Identifying distressed IP assets for acquisition

Businesses possess valuable assets in many forms. When a company needs to quickly raise funds in difficult circumstances (eg, default in commercial loan or incomplete business activity), it can sell these at a low price; such an asset is considered to be ‘distressed’. Businesses are often up against stiff competition to acquire IP portfolios in such circumstances as they can be used to to save R&D costs, an effective strategy for staying ahead. IP asset monitoring is one effective way of determining the patenting status of a company and can come in handy for companies looking for M&A opportunities.

IP portfolio analysis can be carried out to keep track of a company’s IP progress. The process usually takes between one month and one year and involves multiple methods to determine the pool of distressed IP assets in a tech domain. The most important aspect of this process is to look for suitable parameters or indicators to identify companies that are either in distress or could be in the near future. The parameters can be IP based, including legal and fee payment status of patents owned by the entity. Alternatively, non-IP based parameters can be market insights pertaining to the financial status, consumer reviews and information regarding recent M&A in a particular tech sector. It is possible to identify a company in trouble by performing market research or a survey. This research involves examining:

• quarterly or annual revenue details;
• press releases;
• newscasts;
• funding activity;
• partnerships;
• market sense;
• public opinion towards product and services;
• share market analysis; and
• changes in position or role of key personnel.

Non-IP based factors indicate a company’s products in the market and provide the investigating company with news on technologies that could be worth investment. Here, the interested company should determine whether any clients were keen to obtain or license assets. Research into market news can also point to assets that hold value in a certain domain.

Identifying distressed IP assets for acquisition

IP portfolio analysis is another way to identify distressed intellectual property and is typically performed on a high-quality patent search database.

The first step before analysis begins is to find the company’s jurisdiction for distress tracking. As a result, this analysis appears to confirm a company’s IP assets. Further, it is possible to check the market value of a particular tech sector in the country.

A tech-specific patent classification and filter for jurisdictions can be used to screen potential assignees. The databases for identifying the relevant technology in the domain of interest can be used with the right strategy, which includes a broad string incorporated with International Patent Classification (IPC) or Cooperative Patent Classification (CPC) classes and jurisdiction filters. Paid databases with quality results include Orbit, Derwent Innovation and Patseer. Using this type of platform has huge potential to discover companies with active relevant patents in the particular jurisdiction.

Keyword-based searches for a particular tech sector can be carried out by running a suitable search query in the database with filter of jurisdiction. This is usually broad and tech-focused with an array of keywords and relevant patent classes. This analysis helps to identify distressed IP assets of companies working in the relevant technology domain.

A high proportion of patents with abandoned and lapsed status (due to failure of fee payment) signifies distress in companies. However, an increased number of patents with a litigation and opposition are indicative of a company’s work in a trending technology sector.

Other strategies include identifying a patent with high forward citation count (forward citation are patents that cite a specific patent) can be of an interest for the concerned company.

After obtaining assignees/companies with several active patents, the next step is to unfold any patent litigation in which the companies have actively participated, to give a glimpse of how a patent can add value to a specific domain in the market. Along with the litigation data, this can also providee data showing oppositions and challenges submitted by competitors. Therefore, data can be used to capture companies for distress tracking and draw a map of the value of relevant technology in the market; on the flip side, a large number of patent litigations delivers information about assignee interested in the trending technology and can point towards assignee companies to be examined for lower-cost IP asset actuation.

Further, when examining a relevant technology, IPC/CPC classes, country, legal status, forward citation count, it is possible to find active patents in the domain of interest and simultaneously retrieve data on signs of distressed IP assets owned by a company that could be obtained or licensed at a lower cost.

Comment

Learning to identify distressed IP assets for acquisition and how companies can cut R&D costs by purchasing patents and licences allows companies to  acquire distressed assets at the right time, allowing companies a fast route to securing intellectual property and expand into profitable new sectors and geographies.