Saturday 1 May 2010

Qimonda's Patent Sale

It's intriguing to follow the fate of bankrupt German semiconductor Qimonda and its intellectual property. The administrator, Michael Jaffe, proudly notes on its website that Qimonda has over 11,000 patents and 4,000 individual patent families. This would seem to suggest a massive value being held in intellectual property. Once you start actually understanding the technology and marketplace, it's not so clear that the patents have much value at all.Qimonda-Logo.jpg

The DRAM space has been dogged over the years by a number of patent infringement suits. At issue is the fact that most of the DRAM companies require access to other company's intellectual property in order to be able to make DRAMs. The semiconductor industry has traditionally cross-licensed its patents and much of the dispute has in effect been to work out the value of the balancing payments that need to be made. Thus the main value of the patent rights to a company like Qimonda is not so much the value from licensing in the patents, but rather access to other company's technologies and relief from royalty payments. Now it might seem that if you no longer have a manufacturing company, there would be no need to have cross-licensing arrangement. However, Qimonda presumably concluded its licensing agreements on the basis that it was not going to go bankrupt and many of these agreements are still no doubt in force and might bind potential purchasers of the patent assets (although what the effect a change-of-control has on the agreement is unknown).

Added to that many of the most valuable patent rights in the Qimonda portfolio probably came from the joint development with IBM and later with Toshiba on various DRAM architectures. Many of these patent rights are (were) jointly held which meant that IBM has also presumably been able to license them to other players in the market place.

So what are we left with? Any potential purchaser will have in essence a large portfolio of patents (and patent applications) which it needs to maintain. The potential licensors would be limited, since many of the big players no doubt already have licenses to the technology. This might leave a number of smaller fish, but the revenues are likely to be limited.

There's no doubt one or two juicy bits around the place as the announcement that a licensing company was to be set up indicates. And the rest? Well probably not worth much more than the paper that they are written on - at least for a non-operational company. It's of course possible that a DRAM company wanting to acquire IP to strengthen its own position might be interested - but then many of the potential deals will have already been done by Qimonda. It's hardly surprising that no sale has been made and that the administrator is having difficulties finding a potential purchaser.Qimonda-Dram.jpg

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