If you get deep inside the patent sales market you find some surprising details 09 Nov 12
In the next issue of IAM we will be publishing an article by Kent Richardson and Erik Oliver, of ROL Group, which looks at 186 patent packages – consisting of a total of 5,394 issued US patents and 7,595 total patent assets worldwide – offered by brokers and other sellers over the past three years. Richardson and Oliver write:
Our analysis is based on a sample of the market, not the entire market. We estimate that while running buying programmes, we saw somewhere between 35% and 75% of the available packages, depending on the time and the particular project. Also, because of our clients’ locations, we tended to see more US-focused transactions. We have excluded some of very large deals that had over 200 patents or were not widely distributed, even though brokers may have been involved from our analysis, in order to provide decision makers with clear insights about the characteristics of the pool of packages that are readily available. Even with these notes, we believe that our data is sufficient to draw conclusions about the market.
• Over the last year only 14 brokers of the 50 that Richardson and Oliver know about had at least three packages on the market. These are named in the article.
• In addition, other entities, such as AST, HP, IBM, Intellectual Ventures, OIN and RPX, have been repeat sellers.
• Pricing guidance is much lower than publicly reported deals suggest. For public deals between 2010 and 2012, the average price per sold asset was close to $970,000 per patent, but looking across all deal sizes, Richardson and Oliver compute an average asking price per listed patent asset of US$344,000, with an average asking price of $577,000. Note these are asking prices, not selling prices.
• Nearly 70% of the packages have a target price below $2 million.
• Just over 75% of all packages have 10 or fewer US patents. The average package size (excluding packages with more than 200 US patents or patent assets) has eight US patents or 14 total patent assets.
• The average length of time from original distribution to a sale is 180 days.
• Once purchasing starts, the data suggests that between 30 and 60 days to close is reasonable for a pure-patent transaction.
• Of 96 packages separately analysed, only 15 had any registered assignments that were after the receipt date of the package and to an entity other than that selling the package. This equates to 16% of packages being sold.
• Of the 15 that did sell, just two were subsequently litigated – one by an operating company, the other by an NPE.
• Remembering that Richardson and Oliver have deliberately excluded some of the big ticket transactions, they estimate $153 million in annual sales with broker fees of about $34 million.
As I say, this is just a taster; in the article there are plenty more stats, as well as a great deal of important analysis – including what information sellers should be looking to provide to buyers in order to have the best chance of securing a sale at a good price.
As far as I know the work Richardson and Oliver have done represents the first attempt to take a detailed look, for public consumption at least, at what is actually happening in the patent sales market place. And while deals are being done, once you strip away the headline makers, many of them seem to be relatively low level, while a lot of the people you meet who claim never to have been busier could not have been that busy in the first place!
Helpfully, the ROL Group website has a list of, and contact deals for, what it claims are “all known patent brokers, and some larger patent sellers”. It was last updated at the end of September.
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