selling your patent

ASTECS Copyrighted materials. All rights reserved.

Selling Your Patent

© Source: Knowledgebase at www.astecs.org

Agenda

Schedule 9-12:00 noon 10.30-10.45—Break

Introductions Why Patents are Sold Who’s Selling Patents? Why Patents are Acquired Why Buy a Patent? Information Required in the Patent Sale

Process Selecting Patents to Acquire or Sell--

Andre Marais Valuation—What’s a Patent Worth? Patent Licensing Typical Tech-License Arrangement Corporate IP Licensing Role of Intermediaries in the Patent Sale

Process Alternative Sales Channels/Options Why Buyers Use Intermediaries Why Sellers Use Intermediaries Timeline—Patent Sale Q & A


What is a Patent?

The right to exclude, not right to use.

You Do not Have the Rights to Use your own patented invention.

As Elements of your invention may infringe other patents.


Why Patents are Sold

Developer/ Lister

Licensee/ Acquirer

Patent Listing


Most Patents are Unused


Why are Patent Unused?

They’re in the hands of individuals and organizations that don’t have the channels to market them.

Entrepreneurs

Universities

Research

Labs

Corp. R&D

Patents

Inventions

Market

Channel


Channel Barrier for Startups


One Technology—Many Applications

One technology

Multiple applications

Different markets

New routes to market


Who’s Selling Patents?

Startup Companies Funding dried up Liquidating assets Unable to build channels

Large Corporations No longer core to business Divesting of business/unit

Research Labs and Universities University Licensing Groups Unused Not core

Global phenomenon U.S. patents being sold from

many countries


Why Patents are Acquired

Developer/ Lister

Licensee/ Acquirer

Patent Listing


Why Buy a Patent?

Exclude competitors. Barriers to entry.

Enter new markets with mitigated risk of infringement litigation.

Enforce against infringers. Generate licensing revenue. Accumulate ‘arms’ for

potential patent wars.


Patent Buyers

Product manufacturers & marketers Buy rights to exclude competition

from producing similar products Many manufacturers in Asia

Patent enforcers Buy patents that are infringed

Corporate defenders Build portfolio to protect against

infringement suits Buy through third party aggregators

Financial investors Buy patents with licensing revenue

streams


Information Required in the Patent Sale Process


Information Needed to Sell

Patent numbers. Pricing guidelines. Information on prior-sales

efforts. Reasons for sale? Family of international

counterparts? Sell as portfolio or individual

patents? License back required? Potential infringers? Current licensees? Marketing materials? Additional IP included in sale?


Due Diligence Information

Patent office File Wrappers. Correspondence with patent

office. Prior art research.


Documents Needed to Sell

Brokering/representation agreement. Anti-circumvention.

NDA for Buyers. Patent Purchase Agreement. USPTO Assignment.


Selecting Patents to Acquire or Sell

..Including Patent Analysis, Portfolio Strategy and the Role of Patent Attorneys.

Andre Marais, SLW


Valuation—What’s a Patent Worth?


What to Expect: Valuation

Patent invalidated or expired

Known infringers

$0

$10k-30k

$30k-100k

Patent

Acquisition

Value in US$

$100k-$0.5m

$0.5-1m

$1m+

A

B

C

D

E

Not litigated

No licensees

No broad claims

Not litigated

Broad claims

Large market

Several competing buyers

Fortune 500 infringersF

Litigated & won

Litigated & won

Pending (unissued) patent applications: value is triggered when patent is approved. Value is

contingent on approval.

Industry-standard


Which Country?

Patents are country-specific. U.S. patent is only

enforceable in U.S. Chinese patent only

enforceable in China. U.S. patents are most

valuable. Many buyers only

interested in U.S. patents. Difficult to sell patents from

other countries unless they are part of portfolio with U.S. counterparts.


Selling Patent-Pending Applications?

Value highly speculative until patent is approved: If not approved, then

worth nothing. If approved with

weakened claims, then value can be reduced.

Two step sale:1. Sell option to buy the

patent when approved.2. Approval triggers

acquisition at pre-set price.


Patent Licensing


The ‘IBM Effect”

IBM is reported to have generated over $10bn in licensing royalties in the 10 years from 1993

More than 90% reaches bottom line


Solutions Model

Technology Application Solution Problem

Patents

Know-How

Developer/ Lister Licensee/ Acquirer


Solution Solving Model

Technology Application Solution Problem

Patents

Know-How

Developer/ Lister

Target Customer(s)

Application

Solution

Problem

Application

Solution

Problem

Application

Solution

Problem

Application

Solution

Problem


Typical Tech-License Arrangement

License Scope Field of Use

Non-competitive Exclusive/Non Exclusive Term

License Fee $0.25m-$5m Paid up-front

Royalty 3.5% of Revenues Quarterly/annually

Issues Enforcement against unlicensed “infringers”


Enforcement-Based Licensing

You’re infringing our patent. Would you like to take a license?

Of course, we could bring a suit for infringement if you don’t license!


eBay Case and Other Trends

Injunctions now less of a threat.

Declaws some of the patent enforcers.

Rapid Changes. More patent cases

reaching U.S. Supreme Court.


Opening Up their Portfolios

IBM Microsoft Hewlett Packard NEC Xerox Delphi Nortel Honeywell Dupont


Corporate IP Licensing—Getting Started

1. Catalog IP Evaluate and organize

patent portfolio Identify most valuable

assets Prepare listings

2. Publish Catalog Release catalog online

3. Syndicate Listings Through Tynax & broker

network4. Respond to Inquiries5. Approach Target Buyers


Licensing Enforcement Rights

Universities, Research Labs and others are Selling Title to their Patents

This can impede their ability to maximize licensing revenue from their portfolios.

The following structure allows licensees to take enforcement rights:1. Exclusive License. 2. Right to enforce. 3. Indemnification.


Role of Intermediaries


Alternative Sales Channels/Options

Appoint Broker Pros: Reach active buyers. Cons: Reach is usually limited.

Direct sale Pros: No commissions to pay. Cons: Difficult to find active

buyers. Many won’t deal directly. Litigation fear.

Auction Pros: Deadline to sale. Cons: Limited reach. Buyers want

time for due diligence.

Broker network/exchange Pros: Wide reach. Cons: Paying commissions?


Why Buyers Use Intermediaries

Litigation & anonymity. Avoid infringement litigation. “You’re a potential infringer if

you’re a potential buyer!” Pricing.

Avoid price inflation based on the deep pockets of the buyer.

Specialized capabilities. Patent search tools and

analysis techniques. Extended Reach.

Leverage the broker’s channels and connections.


Why Sellers Use Intermediaries

Litigation. Avoid declaratory judgment

lawsuits. Potential infringers bring

such suits to prevent venue being set in Texas.

Pricing. Reach a wider audience of

potential buyers. Create an auction-

environment. Facilitating the Transaction.

Expertise in closing these transactions.


Market Before Tynax


Tynax Exchange


Unique Trading System


Active Lead Generation


Timeline—Patent Sale

Tynax Listing Posted Online

Listing Syndicated & Promoted Online

Buyer RequestsInformation

Lister RespondsTo Questions

Initial Due DiligenceUndertaken by Buyer

Detailed Due Diligence by Buyer

Counter-OffersNegotiated

Pricing & TermsOutlined

"Tell-Me-More"Inquiry

Tentative InterestFrom Buyer

Serious InterestFrom Buyer

Pricing & TermsNegotiated

OfferTerm Sheet

Agreed

Final PaperworkPrepared

TransactionClosed

30-90 days 10-30 days 15-30 days 15-60 days 7-30 days 15-60 days

Patent Sale Process


Q & A