| For corporations and entrepreneurs seeking to | | | | increase its offer to prevent an NPE from obtaining |
| monetize their un- or under-utilized IP rights for the first | | | | that patent for the purpose of bringing suit against the |
| time, it can be difficult to know where to begin. The | | | | corporation. This scenario means that those most |
| patent monetization market is not yet mature and, as | | | | interested in acquiring the patent will bring their best |
| with other emerging marketplaces, no established | | | | offer to the table, a fact which should improve the final |
| methodologies and few experts exist to guide owners | | | | price paid. A further benefit of selling through a good |
| through the process. Today, there are as many as 17 | | | | broker is that they will typically conduct market |
| different business models used. More will likely spring | | | | analysis of the rights to set a rationally-based entry |
| up as the market continues to evolve, even while | | | | level price. Specifically, the broker will set the price |
| some of the current models will certainly fall away. | | | | based upon what comparable patents have been sold |
| With such a range of options, it is not surprising that | | | | for in the past. These figures normally are not public, |
| those seeking to sell their patent rights may be | | | | so a broker with several sales under his belt will likely |
| confused about what path to take. This article is | | | | set a more accurate initial sale price by virtue of the |
| intended to provide an overview of ways that | | | | fact that he is privy to information that allows him to |
| corporate and individual IP owners can most | | | | do so. Notably, even an experienced broker might |
| effectively monetize their rights in today's market. The | | | | incorrectly estimate the likely floor price, but when the |
| models discussed in this article were chosen because | | | | patent is offered to many likely buyers, the market will |
| they are currently the most common. Significantly, due | | | | typically act to reset the price to one more acceptable |
| to the great variability in patents and the individual | | | | to potential buyers. |
| needs of IP owners, the best model for a particular | | | | Beware of Finders Who Say They are Brokers A |
| person or organization might actually one that is not | | | | significant problem with many people who hold |
| discussed here. Nonetheless, it is hoped that after | | | | themselves out as patent brokers is that some are not |
| reading this, a corporation or entrepreneur seeking to | | | | "brokers" at all. Rather, they are "finders" for |
| sell their rights for the first time will be better able to | | | | aggregators or other buyers of patents such as NPE's |
| understand and execute on the opportunities and | | | | (but likely not corporations). Like regular brokers, these |
| challenges present today in the patent monetization | | | | finders maintain relationships with likely buyers. When |
| market. | | | | accepting a patent for sale to a potential buyer, the |
| Thinking of Selling a Patent Directly to a Corporation | | | | finder likely already knows whether it will be purchased |
| Without an Intermediary? Forget About It Most IP | | | | by its contact. In this scenario, the finder actually does |
| owners assume that it is possible to sell their rights | | | | little to earn his 25% fee other than maintain a |
| directly to a company that might play or seek to play | | | | relationship with the ultimate purchaser. Moreover, |
| in the product or technology space covered by the | | | | many of these brokers actually "double dip" because |
| patent. This is rarely the case, however. When I was | | | | they obtain a fee from the purchaser for bringing the |
| employed as a senior attorney in a consumer products | | | | opportunity to them, as opposed to another potential |
| company, it was corporate policy to reject all | | | | buyer. The finder thus might hold divided loyalties: |
| unsolicited offers to purchase or license patents that | | | | should they try to maximize the price obtained for his |
| came into the organization. Thus, an owner did not | | | | client's patent when they might never see an |
| stand a chance to get their rights sold to my company. | | | | opportunity from that seller again, or should they keep |
| This absolute prohibition on unsolicited ideas is not the | | | | the price reasonable so they don't ruin their relationship |
| policy at all companies, but, in truth, few companies | | | | with their buyer to whom they might bring several |
| today actively seek to acquire products and | | | | buying opportunities to each year? Clearly, this |
| technology from outside sources (although this is | | | | scenario is rife with questionable ethics, but the reality |
| starting to change with the drive toward open | | | | of the current monetization market is that no licensing |
| innovation at many companies). Thus, even if a patent | | | | is required for someone to call himself a "patent |
| is a perfect fit for a company's offerings, most | | | | broker," and the rule is definitely "buyer beware." As |
| organizations will nonetheless prefer to pass on a | | | | things stand in today's unregulated broker market, the |
| purchase opportunity because external acquisition is | | | | best way to find a quality patent broker is to seek |
| not part of their technology development model. It is | | | | referrals from someone who understands the market |
| therefore doubtful that most patent owners can hope | | | | and/or who has successfully sold patents through a |
| to successfully sell their rights directly to a corporation | | | | broker in the past. |
| because the latter is not in the business of buying | | | | Patent Auctions: Selling in the Open to the Highest |
| patents generally, and specifically not from individual | | | | Bidder The final common vehicle for selling patent |
| owners. | | | | rights is the public auction setting. Today, the most |
| Aggregators: Buyers of Patents if a Patent Owner | | | | prevalent auction is conducted by Ocean Tomo, which |
| Can Get a Foot in Their Door In recent years, | | | | currently holds 2 auctions each year. Ocean Tomo is |
| companies have emerged that hold business models | | | | very selective about what patents it takes into each |
| centered on the buying of patents held by others. Well | | | | auction, a fact that limits the ability of many patent |
| known aggregators today include Intellectual Ventures, | | | | owners to participate in this model. Ocean Tomo |
| RPX and Allied Security Trust. Each of these | | | | obtains a fee from the seller and the buyer, and it is |
| companies has a different reason that it seeks to | | | | my understanding that the net fee amounts to |
| acquire patents, but each can serve as a great | | | | approximately 25 % paid to the auction house. While I |
| resource for owners seeking to sell their IP rights in | | | | have not personally been involved in an auction, I have |
| certain technology areas. Nonetheless, there are many | | | | heard mixed things from people who have participated |
| more patent owners seeking to sell their rights than | | | | as both buyers and sellers in these auctions. My sense |
| existing aggregator buying opportunities. As a result, if | | | | is that an auction allows one to sell his patent in a |
| an owner obtains a "no" answer, how does he know it | | | | transparent setting where the price is set by |
| is because his patent is worth nothing to the | | | | competitive bidding. This can be good when a patent is |
| aggregator or whether it's because he did not know | | | | desired by multiple parties who are influenceable by |
| the right person to get his rights in front of at the | | | | the "heat" of a public auction process to increase their |
| aggregator company? For most IP owners, especially | | | | bids to result in a higher price for the seller. In my view, |
| those participating in the monetization market for the | | | | one downside of the open auction process is that all |
| first time, patent aggregators will not serve as a likely | | | | participants know the price being offered, a fact that |
| direct purchaser of their rights. | | | | can lead to a lower final sale price if a patent does not |
| Brokers: Facilitors of Patent Sales, For a Price Brokers | | | | garner excitement from the participants. This view |
| such as ThinkFire, IPotential and IP Transactions Group | | | | was borne out in the most recent (April 2009) Ocean |
| can assist IP owners in presenting their patent to a | | | | Tomo auction which was almost universally considered |
| likely buyer, the most likely of which are patent | | | | a failure. Buyers were lacking and, as a result, not only |
| aggregators, non-practicing entities ("NPE's") and, | | | | did few patents sell, the tenor of the auction itself was |
| sometimes, corporations. By leveraging their | | | | said to be very quiet and unexcited. This lack of |
| relationships and reputations, brokers effectively serve | | | | enthusiasm from the auction participants no doubt |
| as "filters" for potential patent acquirers to streamline | | | | reduced the overall success of the auction itself. In |
| and improve the quality of patent buying opportunities. | | | | contrast, in a private auction--such as that effectively |
| Put simply, patent buyers trust their patent brokers to | | | | set up when a quality broker sells a patent into a large |
| "separate the wheat from the chaff" to make it easier | | | | network of potential buyers--the lack of transparency |
| for them to identify and act on good patent buying | | | | can result in a higher final price because the |
| opportunities. A broker who is trusted by a patent | | | | participants know who has been provided the |
| buyer can thus present the latter with a buying | | | | opportunity to purchase but not the amount they have |
| opportunity that the buyer would not have given a | | | | offered (if at all). A further possible downside to a |
| second glance to if the same patent had been offered | | | | public auction is that one can only sell his patent to |
| to them outside of the broker-buyer relationship. There | | | | someone who shows up to participate in the auction. |
| is a substantial cost to hiring a broker, | | | | With a broker-conducted private auction, however, |
| however--typically about 25 % of the total sale price. | | | | someone who may not actively be seeking to buy a |
| Patent brokers also require exclusivity. Thus, when a | | | | patent at that time will be presented with the |
| patent owner selects a particular broker to represent | | | | opportunity to buy. Thus, the number of potential |
| him in the sale, he must trust that the broker will find | | | | buyers can be expanded with the use of a broker. |
| the best deal. I nonetheless believe that the knowledge | | | | It's as Clear as Mud Now, Right? As noted at the |
| and expertise available with a good broker can allow a | | | | outset of this article, the IP monetization market is only |
| patent owner to obtain a final purchase price for his | | | | just now emerging as a viable way to obtain value |
| rights that more than justifies the broker fee. In | | | | from un- or under-utilized assets. In view of this, most |
| particular, the best brokers maintain a large network of | | | | patent owners just starting into will be confused about |
| potential purchasers of patents, including aggregators, | | | | how to proceed in a manner that maximizes the price |
| NPE's and, in some cases, corporations that have | | | | obtained. If one owns patent rights and seeks to sell |
| expressed an interest in buying third party IP rights. | | | | them today, it is my recommendation that he learn as |
| I believe such broad networks serve a critical function | | | | much as possible about the process. And, as with |
| in improving the efficiency of the monetization market | | | | many business situations, checking references and |
| by possibly raising the final purchase price. When a | | | | seeking recommendations from those with experience |
| patent is offered through a quality broker, he will | | | | as patent sellers and counselors to IP owners will be |
| ensure that each party participating in the process also | | | | critical to success in monetization. Personally, I am |
| knows who else is being offered the opportunity. Such | | | | looking forward to the day when more openness |
| transparency could also result in an increase in the final | | | | exists in the marketplace so that patent owners can |
| purchase price when one potential purchaser seeks to | | | | better gauge the quality and qualifications of those |
| ensure that another potential purchaser not acquire | | | | participants in the process. |
| that same right. For example, a corporation might | | | | |