The programme for IPBC 2015 is split between plenary sessions and break-outs. This blog will do its best to cover the plenaries and hopes to manage some reporting of the break-out sessions too, if space and facilities permit.
The first focus was on the demand side and the supply side: how have things changed? In summary, while there were definitely some new faces among the buyers, there does seem to have been a drop in volume as the demand curve drops off. Some individual purchasers and patent clubs are still active. Demand for high-quality assets remains strong, but purchase patterns change in accordance with technology shifts, and there has been a post Alice v CLS effect with regard to the acquisition of software patents. This has affected subject matter as well as price: there has been a shift from software to environmental and medical patents -- and it's not just the volume of sales that has dropped; prices for patents have fallen considerably since the peak year of 2011 and it's definitely a buyers' market.
|The shape of things|
to come ...?
What message is sent out when a company holds a patent but neither uses it nor sues others for using it? Does this have to be justified? It might indicate the existence of a patent that should be sold. Right now, patent valuations are falling too -- for as little as less than US$ 100,000 per family -- as demand falls (though quality patents do continue to maintain their value). While buyers are becoming more selective, sellers are more selective too in what they sell, producing smaller portfolios for sale with less "garbage". Price is also determined by what the buyer thinks it can do with the patents, rather than any objective market valuation.
Questions from the floor:
Q: What sort of a driver of corporate policy is the input of activist shareholders? Activists are particularly interested in litigation issue, asking questions at an executive level both about litigation that exists and about that which doesn't, but might. Every licence is also a potential litigation too.
Q: What is the role of due diligence in patent sale and purchase? The better documented patent portfolios are those that will rise to the top, in terms of sales and values. No-one wants to be faced with a bunch of patent numbers. Sellers are now putting much more effort into justifying sale, easing the work of buyers and making their patents more attractive.
Q: Does the panel discussion above apply equally to standard-essential patents (SEPs)? More or less, mutatis mutandis, yes.
Back to the panel discussion, "demand is somewhere between its peak and its trough". A lot of people who had never been in the patent space all came in at the same time, causing that peak, but the bubble burst and many of them have gone. The Alice effect and uncertainties as to where legislation is heading might make it quite attractive to buy software patents now while they're cheap and their validity is less likely to be upheld.
A tweet from @PatentTwit asked "where's the patent market analysis of Europe and Asia? Opening session largely covers US market trends?" This question was discussed briefly towards the end of the panel session, it being suggested that things might change in Europe once the unitary patent came into force and once China had got its act a bit more together.
The sifting for-sale portfolios in search of nuggets was discussed. If all you want is an arsenal of patents for defensive purposes or for licensing, bulk is more important than the quality of individual patents, but it all depends on the buyer's objective: "if you go into a shop and don't know what you want to buy, it will always take you longer". However, buyers are more likely to take a gamble on a patent that is cheap enough, so price expectations on the part of sellers are relevant to the buyer's commitment to due diligence too.
Looking ahead, where do the panellists see the patent market going in the future, in terms of demand, supply and the ecology of patent sales. A likely fall in IP filings and grants, following Alice and in the light of better drafting following the US Supreme Court's Nautilus v Biosig ruling, more cautious examination, should see a short-term drop in rights but a higher quality of granted rights, reflected in higher prices for individual patents. "Springing licences" will also have an effect on the valuation of patent portfolios.
More questions from the floor
Q: Valuation of portfolios: how does one factor in the uncertainties of invalidity, unenforceability and so on, and how does this affect the financial side of licensing? "It's just a matter of where you place the value", came the simple answer. What about the decision to license rather than to sell, in the light of uncertainties? Uncertainties drive transactions more towards sale than to licensing.
Q: What about residency requirements? They may be important for transactions where tax is an issue.
Q: What are the new and fertile fields for royalty stacking? NPEs are looking to the medical device, automobile and energy sectors, among others, where cross-licensing is a promising business solution.The session then ended with the exciting prospect of coffee and cake ...