9 Sep
2019

Latest patent deal numbers reveal that, for the first time in a decade, software has lost its lead

The big takeaway from AST’s latest quarterly US patent deals analysis is that healthcare and pharma was the busiest sector in terms of number of deals in Q2. Software, a regular at number one in recent rankings, was relegated to third. According to the defensive patent operator’s analysis, this is the first time in a decade that software hasn’t been the sector with the most transactions in a quarter.

In total 179 assets changed hands in the healthcare and pharma across 61 deals, compared with 236 software assets in 46 transactions. In terms of number of assets sold, electronics was the leading sector with 1,521 patents included in 42 deals.

On the company side, IBM dominated the patent deals market in the second quarter thanks to its disposal of a large portfolio to software business Pure Storage. That saw Big Blue take top spot as the largest seller by number of assets and by number of deals, while other operating companies that made the top 10 included Global Foundries, Cypress Semiconductor, Ericsson and Technicolor.

Although IBM has always been a fairly active seller, its deal with Pure Storage was one of its biggest in recent years with more than 1,100 assets changing hands. The two companies have a history of dealmaking, going back to a 2014 agreement which saw them agree a cross-licence and led to Pure Storage acquiring a stockpile of IBM patents. Like many Silicon Valley tech businesses, Pure Storage uses its portfolio for defensive purposes to deter competitor lawsuits. 

Among the other leading sellers were GlobalFoundries and Cypress Semiconductors which sold portfolios to Quarterhill and IPValue respectively, as assets in the chip sector remained attractive to some NPEs. It will be interesting to follow how Cypress’s recent acquisition by Infineon impacts the company’s patent deal activity.

This latest analysis comes with some commentary from AST and then a final word from the defensive operator’s CEO, Russell W Binns Jr. In his comments Binns reveals that in Q2 NPEs were quick to use patents they acquired in new litigation cases with 76 suits filed using grants that were transacted between April and the end of June. Should that also be a feature of Q3 and Q4 it might point to renewed confidence among plaintiffs in the state of the US patent system.        

Top sellers by number of assets

Rank

Seller

Seller Type

Deals

 

Assets

Industry Category

1

IBM

OpCo

3

1,234

Comp (1), H&P (1), SW (1)

2

GlobalFoundries

OpCo

1

329

Semic (1)

3

Cypress Semiconductor

OpCo

1

296

Semic (1)

4

Osterhout Design Group

OpCo

1

191

Elec (1)

5

Technicolor

OpCo

2

184

SW (2)

6

Ericsson

OpCo

1

139

WL (1)

7

Intellectual Ventures

NPE

3

108

Semic (1), SW (1), WL (1)

8

Samsung

OpCo

2

81

H&P (1), WL (1)

9

Mitsubishi

OpCo

2

58

Light (1), SW (1)

10

Steephill Technologies LLC

NPE

1

51

SW (1)

 

Others

 

270

1,262

Mixed

Worth noting

  • Intellectual Ventures sold assets in three deals to two operating companies, Samsung (27) and Citrix Systems Inc (17), and one NPE, LF Capital Partners LLC (64).
  • LF Capital Partners LLC used acquired assets to file six litigations this quarter through its subsidiaries:
    • Computing Resource Technology LLC filed litigation against Forbidden Technologies Inc on 28th June in the District of Delaware using US8,255,805, related to secure program routines in server.
    • Biometric Technology Holdings LLC filed litigation against IRIS ID Systems Inc on 25th June in the District of New Jersey using US6,219,439, related to biometric authentication system.
    • Smart Locking Technologies LLC filed litigation against LockState Inc, August Home Inc, Schlage Lock Co LLC and Igloohome Inc on 29th May in the District of Delaware using US6,300,873 and US6,696,918, related to biometric authentication system.

Top sellers by number of deals

Rank

Seller

Seller Type

Deals

Assets

Industry Category

1

IBM

OpCo

3

1,234

Comp (1), H&P (1),

SW (1)

2

Intellectual Ventures

NPE

3

108

Semic (1), SW (1), WL (1)

3

Siemens

OpCo

3

5

H&P (1), SW (1), WL (1)

4

Bayer

OpCo

3

4

H&P (1), Ind (2)

5

Hokkaido University

Univ

3

4

Auto (1), H&P (2)

6

Technicolor

OpCo

2

184

SW (2)

7

Samsung

OpCo

2

81

H&P (1), WL (1)

8

Mitsubishi

OpCo

2

58

Light (1), SW (1)

9

Nokia

OpCo

2

30

Elec (1), SW (1)

10

LG

OpCo

2

24

Ind (1), WL (1)

 

Others

 

262

2,201

Mixed

Worth noting

The following deals are worth noting because of high-profile company or NPE involvement.

  • IBM sold 1,234 assets to three operating companies:
    • Pure Storage Inc - 1,175 storage network assets
    • Ecobee - 58 smart home assets
    • Exploit Technologies Pte Ltd - one block copolymer asset
  • Siemens sold three assets to an NPE and two assets to two operating companies.
  • Twenty-nine different individuals sold 81 assets in 29 deals to various operating companies, NPEs and defensive consortiums.

Top buyers by number of assets

Rank

Buyer

Buyer Type

Deals

 

Assets

Industry Category

1

Pure Storage Inc

OpCo

1

1,175

Comp (1)

2

Quarterhill

NPE

1

329

Semic (1)

3

IPValue Management

NPE

1

296

Semic (1)

4

Magic Leap Inc

OpCo

2

218

Elec (2)

5

InterDigital

NPE

2

184

SW (2)

6

BBK Electronics

OpCo

2

140

WL (2)

7

Huawei

OpCo

1

80

WL (1)

8

LF Capital Partners LLC

NPE

1

64

SW (1)

9

Ecobee

OpCo

1

58

SW (1)

10

Rakuten

OpCo

2

54

SW (2)

 

Others

 

273

1,335

Mixed

Worth noting

  • Pure Storage Inc purchased 1,175 network storage assets from IBM.
  • InterDigital bought 184 assets, compared with 81 assets the previous quarter.
  • Fifty-two NPEs bought 1,165 assets in 61 deals from individuals, NPEs, operating companies and a university.

Top buyers by number of deals

Rank

Buyer

Buyer Type

Deals

Assets

Industry Category

1

2S Ventures

NPE

5

11

Elec (2), H&P (1), Semic (1), SW (1)

2

Samsung

OpCo

4

44

Light (1), Semic (2), WL (1)

3

IBM

OpCo

4

28

SW (1), WL (3)

4

RPX

Defensive Consolidator

3

50

SW (1), WL (2)

5

Knapp Investment

NPE

3

23

Elec (1), SW (2)

6

Magic Leap Inc

OpCo

2

218

Elec (2)

7

InterDigital

NPE

2

184

SW (2)

8

BBK Electronics

OpCo

2

140

WL (2)

9

Rakuten

OpCo

2

54

SW (2)

10

Cedar Lane Technologies

NPE

2

53

Elec (1), SW (1)

 

Others

 

258

3,128

Mixed

Worth noting

  • 2S Ventures purchased assets in five deals from:
    • Two individuals: Cary Gresham Bayne (5) and Simon Sung Lee (1)
    • Two operating companies: Pixart Imaging Inc (1) and Voiceteach LLC (1)
    • One NPE: Brian Yates (3)
  • 2S Ventures' affiliate TZU Technologies LLC filed five litigations using US8953032 - Self Articulating Behind Wall Camera, against Milwaukee Electric Tool Corp, Optim LLC, Advanced Inspection Technologies Inc, Fluke Corp and SKF USA Inc.
  • Cedar Lane Technologies purchased 51 assets from an NPE, Steephill Technologies LLC, and two assets from KiLife Tech Inc. It used nine acquired assets to file five litigations this quarter against 123Rf LLC, Advert Tech (USA) LLC, Teledyne Digital Imaging US Inc, Photonics Management Corp and PicMonkey LLC.

Assets and deals by industry category

Rank

Industry Category

Deals

Assets

1

Healthcare & Pharma

61

179

2

Industrial

51

365

3

Software

46

236

4

Electronics

42

1,521

5

Wireless

24

183

6

Semiconductor

23

550

7

Automotive & Transport

17

30

8

Lighting

10

12

9

Computing Systems

5

122

10

Communication

4

701

11

Others

4

33

Worth noting

  • In Q2 2019, 21% of deals were related to healthcare & pharma. Notably, through Q1 2019, software had the most deals every quarter since 2010. Software deals comprised 16% of total deals this quarter, compared with 22% the previous quarter.
  • Overall, the primary categories for deals are healthcare & pharma, industrial, software and electronics.  In terms of transacted assets, electronics and communications continue to top the list, as they have since Q3 2018.
  • Key question:  Does healthcare & pharma’s leap to the top of the list indicate a changing of the guard, or is it merely a temporary shift?
  • Methodology – AST manually analyses the industry category of each deals, based on the asset’s title, Cooperative Patent Class (CPC), US class, and seller and buyer domains. The CPC of the asset if used for identifying the asset’s industry category.

AST CEO Russell W. Binns, Jr. says…

In the second quarter of 2019, the secondary patent market experienced modest increases from Q1, with 287 new patent sales involving 3,932 assets, 263 sellers, and 259 buyers. Since Q3 2018, the market has been averaging around 300 deals per quarter, an increase from the 2017 average of 275 deals.

A few important observations:

  • In an unusual turn of events, healthcare & pharma overtook software as the leading category, as measured by the number of deals. In fact, software was third this quarter, as the industrial sector moved into second place. This marks the first time in a decade that software has not been the technology category with the most transactions in a quarter.
  • IBM’s sizable sale of 1,175 assets to Pure Storage Inc made up the overwhelming majority of the 1,234 assets that IBM sold this quarter.
  • In Q2 non-practising entities (NPEs) were particularly litigious. They filed 76 new lawsuits using Q2 transacted patents, compared with only 15 lawsuits in the previous quarter. In addition, in many cases, NPEs are filing lawsuits against operating companies right after acquiring the patents.
  • While there were fewer NPE buyers this quarter, several NPEs bought large portfolios in software and semiconductor technologies. One example: 2S Ventures bought assets from different sellers in various deals.

Richard Lloyd

Author | Editor

[email protected]