what's inside intellectual ventures' patent portfolio

Copyright 2014 ROL Group 1

Intellectual VenturesPortfolio Analysis - PreviewErik Oliver and Kent Richardson

March 2014


Notes

This is a preview of a longer analysis that ROL Group is undertaking

The final results will appear in IAM Magazine later in 2014

Sources (when not otherwise noted)

• IV public patent list• Patent metadata from Thomson Innovation

Still finalizing data, please do not redistribute this version outside the Gathering


Intellectual Ventures BackgroundBasics

• Founded 2000, total acquisitions of 70,000 IP assets• 35,000 IP assets/year evaluated (for purchase/license)

Funds raised• $6B as of 2014• Form of capital commitments with a 10 year draw

Expenditures as of 2014• $2.3B

• $730M to large companies• $240M to mid-sizes• $720M to startups/SMEs• $510M to independent inventors• $110M to universities

• Does this include: management fees, salaries (500-800 emps), portfolio/prosecution fees?

Return to investors and revenues• Licensing revenues of $3B as of 2014

News/Context• IIF1 vs. IIF2 investor returns?• IIF3 Status?• Broker community on payments?• Recent layoffs

http://www.intellectualventures.com/about/investor-relations2014 spend from IV Talk slides

http://www.intellectualventures.com/about/investor-relations

http://www.intellectualventures.com/about/investor-relations


IV Universe

IV Portfolio*

IV Portfolio•~70K patents/apps

IV Portfolio in monetization•~40K patents/apps

Public List•~33K patents/apps

US Published/Issued•~22K patents/apps

Business Segmentation

Invention Investment Fund 1 (IIF1)

Invention Investment Fund 2 (IIF2)

Invention Science Fund (ISF)

University/Licensing (IDF)

http://patents.intven.com/finder

+ Invention Investment Fund 3 (IIF3)







IV Analysis Process and Focus

Fund Monetized Listed US Pat + Pregrant Pub

Assignment to IV id’ed

RemoveISF

IIF 1 and 2 ✓ (32.0K) ✓ (25.8K) ✓ (18.2K) ✓ (17.4K) ✓ (17.4K)

ISF (Science) ✓(3.7K) ✓ (3.7K) ✓ (2.4K) ✓ (2.4K) ✗ (0K)

IDF (Univ. Licensing)

✓ (~4.0K) ✓ (~3.5K) ✓ (0.7K) ✗ (0K) ✗ (0K)

Asset Count (Approx)

40K 33K 21.3K 19.8K 17.4K

IV’s FAQ explains gap between 70K 40K: http://patents.intven.com/faq, in brief cost controls, patent sales, and expirations.The US list has issued US patents and US patent publications only; reissues have been removed (425); applications with no publication number have been removed (276).

IIF – We are including the Digimarc licensing agent agreement as part of IIF, approximately 700 assets.ISF – We believe that they have listed substantially all of their ISF portfolioIDF – We know that Asia is a focus for the program, we did not have access to the assignment records in those countries; however, we estimated that the Asian listed IDF portfolio was 4x the size of the US listed IDF portfolio and scaled that to approximate the monetized asset count..

We primarily performed analysis of US IIF subset and then back-estimated to

the purchased IIF patentsReminder we have a

snapshot today... What did the portfolio look like

2, 3, 4 years ago?

http://patents.intven.com/faq

http://patents.intven.com/faq


When was IV Buying?

2001 2002 2003 2004 2005 2006 2007 2008 2009 2010 2011 2012 20130

1000

2000

3000

4000

5000

6000

Scaled Acquisitions by Year (Monetized IIF)

IV was buying when the market was down and continued to buy throughout the downturn

Assignment data reflects opportunistic purchases from struggling companies

Low numbers may reflect expiration/sales of IIF1 patents or early

buying selectivity


Estimated Spend by IV per YearTotal Est. Spend $1.7B

2001 2002 2003 2004 2005 2006 2007 2008 2009 2010 2011 2012 20130

50

100

150

200

250

300

350

400

Scaled Spend per year ($M) (Monetized IIF )

Comparable acquisition #, but paying less per

patent by 2011


When do the IIF portfolios expire?Estimated Expiration Using 20 Years from Earliest Priority

<2010

2010 2011 2012 2013 2014 2015 2016 2017 2018 2019 2020 2021 2022 2023 2024 2025 2026 2027 2028 2029 2030 2031 20320

500

1000

1500

2000

2500

3000

3500

4000

4500

Scaled Assets by Estimated Expiration Year (Monetized IIF)~50% of portfolio expired by 2021 (7 years)

~80% of portfolio expired by 2024(10 years)

If your company were to consider a deal with IV and the deal runs 5-7 years (2019-2021) what would a future deal look like? Where is the distribution of patent value from IV’s perspective vs.your company’s perspective?


Remaining Asset Life at Time of PurchaseCalculated based on estimated expiration

Robust continuation practiceApprox 8% of portfolio today

20 19 18 17 16 15 14 13 12 11 10 9 8 7 6 5 4 3 2 1 00

500

1000

1500

2000

2500

3000

3500

Scaled Remaining Asset Life at time of IV Purchase (Mone-tized IIF)

Further ProsecutionPurchased


Remaining Life over Time is DecliningEstimated Average Remaining Life Over Time (US Pats & Pubs; Continuations Excluded)

IV seems to be buying assets closer to expiration over time!Why? Is IV cherry picking patents with greater adoption certainty?

1999 2000 2001 2002 2003 2004 2005 2006 2007 2008 2009 2010 2011 2012 2013 20140

2

4

6

8

10

12

14

16

18

20

Estimated Average Remaining Life Over Time (US Pats & Pubs; Continuations Excluded)


Sellers are DiffuseFrequency of Assets Assigned by Sellers

100+ 90-99 80-89 70-79 60-69 50-59 40-49 30-39 20-29 10-19 <100

200

400

600

800

1000

1200

1400

1600

Frequency Distribution of Number of Sellers with Indicated Quantity of Assets Assigned (US Pats and Pubs)

~100 total companies~60% of assets

~300 total companies~75% of assets

~1350 individualsbut only 25% of total

assets

This distribution generally foots with IV’s reported spend to IV entity size


Who is Selling?Ordered by Number of Patents Sold (at least 30 sold)Top 20 Next 20 Next 20 Next 20Kodak Nortel Recursion Software MosaidDigimarc Cubic Wafer Hong Kong Technologies LapisNXP Genesis Microship Nippon Steal CasioRaytheon Marconi IP Fujitsu ThalesMangachip Delphi Chunghwa Picture Tubes Alcatel-LucentTelcordia Verizon Sonic Dowling ConsultingTransmeta Aplus Flash AT&T Lockheed MartinSpyder Navigations Autocell Katrein-Werke Pulse-LinkAmex Crosstek Capital California Inst of Tech Lightspeed LogicPolaroid Tier Logic Be Here PSS SystemsCypress Semi Mindspeed Technologies Digital Imaging Systems DuPontDaimler Cirrus Logic Ideaflood Lightsmyth TechFrance Telecom Kimberly-Clark UMC ST MicroPrimax Electronics Airnet Communications Microsoft RockwellConexant Idelix Software Airip Cooler MasterBAE Icefyre Semi Discovision XeroxSanyo Mitsubishi Motorola ArraycomNokia Neomagic Triquint BelieveBellsouth Oki Electric Terabeam General DynamicsEntorian IPWireless Exclara

Many “blue-chip”/household names among sellers of patents to IV

Implications? How would something like a license on transfer impact a future aggregator?


Technology Market AreasBased on CPC code analysis

Circuit

ry

Semico

nduc

tors

Regist

ers an

d Ran

domne

ss

Materia

l Prop

erties

Optics

Signal

Proces

sing

Teleph

ony/S

ignal

Transm

ission

Inform

ation

Stor

age

Data P

roces

sing

Naviga

tion

Money

Han

dling

Medica

l Dev

ices

Climate

Cha

nge

0

1000

2000

3000

4000

5000

6000

7000

8000

Relative Size of Portfolio by Market

Hardware Software Other


2001 2002 2003 2004 2005 2006 2007 2008 2009 2010 2011 2012 2013

Relative Size of Market Category Purchases by Year

HardwareSoftwareOther

Technology Market Areas over Time

Less subject matter focus in 2010?

Pivot into hardware?Or did hardware patents

expire/sold sooner?


International Asset DistributionMonetized IIF – Not Yet Filtered for Pub vs. Patent

IIF portfolio has limited foreign coverage ~10K assets—weak in BRIC

Issued foreign portfolio likely significantly smaller—publications were listed

JP WO EP AU DE CN KR CA GB AT Other TW FI FR IL ES SE BR NO MX HK DK0

500

1000

1500

2000

2500

Estimated Foreign Asset Profile (Monetized IIF)


ROL Group Automated Ranking System

•How to decide where to spend time first in a portfolio?

Problem

•Quick and easy to calculate•Scoring vectors make intuitive sense•Easy to explain

Constraints

•Heuristic ranking system based on static characteristics

Solution

•# independent claims•# forward citations adjusted for age•Remaining patent life•Claim 1 word length•Means claims reduces rank•Current age reduces rank•Etc.

Sample Characteristics

•Used across projects for over 5 years – regularly helps us find where to focus in a portfolio•Have benchmarked in the past versus human selection and alternative (more complex) scoring systems and generally found similar—but not identical subsets for value—but high return for low computation costs/explanatory simplicity

Results


IV PortfolioComputer-based Ranking by Assignment Year

2001 2002 2003 2004 2005 2006 2007 2008 2009 2010 2011 2012 20130

500

1000

1500

2000

2500

Scaled Asset Rank by Assignment Year (Monetized IIF)

• High selectivity in purchases - Overall portfolio is relatively evenly distributed between H/M/L, this is atypical

• Selectivity has varied over time, e.g. 2008 (bulk) vs. 2010 (quality)


ReissuesDemonstrates IV’s focus on patent development

IV Before IV0

50

100

150

200

250

300

Who Reissued? (n=386)

2004 2005 2006 2007 2008 2009 2010 2011 2012 20130

10

20

30

40

50

60

70

IV Initiated Reissues by Fil-ing Year (n=250)

IV focused on reissuing patents for value and bought reissued patents for value

The vast majority of reissues were filed by IV in the first 24 months after purchase


Litigation Analysis

Coming soon

Lex Machina data under analysis:~430 US patents where assignment was found ever been litigated

~182 litigationsTo do: Figure out which litigations occurred after the IV purchase


Gathering Discussion Topic

What other questions could be asked?• Tech area specific analysis, e.g. Expiration time line vs. spend• More fine-grained analysis of IV’s purchases in “my company’s” market segments• Assignment analysis, e.g. holding companies used and intra-IV transfers as indicators• Analysis of sellers• Is there overlap to companies who complain about NPEs?• Are there common characteristics of sellers, e.g. financial distress for corporates?

• Better quantifying the amount of patent development IV performs after the purchase• When IV purchases a patent how much of the TAM is potentially consumed by the IIF members?• E.g., the revenue of all the corporations in that IIF fund for the area of the purchases patents• Further follow up, publicly announced IV licensees?• Royalty modeling, e.g. Microsoft v. Motorola (Washington; Apr 2013)• Apply a similar analysis to IV’s portfolio, what is the proportion of total patents in the area vs.

size of IV’s portfolio• Could be performed on a segment-by-segment basis, e.g. what % of active patents in a given

CPC class does IV own? • Note the Washington case was a RAND case

• How would you use the information to counter an IV assertion? Prepare for IV to knock?

What would you like to know?


Gathering Discussion Topic

What else would you like to know?• What would you do (differently) if IV approached

based on this data?• What else would you like to know?

Possible future IV scenarios?• No change: IIF3 moves forward, licensing continues• Funds unwind/time out: What happens to portfolio?• Legal shift: FTC action vs. NPEs, CLS/Alice Bank

@ SCOTUS reduces SW patents, other (e.g. Licensing approach shifts to IBM/Twitter style licenses)?


BACKUP


Technology Market Areas by Year

2001 2002 2003 2004 2005 2006 2007 2008 2009 2010 2011 2012 2013

CircuitrySemiconductorsRegisters and RandomnessMaterial PropertiesOpticsSignal ProcessingTelephony/Signal TransmissionInformation StorageData ProcessingNavigationMoney HandlingMedical DevicesClimate Change


Technology Market AreasDrilldown on Telephony/Signal and Data Processing

Electric

al Digi

tal D

ata P

roces

sing

Recog

nition

/Pres

entat

ion of

Data

Financ

ial A

dmini

stativ

e or F

oreca

sting

Imag

e Data

Proc

essin

g0

500

1000

1500

2000

2500

3000

3500

4000

Data Processing Subclasses Relative Size

Digital

Sign

al Tra

nsmiss

ion

Video R

ecord

ing an

d Tran

smiss

ion

Teleph

onic

Commun

icatio

n

Broadc

ast C

ommun

icatio

n

Transm

ission

Meth

ods

Multipl

ex C

ommun

icatio

n

Amplifie

rs

Aerials

0

500

1000

1500

2000

2500

3000

3500

Telephony/Signal Trans-mission Subclasses Rela-

tive Size

what's inside intellectual ventures' patent portfolio

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