The latest issue of IAM – now available online for subscribers – features our annual review of the brokered patent marketplace. The past few years have been something of a turbulent time for US patent assets and the intermediaries who seek to profit from transacting them. The effect of the 2011 America Invents Act is now being felt in full, while US Supreme Court and Federal Circuit jurisprudence, the prospect of further legislative reform and the volatile nature of IP monetisation-focused stocks are further impacting on the patent transactions ecosystem. All in all, the total dollar value of the market has seen a drop over the past year and some packages – notably, those including business method patents – have seen a marked decline. Nevertheless, a closer look at the details would suggest that there is still plenty of opportunity for enterpising brokers.
This is the fourth year in which Kent Richardson, Erik Oliver and Michael Costa of California-based ROL Group have run their analysis for IAM’s readers. Premium subscribers can view the full, in-depth report here; I’ve included a selection of the key findings, compared against those from last year, below:
|Number of US-issued patents||4,271||6,127|
|Asking price per US-issued patent||$360,000||$277,000|
|Asking price per patent asset||$269,000||$190,000|
|Percentage of packages sold (calendar year to date)||10%||13%|
|Percentage of packages listed during previous year predicted to sell||32%||29%|
|Mean number of assets per package (excluding packages of over 200 assets)||12.6||15.6|
|Median number of assets per package (excluding packages of over 200 assets)||3||5|
|Percentage of packages with 10 or fewer US-issued patents||81%||75%|
|Total value of annual sales||$260m||$233m|
|Estimated number of people employed as brokers||173||157|
As you can see, asking prices per individual asset are down on last year. However, each package that is coming to market generally includes a greater number of assets than previously - and of US-issued patents in particular.
During the examined period of 1st June 2014 to 31st May 2015, there were 60 brokers operating in the market, up slightly from 58 the previous year. They offered 566 packages compared to last year’s 556, meaning that the market has essentially remained flat by that measure of volume. However, of note is that those packages featured a significantly higher ratio of US patent assets to non-US ones; 6,127 – or 69.3% - of 8,846 brokered assets were US rights, compared to 4,271 (60.8%) of 7,021 in 2013-2014. This represents an increase of 43% in US patent assets out of an overall 26% rise in brokered assets.
Despite the Supreme Court’s Alice decision and the spectre of PTAB challenges, internet computing-related software patents still command the highest asking prices of any technology area. Listing rates for packages potentially affected by Alice have followed the same trend for those packages that would not seem to face any implications from the decision.
Well over two-thirds of the packages offered for sale by brokers came from operating companies. However, operating companies accounted for a smaller proportion of the packages that were successfully sold, with NPEs and defensive aggregators buying 63%. Intellectual Ventures (IV), RPX and Allied Security Trust bought 36% between them; in fact, IV alone bought 19% of packages, 25% of assets and 25% of US-issued patents over the course of the year.
At first thought, it would seem that cutting out the middleman gives better value for money for both vendors and buyers. However, considering the opacity of the patent market and the fact that many prospective purchasers still lack relevant resources to navigate it efficiently, brokers can add significant value for both the buy and sell sides. As Richardson, Oliver and Costa point out in the article, brokers and intermediaries can bring benefits to the table, by leveraging their connections and their proficiency in negotiation over pricing, by developing further evidence of use around assets and by providing an initial filter to screen for the most valuable patents available, among other things. Times are certainly tough, but there is still a role in the marketplace - and money to be made - for top-class brokers.