Monetisation options outside the courtroom are growing, but their ability to deliver remains open to question 14 May 15
If you’re a patent owner, monetising your IP in the US may seem like a tough task right now. The traditional licensing route has become so mired in litigation and re-exam challenges that it is increasingly only open to the richest plaintiffs. And although we recently reported on an uptick in sales in the first three months of this year, it is widely acknowledged that patent values are depressed. In short, it is not a sellers market.
But that doesn’t mean owners don’t have options. Earlier this week, a new initiative designed to give them a way of profiting from their inventions was launched; while we also got an early progress report on another programme aimed at shaking up the licensing market.
On Monday Dominion Harbor, the licensing business started by a group of former IPNav executives in 2013, launched an IP bank aimed at buying up patent assets and seeding them into start-up companies. The Dominion Harbor team will use its expertise to vet patent portfolios; those that pass muster will either be bought outright or the owner will be given an ongoing interest in the assets for when they are transferred to another business. The bank will be hosted by Monument Patent Holdings, the patent-owning vehicle which is affiliated with Dominion.
Talking to IAM, Dominion CEO David Pridham claimed that this model would not only work for smaller patent owners, but also Fortune 50 businesses that may be looking to monetise their non-core IP and might have an aversion to a traditional privateering style model. “Too many major actors are using IP as a club to either knock down start-ups, prevent companies from entering new markets or stop them innovating,” Pridham stated. Setting up the bank was part of what he described as Dominion’s aim to take “a different tack in the licensing market”.
Although the bank is not designed to create new companies around patent portfolios, Dominion COO Brad Sheafe pointed out that it would be able to seed patents into early growth businesses that may be waiting for their own IP to be granted by the USPTO. This could give VC funds and other investors greater confidence in the IP rights of any business they’re putting their money into.
Dominion’s initiative comes just a few weeks after Google launched its Patent Purchase Promotion designed to give patent owners a one-off opportunity to sell their assets to the search giant. Pridham and Sheafe did not miss the opportunity to question the tech company’s motives, pointing out that while it was lobbying in Washington DC for patent reform, which is seen by some as having a depressing effect on the deals market, it was now also looking to spend “pennies on the dollar” to acquire patents.
“The cynicism that surrounds patents today is unbelievable,” Sheafe remarked. “Patents have a value but they’re being devalued in the market and also from the public’s perspective.” Perhaps the true test of the new IP bank will not only be whether it makes money for Pridham, Sheafe and their partners, but also if it helps defuse some of that cynicism.
Another initiative, which, if it is successful, could help make the market a little less cynical, reported its early and so far very slow progress on Wednesday. The US Patent Utility, the scheme launched by Priceline.com founder and chairman of NPE Patent Properties, Jay Walker, is designed to help generate a licensing return from the vast majority of American patents that remain unused. We reported on the launch of the beta version last November, but the first quarter of this year represented the first opportunity to check on the Utility’s progress since it was fully launched in late January.
The Utility is a volume-driven model designed to generate around $1,000 each year from a typical licence. That’s well short of the hundreds of thousands or even millions that some inventors dream of realising; however, as the Utility’s thinking goes, it’s better than the zero return that many currently receive.
But judging by Patent Properties’ first quarter results, the Utility’s first couple of months have been very modest. The NPE reported revenues of just $12,000. This includes both subscription revenues from the Utility and licensing returns from Patent Properties’ own patents. On a call with investors CEO Jon Ellenthal insisted that they were pleased with the first few months, commenting that “although we’re only in the first inning of this game we like how things are setting up for us”.
Thus far the Utility has not struggled to sign up some headline patent owners who can list, free of charge, which of their patents are available to license. Most recently it announced that Intellectual Ventures had agreed to make several thousand of its assets available.
However, the success of the Utility will be determined by whether large numbers of potential licensees agree to pay the monthly subscription rate of around $1,200. The early numbers suggest that interest in handing money over thus far has been very slow to materialise.
Walker’s experience with Priceline.com shows that he has a proven track record of dismantling widely held pre-conceptions about a market and of monetising previously unused inventory by using sophisticated software to improve information and promote greater efficiencies. That may yet happen in the licensing business but, as the failure of IPXI earlier this year demonstrated, there are still significant challenges in convincing potential licensees that they need to pay out in the first place. IPXI attempted to develop a model based on good-faith licensing but found that the dominant message from companies was simply “sue us”.
Patent owners will still need to see some return from the likes of Dominion’s new IP bank and the US Patent Utility before we can say that the era of litigation licensing is over.
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