IP Market 2.0 is going to be a lot more international than the previous US-centric one
We’re less than two months into 2015 and I have already made trips from the UK to the US and China. Along the way I have had a fair few conversations with various IP market participants about where things stand. The overall view is that change is occurring at a rate of knots. Oft-chronicled events in the US courts, the rise of the PTAB and the potential for further legislative patent reform, as well as significant developments in both Asia and, possibly, Europe, mean that the future looks a lot more international than it did even a couple of years ago. That will affect the strategies not only of IP owners, but also of those who provide services to them. Here are a few observations:
Nobody knows for sure about where things stand in the US patents sales market. Some people will tell you that they are busier than they have been for three years, others will say that everything is flat. My sense is that the latter is more the case than the former, but I would not be that surprised if I were wrong. What is clear is that quality is where it is at nowadays; those marginal deals that might once have been doable are now not going to happen. It is probably also the case that there is a lot more company to company dealing going on, with fewer brokers getting involved. That will have the affect of making what is already an opaque market even less transparent. The fewer people who know about deals, the less chance that information leaks out.
In Asia, we can be more confident of what is going on. What happened to Xiaomi in its Indian SEP-related dispute with Ericsson has been a real wake up call to many Chinese companies. All of a sudden they have realised that they really can be excluded from key markets with one court decision. The effect of this has been to make them much more focused on building patent portfolios – they understand that they really do need some cover as they expand. One broker told me his calls are now being taken by higher ranking managers, that deals are getting done more quickly and that they are higher in value. It’s a similar tale, though on a lower-scale, in both Korea and Taiwan, and even some Japanese companies – more usually known as sellers – are looking at buying opportunities.
Everyone is waiting for the next big patent war and seeking to ascertain where it will break out; energy, perhaps; or the auto sector; 3D printing, maybe; wearables; the internet of things; or some currently obscure sector that might suddenly explode into life? All are possible. But on the other hand, maybe we will not see another war because the assumptions that underpin one starting can no longer be made. Take the mobile sector. Apple launched thermonuclear war on Android thinking, not unreasonably at the time, that if it were successful it could blow the platform out of the market with injunctions. It turned out it couldn’t. If injunctions in the US are going to be an ever-less reliable weapon, what is the point of going into battle in the first place, except to get licensing revenues that may make it more expensive for your competitors to do business or mean they have to charge more for their products? You don’t fight wars for licensing income.
There are a lot of smaller NPEs – public and private – currently looking for buyers. It’s getting too tough to find the financing to continue because of the heightened risks now involved in seeking to assert unproven portfolios. The big boys love it.
One to file under “I’ll believe it when I see it”, but the logic underpinning the mass procurement of US patents for defensive purposes may be being reassessed in some quarters. For so long justified on the basis that if you have a mountain of patents to throw back at a competitor who comes after you it will deter such assertions and/or lead to cross-licensing deals instead of monetary exchanges and injunctions, two things are leading to a rethink: (1) if NPEs file most of the suits, patents are not going to help you fight back; and (2) there is no longer any certainty that even operating companies in the US will get injunctions should they prevail in a case, so making the threat of litigation less of an existential one. Thus, if patents are not going to stop you being sued and if you are not going to need them to prevent an injunction should you lose, why spend so much time and money on creating and managing so many of them in the first place? As I say, I’ll believe it when I see it, but there is a certain logic involved. Were it to come to pass, of course, there would be room to focus more on developing smaller, higher quality portfolios and more time for the USPTO to exam what would, presumably, end up being fewer filings. We’ll see, but don’t hold your breath.
Whatever they say in public, operating companies are being hit by fewer NPE actions than they were a year ago. One private practice lawyer told me that normally a particular client of his would expect to be on the end of 40 or so NPE suits over a six month period, but that in the last two quarters it had received none. The lawyer in question was not exactly delighted.
There is more focus on European patent assets than there has been in the past. This is being driven by the possibility of the Unified Patent Court (UPC) coming into being. The expectation is that it will be easier to get an injunction via this system than it is now in the US. And that would be an injunction covering 25 countries with a combined population in excess of 500 million people. Companies without decent-sized European patent portfolios could well find themselves vulnerable, while entities interested in patent monetisation may find the forum a far more attractive one than the US is becoming. Either way, there is an incentive to ensure a strong European element to portfolios. Brokers, aggregators and companies I have spoken to have all reported a much greater interest in Europe – and that could end up having a significant impact on European patent values, as well as filing and management strategies (they’ll need much greater care and attention). More and more people are talking about Europe becoming the centre of global patent litigation. That will be very good news for European IP lawyers, attorneys and service providers, and may mean their American equivalents spending a lot more time on trans-Atlantic planes and in new European offices.
The smartest in-house IP teams are thinking much more creatively about fully-integrated IP strategies. You will not get the most from what you own unless you see, say, your patents, trade secrets and brands as interdependent. We’ll be hearing a lot more about the amorphous IP cloud in the future – a swirling mass, blurred on the edges in which all kinds of intellectual asset float around. Silos are very 20th century and you are not going to get to the top in the corporate IP world unless you embrace this.