Wednesday, 18 May 2016

Would you sell your family?

The IAM Blog is always a good place to find news, views and talking points on intellectual property strategy topics, particularly in the hyperactive area of patents.  We have just been taking a look at a recent post, "Facebook, Google, Apple, Microsoft, IBM and 14 others team up with AST to launch new patent buying initiative" by Richard Lloyd; you can read it in full hereIn short, it runs like this:
"A group of major patent-owning companies - Google, Microsoft, Apple, IBM, Ford, Cisco and Facebook among them - have banded together to form the Industry Patent Purchase Program – or IP3 – providing patent owners with a streamlined way of selling their IP. The new initiative has been developed in conjunction with AST  [Allied Security Trust, which signed up with ORoPO last year] which will play the central role in administering the project. In effect it is the second iteration of Google’s Patent Purchase Promotion  [reviewed on this weblog a year ago here], which the search giant launched last summer and which saw it buy up a number of patents in a price range of $3,000 to $250,000.
The new initiative will buy families of patents that include at least one US grant [it's not clear why this is so but, given the timetable described below, it may be a matter of accelerating the evaluation process rather than anything of a politico-economic nature]. These will then be licensed to those companies participating in IP3 and ultimately resold by AST.  ...
IP3 will launch with 18 participants [though others are not barred from joining in] ... Those taking part will pay a certain amount into a central fund which AST will then use to buy any patents that it deems worthwhile. There are different levels of membership depending on how much a company pays, with the more that is paid in determining how much comes back when AST, which is non-profit, sells the patents.  
As with Google’s original programme, part of the attraction of IP3 is meant to be the speed with which any deals can take place. Patent owners will be able to submit their patents for consideration – along with the price they want - for two weeks starting on 25 May. These will then be evaluated by AST using a number of external, subject-matter experts and some machine learning analysis [this should be reassuring to IP analytics doubters: machine learning analysis is there to facilitate and improve the quality of human assessment -- not to replace it], with all of the sellers notified by the end of July about whether they will move to the next phase of due diligence [it would be good to know whether the results of the evaluation will be made available to sellers who will likely assume that, if the evaluation is a commercially valid one, their patent families will be worth more than whatever price they are offered]. Agreements with the sellers will then be in place by the end of August and payments made by the end of September.
“Selling your patents can sometimes take six months to a year, especially if you have to prepare claim charts and do all sorts of other work before you introduce your portfolios to the market,” [AST CEO] Binns remarked. ‘With this programme none of that is required, you just have to identify your family of patents, we’re going to do all the work.”    
One of the most notable parts of this new initiative is the broad range of companies that are involved ... [the common factors being that they are big, techno-friendly and wealthy].
... As Binns pointed out the supply of assets for sale has been fairly healthy for several years: ... 
“There’s still a pent up demand to sell assets and I think some sellers are struggling with how to do that so I think the timing is right for this programme ...I expect to see thousands of assets submitted and I expect us to have a good choice of patents.”
... What is not clear is whether the right to buy the patents from AST will be restricted to certain types of entity. At least some of those involved in IP3, such as Google and Cisco, have been very vocal about not selling to NPEs, but as they will not ever own the patents AST acquires themselves that may not be so much of an issue. Of course, if you reduce the buying pool, you may also reduce the amounts that you can raise - though as a non-profit, private firm that is not an issue for AST itself [presumably IP3's legal advisers have looked into possible antitrust problems involving purchase pools and cartels to drive down prices and will have given the scheme a clean bill of health].  
... For some small inventors and SMEs who have spent the past decade railing against the [alleged] injustices of the patent system, thanks to reform legislation and decisions from the Supreme Court and the Court of Appeals for the Federal Circuit (CAFC) making it much harder to get accused infringers to take a licence, their response to IP3 may not be printable. The fact is that, whatever the good intentions, the market now has an immensely powerful group of companies acting in harmony with the kind of capital to buy up large numbers of patents and glean huge amounts of information about an even broader range of assets. That is not usually a recipe for driving prices back up [though, if one looks at the very large number of patents that owners have been unable to sell in the past, a recipe for low prices may be regarded as being preferable to a recipe for no prices at all] ... "
The entire community of patent monetisers, strategists, analysts, owners, investors and pundits will be watching closely for word of how this initiative works out. If it succeeds, will we see corresponding models for use in FinTech, food and agriculture, biotech and beyond?   IAM will no doubt be among the first to bring news and comment.    Meanwhile, it is good to speculate on one tantalising hypothetical question.  Knowing that IP3 will indeed have some articulate critics among patent family owners, what sort of scheme would they have created, left to themselves, for the assessment, evaluation and sale of their patent families?

1 comment:

  1. There's a sequel to this. See our blogpost at http://blog.aistemos.com/2016/05/ip3-and-lawyers-core-skills-revisited.html, discussing Mark Anderson's comments on the IP3 terms and conditions at https://ipdraughts.wordpress.com/2016/05/22/another-patent-purchase-programme-ip3/

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