IV on verge of major patent fund sale

Intellectual Ventures is in the process of selling its third Invention Investment Fund, in a further indication of how the giant NPE is scaling back its business. IAM understands that the buyer is Micron. The sale has been confirmed to IAM by three separate sources, with a fourth identifying the US-based semiconductor giant as the buyer. IV declined to comment for this story.

For the iconic NPE, the sale is another step in its disposal programme which has ramped up significantly in recent years as it looks to whittle down a portfolio that at one point totalled over 35,000 individual patents. It is also a reflection of how much the climate has changed for IV’s investors - which for the third fund included Microsoft and Sony - with suggestions that several have become increasingly uncomfortable with a monetisation strategy based around assertion.

After IV struggled to attract the same kind of interest from investors as it had for its first two funds, fund three began buying patents in 2014. However with the worsening licensing conditions and investors getting cold feet, IV ceased acquiring assets for it in April last year.

A further indication of the problems that IV had encountered with fund three came earlier this year when a filing for a Microsoft entity based in Ireland revealed that the software giant had taken a $136.5 million hit on its investment. The filing also established that the company was by far the largest investor in fund three with a 73% stake and that the fund was set to be wound down by the end of this year.

Speaking to IAM at the time, IV’s Cory Van Arsdale confirmed that the NPE would “no longer be managing the assets in the fund by the end of the year”. He didn’t give anything away on how the business might dispose of the assets but he looked to play down the significance of any sale by pointing out that fund three represented just 13% of IV’s overall portfolio.

That means that Micron is picking up a few thousand assets and while it’s not clear how much it’s paying, given that average prices on the secondary market remain depressed and that IV has been known as a willing seller for some time, it seems safe to assume that it is getting the assets for a good price. This latest deal is particularly notable because IV is selling to an operating company when the vast majority of its previous sales have been to NPEs including Dominion Harbor.

What Micron does with the patents remains to be seen, but many in the IP market will remember that the company was instrumental in establishing NPE RoundRock back in 2009 before transferring around 20% of its entire portfolio to the firm, which was led at that time by former Micron outside counsel John Desmarais. Whether the company will consider doing something similar once it has taken ownership of the patents in the fund that it wants remains to be seen. But it seems pretty certain that a decent proportion of what Micron is acquiring will have no direct relevance to its business.   

For its part, as well as upping its rate of disposals, Intellectual Ventures has also seen a significant amount of flux among its senior leadership with Van Arsdale, a key player in many recent deals, announcing last month that he is leaving the business.   

While many in the patent community will seize on this latest news as another sign of IV’s decline, with a portfolio that still makes it one of the largest patent owners in the US and many of the assets being sold to assertion entities, it remains a potent force for now.