PIPCO investing in a brave new world

By Mark Gober and Kevin Rivette

The challenging and uncertain patent enforcement environment has wreaked havoc on small/micro-cap public IP company valuations. However, the associated volatility has created money-making opportunities for public market investors

In 2010-2011, patent valuations were flying. First, Novell sold its 882 patents for $450 million. Then, Nortel sold its 6,000 patents for $4.5 billion out of bankruptcy – significantly exceeding the $3.2 billion it had raised from selling off its operating businesses. This deal was followed by Google’s acquisition of Motorola Mobility for $12.5 billion, largely motivated by its portfolio of tens of thousands of patents. These numbers caught the attention of holders of patent rights and investors. Rights holders began to look for ways to get rich off their patented innovations, while investors with stars in their eyes wanted a piece of the action. This scenario created the perfect conditions for new publicly traded companies, known as PIPCOs, whose business models are driven by collecting licensing fees from parties which they believe to be infringing their patents.

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Issue 90