Richard Lloyd

Jawbone, the consumer electronics business, which was one of the pioneers in fitness oriented wearable devices, started liquidation proceedings earlier this month. Having attracted more than $600 million in venture capital funding and reached a peak valuation of $3 billion, the company suffered in the increasingly competitive wearables market which has seen large tech companies like Apple and Samsung growing their presence. According to reports the company’s founder has set up Jawbone Health Hub which will continue to service Jawbone devices.

One bright spot for those looking to extract some value from the now-defunct business might come from its patent portfolio. According to an analysis from Envision IP Jawbone’s stockpile of assets could be worth between $25 million and $40 million. That’s hardly Nortel circa 2011 levels, but any sale would provide an interesting insight into the state of the deals market. 

Jawbone’s parent company AliphCom owns 251 US grants, the vast majority of which were acquired through the 2013 takeover of BodyMedia for more than $100 million. Around 50 patents were developed organically with the remainder acquired from various third parties.

Design patents comprise approximately 50% of the portfolio and although Envision doesn’t breakdown the value of the assets it seems safe to assume that most of the value lies in the 105 patents covering hardware systems and devices. Just 20 of Jawbone’s grants relate to software and business methods suggesting a relatively small proportion may be subject to Alice-style invalidity challenges under section 101 of the US patent statute. In terms of quality Envision calculates that 27 patents have at least 100 forward citations, suggesting that they could be relatively fundamental to the fitness tracking and monitoring sector.

So who might be in the market for these assets? Not surprisingly, Envision picks out some of the electronics giants that have been moving into the wearables space such as Apple, Google, Samsung, LG and Jawbone’s rival Fitbit. The research questions to what extent the portfolio will be of interest to any NPEs. Most have been squeezed in recent years as operating conditions have worsened in the US and don’t have $40 million lying around to invest in new assets.

Plus there must surely be questions over to what extent the wearables market is big enough to support an aggressive monetisation campaign. The sector is growing significantly as shipments of devices reached an all-time high of 33.9 million units in the fourth quarter of 2016 according to International Data Corporation (IDC). That represented growth of 16.9% year-on-year, but is still a fraction of, say, smartphone shipments which hit just under 350 million in the first quarter of this year.  

The high proportion of design patents in the Jawbone portfolio, Envision speculates, might make it more likely that a product company buys the assets along with the product line in order to continue to commercialise the technology in some way. The assets could also give an operating company greater freedom to operate in a sector that remains fairly litigious.

Jawbone itself has been involved in a series of disputes with its close rival Fitbit which has seen the two facing off in the ITC and in a number of lawsuits filed in the Northern District of California. Fitbit, which has been struggling amid the growing competition, remains mired in a number of suits including one filed earlier this week by Immersion Corporation concerning haptic technology. 

Patent valuation is as much an art as science, so if they find a buyer whether Jawbone’s patent assets reach as much as $40 million remains to be seen. But should the rights end up being acquired the identity of the buyer might well provide some insight into how the patent landscape in the wearables sector is likely to develop in the next few years.