Richard Lloyd

Since Yahoo! put up a large portfolio of is patents up for sale last year we have become accustomed to plenty of speculation about how much the assets might be worth and who might buy them. But we’re still none the wiser about how much the assets might be worth, because aside from a small package that was acquired by Dominion Harbor the portfolio, known as Excalibur IP, is still owned by what remains of the Yahoo! business which is now known as Altaba.

Speaking recently in New York, Provenance Asset Group CEO Dan McCurdy posited one reason for why the patents haven’t sold, as he compared the process with the 2012 disposal of the portfolio owned by chip designing business MIPS - a deal he was involved in when CEO of Allied Security Trust. “There were literally thousands of companies around the world that were fearful of the MIPS portfolio and there aren’t thousands scared of the Yahoo! portfolio,” he commented. In other words, the Excalibur patents don’t pose such a threat to operating companies that a large corporate buyer feels they need to have them or a defensive aggregator feels motivated to launch a bid in order to protect its subscribers.

The MIPS transaction saw the company sell almost 500 patents to a consortium led by AST and including British chipmaker ARM (MIPS was then acquired by Imagination Technologies). Such was the strength of the portfolio and the risk that it might fall into the hands of a non-practising entity or an industry competitor that the likes of ARM felt strongly motivated to step in.

McCurdy was taking part in a panel discussion at the recent IP Dealmakers Forum alongside Michael Friedman of Hilco IP Merchant Banking, Courtney Quish of Rovi and Mike Dansky of Berkeley Research Group. The session - “Getting good deals done” - was moderated by Elvir Causevic of Houlihan Lokey, which is handling the Yahoo! disposal. Causevic admitted that they had tried to create the same kind of competitive dynamic as the MIPS deal, which prompted McCurdy to make his comment about why he thought the Yahoo! assets hadn’t sold. The Provenance head described the MIPS rights as “an extraordinarily fundamental patent portfolio” and credited the company with doing “a good job of making sure that people knew there was a risk they might do a deal with an NPE”.

Of course, 2012, when the deal was done, feels like light years away from today’s patent climate. Anyone looking at the Yahoo! assets would naturally be concerned about eligibility challenges, thanks in large part to the Supreme Court’s Alice decision. There are also far fewer, well-capitalised NPEs on hand to acquire the assets and none (that I can think) which would be willing to pay cash upfront for a portfolio rather than get involved in some sort of privateering deal structure with the vast majority of the money changing hands once a deal had been done. 

As well as McCurdy’s comments, the panel discussion also looked at a range of other reasons for why patent transactions collapse. Friedman pointed out that deals often face competition from other assets such as real estate, which might be more appealing and perhaps better understood than an IP transaction. Plus dealmakers in the IP space still run up against a familiar narrative which can turn investors off. “The zeitgeist on Wall Street is that anyone who asserts a patent is a troll,” Friedman commented. “We’ve had deals fall apart because an investor has this irrational fear of assertion.” Creating a competitive dynamic for patent assets with that kind of concern is still a huge challenge for dealmakers. Just ask Yahoo!.