Best Practices in IP 2013: the monetisation session

Following Jonathan Taub's keynote speech, today's "Best Practices in IP 2013" conference continued with a panel session featuring Paul Lerner (WiLAN), Naftali Levy (Alvarion), Ilan Ben David (Genoa Color), Zvi Marom (BATM), Steven Steger (Global IP Law Group) and Naomi Assia (Naomi Assia Law Offices). Moderator Monte Silver handled this session as a Q and A as follows:

Q. Whatever happened to Nortel?
Steven Steger: after Nortel became bankrupt its only major asset was its IP portfolio -- and no portfolio of that magnitude had gone up for sale before. Nortel had the opportunity to become a licensing company or to sell up.  Given that the biggest players in the mobile technology sector were young, patent-naked companies, the option of selling Nortel's incredibly unencumbered portfolio was too good to miss. Once Google indicated that it was prepared to pay $900 million, that raised a great deal of interest in acquiring the patents -- which ultimately sold to $4.5 billion.

Q. What makes a patent valuable?
Paul Lerner: lots of things. It may be useful for litigating, exploiting or using defensively.  In each case its value will be different.  As a patent litigator, the value to me is what I expect to make by enforcing that patent.

Ilan Ben David: when people have a defensive or offensive marketing strategy, they will buy a technology rather than just the patents. However, once the objective is enforcement, all the interest is in an allegedly infringed patent -- you can't expect to sell an entire technology portfolio and perhaps not even its uninfringed patents.

Naftali Levy: the value of patents is not always apparent, even in the course of litigation. As an in-house manager, one has to know the status of each patent in standards-related technology.

Q. How do you decide what to do with your resources: when do you invest in R&D, litigation or just sell up?
Zvi Marom: there is always a limit to the amount one can invest in patents at the R&D stage, before patents for new products are filed. As a start-up, it's also useful to guard one's flow of revenue by getting the big guys to protect you against the risks and costs of patent litigation. Investment in protecting patent rights in countries that (at the mildest) have no respect for patent rights must also be taken into account. One has to put all possible expenses into a "witches' brew" and see what comes out.

Naomi Assia: it's good for start-ups to focus not just on the fact that they have a couple of patents but on the potential for monetisation in the future.

Q. What is a non-core asset and when do you sell it?
Zvi Marom: (i) an asset that is not capable of generating 10% of one's income and it's not so new; (iii) when you can sell it to someone other than a competitor.

Best Practices in IP 2013: conference keynote on monetisation

Today's Tel Aviv conference on "Best Practices in Intellectual Property 2013: International Perspectives on Creating and Extracting Value" focused on, among other things, IP monetisation.  This session, moderated by Monte Silver (CEO Yazam IP), was opened by Jonathan Taub (Acacia Research Group) who began with a fundamental question: why monetise patents? Patents have become a discrete asset class, he said, citing figures from the World Bank and Deloitte & Touche to buttress his contention that monetisation has become a common practice since the beginning of the 2000s, fuelled by an accompanying technology explosion. There is no better example of this than the field of telecoms technology.

Jonathan compared the phenomenon of a country with a small number of mega-corporations enjoying a large international market share with that of the start-up economy of a country such as Israel, with a large number of smaller IP-laden companies but initially a very low international market share.  How does such a country monetise its patents and grow its businesses -- by licensing or by selling its patents? A good case can be made for each path. Royalty income appears on the profit-and-loss account rather than as an asset disposal, and therefore does not affect the valuation of the licensing company, though it may not satisfy the immediate need for cash infusion which only a sale can achieve.  Typically, large and successful companies make more money by licensing their IP portfolio than by selling.

Jonathan recommended licensing over sale as being less disruptive of the patent holder's business and as exposing it to lower risk, while offering the opportunity for the licensee to enrich the licensor through its own experience and technology skills. Licensing can lead to ongoing relationships, which in turn lead to greater trust and further cooperation.  Another consideration is that, when a patent is seen to be offered for sale for a long time, potential purchasers wonder what's wrong with it and can be reluctant to buy it.

Jonathan then spoke of the advantages of seeking a deal through an intermediary, the tendency of licensor and licensee to gravitate towards one another and the need for good due diligence.  What about IP auctions? Do they still make sense? Enigmatically, he indicated that there may be situations in which they do, but he did not adumbrate on when they might.

Earlier sessions of this conference have been noted on the IPKat here, here and here.