, and anyone who ignores or misuses IP data runs the risk of turning gold into dross.

We need only add the somewhat depressing thought that, if your business has nothing going for it except the prospect of selling its patents, the chances are that all is lost. A few companies will get lucky, like Nortel, but the greater likelihood is that the gap between the price expected and that received will leave sellers disappointed, as in the case of Kodak.

No comments:

Post a Comment