Michael G. Lubitz (GTT Group).. First to speak was David Anderson (VP Corporate Development, RPX, right), who addressed the massive inefficiency of monetarisation of patents by non-practising entities (NPEs), given the cost of litigation: it costs around $52 million to extract a profit of $8 million, he said. Last year some 2,500 companies were sued by NPEs in the US. We can expect to see some of the inherent inefficiencies whittled away, he added.
Peter Holden (IP Value) spoke next. IP valuation really started some thirty years ago, with securitisation, but has now become a large driver of value in IP transactions, he noted. What we see now is the rise of risk capital as a force in driving patent value, as corporate and private investors invest in bets worth hundreds of millions of dollars on the outcome of IP litigation. This correlates to an increased level of focus on IP value at board level. Most funds are not captured by IP per se but are project-based, the projects being based on such factors as a need to sell for liquidity or acquisition for risk distribution.
Daniel Ilan (Cleary Gottlieb) then addressed some of the pitfalls of buying patents from a bankrupt seller, as well as the importance of conducting proper due diligence wherever time permits. Following bankruptcy, people and documents tend to disappear, along with engineering data, and it can be difficult to obtain statements from inventors. Claims against the bankrupt business can spring out of the woodwork, since the bankruptcy process encourages them to come forward. There can however be advantages: a court can give good, clean title -- and encumbrances such as existing licences can be rejected or removed. If a licensee exercises its right to reject the licence following a licensor's bankrupcty, that can be good too. However, it is not clear how far the US provisions apply to non-US parties.
Jose Esteves (Skadden) considered the legal dimension of government involvement or interference in IP monetarisation deals, particularly where state-backed or important national businesses are at stake, as well as legislative and enforcement issues such as the proposed SHIELD Act in the US and the US ban on the import of Chinese telecoms goods while allowing thousands of Chinese patent applications in the same sector. Said Jose, government involvement can result in greater complexity in an area where more simplicity is required.
This session continued with talks by Owen Byrd (Lex Machina) and Selvyn Seidel (Fulbrook Capital Management), which this blogger had to miss on account of his participation in another conference session.
Thanks for this interesting summary. I took particular note of your summary of the psentation by David Anderson (VP Corporate Development, RPX, "who addressed the massive inefficiency of monetarisation of patents by non-practising entities (NPEs), given the cost of litigation: it costs around $52 million to extract a profit of $8 million, he said. Last year some 2,500 companies were sued by NPEs in the US. We can expect to see some of the inherent inefficiencies whittled away, he added."
I had not thought that the rest of the patent system was that efficient. Did he give any data on ROI for patents that are not enforced by NPE's? Did he indicate the source for his "$52 million; $8 million" figures?
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