IP Market Updates
June 26, 2017
Read by over 12,000 professionals in the IP, business, and investment community.
Last week was IPBC Global. This annual gathering attracts the who’s who in the IP business community with over 500 of the C-suite representatives of most organizations that matter in the IP space, including operating companies, NPEs (both publicly and privately owned), IP boutique law firms, investors, service providers who specialize in patent analytics and reverse engineering of complex products for the purpose of establishing infringement, and the very few intermediaries like us who are still alive and kicking …
I won’t bother you with a detailed summary of the two-day conference, as the IAM reporting staff, as always, did a great job distilling the substance of Day 1 and Day 2.
What should be interesting for this audience is that such gathering is always a great venue to feel the pulse of where things are going and measure the overall level of optimism (or the absence thereof) toward the IP market in general. On this aspect and if you are to believe a certain consensus that was emerging, many appear – for the first time maybe in 3 years- cautiously optimistic about the overall health of the market. Some of this cautious optimism results from seeing that the discourse is finally changing after several years of almost uninterrupted bashing of patent enforcement activities, which in turn has led to a significant erosion of patent rights in the US. Indeed, and just as the IPBC Global was wrapping up, the STRONGER Patent Act – a rare bipartisan bill, was introduced into the US Senate on June 21st by 4 US Senators.
While such a bill is not likely to become law (not unlike the 6 other related patent bills introduced so far), it is nonetheless the first one introduced under the new Congress and a barometer that things may be changing. It would appear that several elected officials have finally become convinced the current state of affairs is doing structural damage to the economy by creating uncertainty over the patent system as a whole, which discourages innovation and its funding. It is not every day that you read a quote like the following from a US senator: “We must work together to ensure that the patent laws keep up with the innovators, so their ideas and businesses can fuel the American economy for generations to come. This means working to ensure that a patent continues to play its historic role in enabling inventors and small businesses to get funding and protect their ideas from being copied by larger corporate infringers.” Among other things, the new bill calls for measures to make injunctive relief against infringers easier to obtain (currently, it is practically impossible to obtain one), and to harmonize the PTAB and Federal Court tests for determining whether a patent is valid, something the Supreme Court refused to do a few months ago when it had the chance. The bill has garnered some important support so far from several organizations, while the anti-patent lobby didn’t take long to voice its concerns.
At the very least, this should help continue to provide a much-needed balance in the rhetoric and let the facts speak, for a change. In this regard, a recent and still little-known report from some Harvard and U of Chicago professors “found a strong positive relationship between patent activity and GDP growth at the state level. They [authors] predict that a state with four times as many patents as a less innovative state would become 30 percent richer in terms of GDP per capita from 1900 to 2000”. We need more academic papers like this to inform people of both sides of the narrative so that we can finally move beyond the type of bogeyman arguments that we have been hearing for years. Innovation simply cannot be sustained over time if there is no corresponding protection to reward the inventors. One must not confuse abusive behaviors by a very few with IP rights themselves, which all patent owners should be able to rely on. It is as simple as that.
This hint of optimism is also supported by the most recent 2017 benchmarking survey conducted by IAM among the IP community at large and received over 800 detailed responses from various leaders. Below are some of the salient points from the results collated by IAM:
* 34% of operating company respondents report that their organization has been purchasing patents this year, compared to 32% last year.
* Last year, 48% of operating company respondents stated that prices had fallen; this year, 36% are reporting further falls, with 51% of NPEs saying the same (compared to 71% in 2016).
* According to both operating company and NPE respondents, the three major contributing factors to these low prices, in order of importance, are:
* the inter partes review system in the United States;
* the US Supreme Court’s Alice decision; and,
* a greater availability of patents on the transactions market.
* Nevertheless, operating companies and NPEs alike see US-issued patents as being the most valuable assets in their portfolios. Operating companies rate UK and Korean patents as the next most important, while NPEs go for German and Korean.
* When it comes to IP licensing, 8% of operating company respondents say that royalty rates have fallen, compared to 16% last year. However, the number reporting that royalty rates have risen has also decreased – and that from an already low percentage (4% in 2016 to 2% in 2017).
* Fewer operating company respondents say they are seeking licensing opportunities outside the United States this year (9%, compared to last year’s 13%). The decline on the NPE side has been even more dramatic: 30% told IAM last year that looking beyond the United States was part of their licensing strategy, falling to 17% this year. This might be explained by uncertainty over the Unified Patent Court and Brexit, or a lack of resources that is making it more difficult to enter overseas markets.
While none of the above is cause for great joy in isolation, it marks what we think is the bottoming out of the market and we can attest that prices for quality patents have already started to rise slightly since the survey was conducted this past February and March. Our own deal flow (we see 3-5 portfolios per day and talk to hundreds of buyers on a regular basis) and recent offers received for the portfolios we have under brokerage indicate that, although there are more sellers than ever, there are also several new buyers coming to the table, many of which are willing to pay a fair (or at least “fairer”) price for patents. We have even started to see again NPEs making offers with a non-trivial upfront cash component! We also foresee a potential temporary bump in prices (which could become permanent) while the market awaits for the US Supreme Court to hear the case of Oil Sands (which we discussed in more details last week). Some players may indeed want to hedge their risks should the Supreme Court rule PTABs IPR proceedings to be unconstitutional. Since IPRs have been suggested as the first culprit for the current market conditions (see above), it does make sense to acquire assets at today’s valuation in case they go up significantly in a few months. One thing is sure; they can’t go any lower!
Finally, one last piece of news for our European friends, albeit not a positive one: the German court has put the implementation of the Unified Patent System (UPC) on hold while it is preparing to hear a challenge to its constitutionality. Since there were also already some trepidations about the fate of the UPC as a result of Brexit, Europe now needs Germany and France, the two largest beneficiaries of the new system, to put all their weight behind it if it stands a chance to pass.
Talking about France, I am taking an apparently overdue one week vacation in the middle of the Hexagone, where I have been promised to find fresh baguettes and cheese, spotted cows and…spotty wi-fi! So our next column will likely be in a couple of weeks. Meanwhile, thanks for reading this and for all the supportive comments I keep receiving from people who tell me they find it informative and (mostly) easy to digest. You make my day each time and I’ll try to keep it this way! :-)
Other news and recently announced deals below…
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Times of India
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Supreme Court to Decide the Constitutionality of Inter Partes Review
The National Law Review
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In Fintech, Trade Secrets May Be Replacing Patent Applications
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The bipartisan Stronger Patents Act will protect America's perpetual motion machine: innovation
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Apple ups the stakes on patent royalties battle with Qualcomm
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IPR Victory over Unified Patents Strengthens Sisvel Patent
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End of Laches Might Increase Declaratory Judgement Actions
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Trump can finally make American patents great again
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REVEALED: Russia abruptly approved long dormant Trump patents on Election Day
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IP Bridge Enters into New Patent License Agreement for IP Bridge’s Wireless Telecom Standard-Essential Patents
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How Cisco’s IP Strategy to Stop Arista Went Bust
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Cipla, Roche Settle Cancer Drug Patent Case
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Toshiba, Intellectual Ventures To Settle Chip Patent Case
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