RPX breaks new ground in billion dollar patent licensing link up with Alcatel Lucent 11 Feb 12
Alcatel Lucent could earn over $1 billion in extra licensing revenues this year following a deal signed with RPX Corp to monetise the company’s 29,000-strong patent portfolio, according to some estimates. Under the terms of the agreement, the defensive patent aggregator will form a licensing syndicate through which the patents will be offered to its membership, which currently comprises over 100 companies.
The exact details of what this will actually mean have not been explained. The press release announcing the hook-up states: “Participation in this innovative licensing approach will be open to a wide range of prospective licensees. Fees to obtain perpetual, non-exclusive licenses under the program - which will include licenses to both issued Alcatel-Lucent patents and pending applications - will vary depending on company size, portfolio applicability, technology areas and other relevant factors.” Alcatel Lucent CEO Ben Verwaayen states: "We believe that RPX's model encourages an environment where owners and users of intellectual property have the benefit of transparency and fair pricing. We expect to generate substantial proceeds from this arrangement.”
In a telephone presentation and follow-up Q&As discussing Alcatel-Lucent’s annual results on Friday, Verwaayen and CFO Paul Tufano put more flesh on the bones of the deal. Essentially, it seems, RPX will market the Alcatel portfolio to its membership. Presumably, this will involve the firm going to those which it feels may infringe, or could in the future infringe, Alcatel rights, demonstrating this and then arranging the relevant licence, under terms which are exclusive to RPX members. The licensees will form the syndicate, which will not necessarily involve all RPX members – something which makes the deal different to a normal purchase or licence agreement undertaken by the firm. Alcatel will also have the right to walk away from the deal if it does not work out to its satisfaction.
From the sound of it, RPX has already had detailed conversations with Alcatel which have involved identifying where there could be synergies and revenue-generating opportunities, and Alcatel has liked the sound of what it has heard. Presumably, RPX’s membership has OKed all this and has been kept briefed on discussions. In this way, it is a win-win for everyone: Alcatel gets new licensees and a significant new cash stream, along with the possibility of pulling out of the deal if projected targets are not met; while the RPX members get favourable terms through an efficient, transparent and time-friendly process in which a trusted partner is the intermediary. As for RPX itself, it is enhancing the appeal it has to existing members so locking them in more tightly, while making itself more attractive to new members and, possibly, opening up new business opportunities away from straight aggregation.
The articles of association under which it operates forbid RPX from enforcing any of the patents it owns, but the beauty of this deal is that Alcatel Lucent is the rights-holder. Presumably, therefore, the normal rules do not apply. Not only does RPX have more than 100 members, all of which will be offered the chance to take licences, but it could also put its databases and analytics expertise to good use in identifying other potential licensees of a portfolio which covers a wide-range of technologies, before employing its pricing and deal-making expertise to get prospects signed up. Those that refuse to play ball can be handed over for Alcatel-Lucent or a third-party privateer to deal with – with RPX providing advice as necessary.
RPX’s website talks about the possibility of what are described as syndicated acquisitions, and this looks like a variation on that. To my knowledge it is the first such deal the firm has been involved in, at least publicly, and to get Alcatel Lucent involved it may have been offered particularly attractive terms. However, if things work out it should provide a healthy income for RPX. Given the expertise it has acquired and the databases it has built this is exactly the kind of deal that the firm should be doing as it seeks to expand out of the narrow world of defensive aggregation. Continuing what has been a very good start to 2012, RPX's share price was up over 10% on the news of the deal. That’s no big surprise: if it is successful, others are sure to follow.
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