Jack Ellis

Conversant has acquired a patent portfolio from Korean chipmaker Dongbu HiTek, USPTO assignments records reveal. This represents the privately-held Canadian NPE’s second significant purchase from an Asia-Pacific based operating company in recent months – and may be a sign of things to come as the ‘public IP company’ (PIPCO) model founders.

According to USPTO data, Conversant was assigned 29 US patent assets by Seoul-based semiconductor foundry Dongbu HiTek and its affiliate Dongbu Electronics in a transfer executed at the end of last year. The patents appear to relate to CMOS image sensor technology.

Of note is that Dongbu HiTek has been one of Asia’s most prolific patent vendors over the past few years. Uncharacteristically for a Korean company, it has sold patents to a variety of buyers, including several NPEs (see table below). In research conducted by Allied Security Trust and published in issue 69 of IAM back in early 2015, Dongbu HiTek was identified as one of the top 15 sellers of patents worldwide during 2014 – the first year in which it was known to have offered its assets for sale. Other HiTek patents are currently up for auction through ICAP Patent Brokerage.

The Korean company’s somewhat unusual willingness to sell its IP seems to be related to previous debt problems and the financial woes of its parent, the Dongbu Group chaebol (conglomerate). HiTek as a whole has attracted interest from potential suitors including Chinese foundry SMIC and local competitor iA. However, things have taken a turn for the better of late, with HiTek expected to earn record profits for its 2016 financial year and anticipated to burst into the global top ten foundries by sales revenue.

The HiTek story is a positive one for patent owners at a time when it is has become exceedingly difficult to realise the value of their IP assets. The Korean company’s ability to sell patents – made possible through its long-term investment in patenting – has contributed to helping it pull off this turnaround.

As for Conversant, this is the second deal in which it has purchased patents from an Asian operating company in the past few months, following its November acquisition of 20 US assets from Panasonic. As far as I can tell, neither of these deals were mentioned anywhere in the press, nor on Conversant’s website. Which makes sense, considering that Conversant, unlike several of the other high-profile NPEs, is a privately held company.

A few years ago, much of the discussion about the NPE sector focused on the opportunities presented by going public and having access to capital market cash. But more recently, the PIPCO model has undergone a clear decline, as patent monetisation becomes an even higher-risk enterprise that it was previously and investors flock to more stable propositions. Most PIPCOs are now diversifying away from being patent pure-plays; the most recent evacuee being WiLAN, which last week announced that – while continuing with one foot in the licensing business – it would shift its focus to investing in ‘Internet of Things’ companies.

A privately-held NPE like Conversant, on the other hand, does not face these same pressures as its publicly-traded counterparts. It does not have to regularly publicise details of every deal it makes, the outcome of every negotiation it is engaged in or, of course, in-depth details of its financial performance. In the current climate, this kind of set-up may look increasingly attractive to operating companies – and particularly those in Asia – that have non-core patents burning a hole in their pockets.

 

Select patent sales by Dongbu HiTek

Buyer Country Industry Transaction date(s) Number of US assets transferred
Conversant Canada NPE Dec 2016 29
Intellectual Ventures United States NPE Jan 2015 32
Inphi United States Semiconductors Oct 2014 201
Intellectual Discovery South Korea Sovereign patent fund Sept 2014 10
RPX United States Defensive patent aggregation June 2014 10
Document Security Systems United States NPE May 2014 115
Strategic Global Advisors of Oregon United States Investment management May 2014-Apr 2015 39 (later transferred to Tessera/Xperia)