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Selling Your Patent
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Agenda
Schedule 9-12:00 noon 10.30-10.45—Break
Introductions Why Patents are Sold Who’s Selling Patents? Why Patents are Acquired Why Buy a Patent? Information Required in the Patent Sale
Process Selecting Patents to Acquire or Sell--
Andre Marais Valuation—What’s a Patent Worth? Patent Licensing Typical Tech-License Arrangement Corporate IP Licensing Role of Intermediaries in the Patent Sale
Process Alternative Sales Channels/Options Why Buyers Use Intermediaries Why Sellers Use Intermediaries Timeline—Patent Sale Q & A
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What is a Patent?
The right to exclude, not right to use.
You Do not Have the Rights to Use your own patented invention.
As Elements of your invention may infringe other patents.
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Why Patents are Sold
Developer/ Lister
Licensee/ Acquirer
Patent Listing
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Most Patents are Unused
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Why are Patent Unused?
They’re in the hands of individuals and organizations that don’t have the channels to market them.
Entrepreneurs
Universities
Research
Labs
Corp. R&D
Patents
Inventions
Market
Channel
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Channel Barrier for Startups
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One Technology—Many Applications
One technology
Multiple applications
Different markets
New routes to market
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Who’s Selling Patents?
Startup Companies Funding dried up Liquidating assets Unable to build channels
Large Corporations No longer core to business Divesting of business/unit
Research Labs and Universities University Licensing Groups Unused Not core
Global phenomenon U.S. patents being sold from
many countries
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Why Patents are Acquired
Developer/ Lister
Licensee/ Acquirer
Patent Listing
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Why Buy a Patent?
Exclude competitors. Barriers to entry.
Enter new markets with mitigated risk of infringement litigation.
Enforce against infringers. Generate licensing revenue. Accumulate ‘arms’ for
potential patent wars.
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Patent Buyers
Product manufacturers & marketers Buy rights to exclude competition
from producing similar products Many manufacturers in Asia
Patent enforcers Buy patents that are infringed
Corporate defenders Build portfolio to protect against
infringement suits Buy through third party aggregators
Financial investors Buy patents with licensing revenue
streams
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Information Required in the Patent Sale Process
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Information Needed to Sell
Patent numbers. Pricing guidelines. Information on prior-sales
efforts. Reasons for sale? Family of international
counterparts? Sell as portfolio or individual
patents? License back required? Potential infringers? Current licensees? Marketing materials? Additional IP included in sale?
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Due Diligence Information
Patent office File Wrappers. Correspondence with patent
office. Prior art research.
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Documents Needed to Sell
Brokering/representation agreement. Anti-circumvention.
NDA for Buyers. Patent Purchase Agreement. USPTO Assignment.
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Selecting Patents to Acquire or Sell
..Including Patent Analysis, Portfolio Strategy and the Role of Patent Attorneys.
Andre Marais, SLW
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Valuation—What’s a Patent Worth?
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What to Expect: Valuation
Patent invalidated or expired
Known infringers
$0
$10k-30k
$30k-100k
Patent
Acquisition
Value in US$
$100k-$0.5m
$0.5-1m
$1m+
A
B
C
D
E
Not litigated
No licensees
No broad claims
Not litigated
Broad claims
Large market
Several competing buyers
Fortune 500 infringersF
Litigated & won
Litigated & won
Pending (unissued) patent applications: value is triggered when patent is approved. Value is
contingent on approval.
Industry-standard
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Which Country?
Patents are country-specific. U.S. patent is only
enforceable in U.S. Chinese patent only
enforceable in China. U.S. patents are most
valuable. Many buyers only
interested in U.S. patents. Difficult to sell patents from
other countries unless they are part of portfolio with U.S. counterparts.
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Selling Patent-Pending Applications?
Value highly speculative until patent is approved: If not approved, then
worth nothing. If approved with
weakened claims, then value can be reduced.
Two step sale:1. Sell option to buy the
patent when approved.2. Approval triggers
acquisition at pre-set price.
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Patent Licensing
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The ‘IBM Effect”
IBM is reported to have generated over $10bn in licensing royalties in the 10 years from 1993
More than 90% reaches bottom line
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Solutions Model
Technology Application Solution Problem
Patents
Know-How
Developer/ Lister Licensee/ Acquirer
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Solution Solving Model
Technology Application Solution Problem
Patents
Know-How
Developer/ Lister
Target Customer(s)
Application
Solution
Problem
Application
Solution
Problem
Application
Solution
Problem
Application
Solution
Problem
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Typical Tech-License Arrangement
License Scope Field of Use
Non-competitive Exclusive/Non Exclusive Term
License Fee $0.25m-$5m Paid up-front
Royalty 3.5% of Revenues Quarterly/annually
Issues Enforcement against unlicensed “infringers”
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Enforcement-Based Licensing
You’re infringing our patent. Would you like to take a license?
Of course, we could bring a suit for infringement if you don’t license!
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eBay Case and Other Trends
Injunctions now less of a threat.
Declaws some of the patent enforcers.
Rapid Changes. More patent cases
reaching U.S. Supreme Court.
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Opening Up their Portfolios
IBM Microsoft Hewlett Packard NEC Xerox Delphi Nortel Honeywell Dupont
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Corporate IP Licensing—Getting Started
1. Catalog IP Evaluate and organize
patent portfolio Identify most valuable
assets Prepare listings
2. Publish Catalog Release catalog online
3. Syndicate Listings Through Tynax & broker
network4. Respond to Inquiries5. Approach Target Buyers
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Licensing Enforcement Rights
Universities, Research Labs and others are Selling Title to their Patents
This can impede their ability to maximize licensing revenue from their portfolios.
The following structure allows licensees to take enforcement rights:1. Exclusive License. 2. Right to enforce. 3. Indemnification.
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Role of Intermediaries
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Alternative Sales Channels/Options
Appoint Broker Pros: Reach active buyers. Cons: Reach is usually limited.
Direct sale Pros: No commissions to pay. Cons: Difficult to find active
buyers. Many won’t deal directly. Litigation fear.
Auction Pros: Deadline to sale. Cons: Limited reach. Buyers want
time for due diligence.
Broker network/exchange Pros: Wide reach. Cons: Paying commissions?
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Why Buyers Use Intermediaries
Litigation & anonymity. Avoid infringement litigation. “You’re a potential infringer if
you’re a potential buyer!” Pricing.
Avoid price inflation based on the deep pockets of the buyer.
Specialized capabilities. Patent search tools and
analysis techniques. Extended Reach.
Leverage the broker’s channels and connections.
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Why Sellers Use Intermediaries
Litigation. Avoid declaratory judgment
lawsuits. Potential infringers bring
such suits to prevent venue being set in Texas.
Pricing. Reach a wider audience of
potential buyers. Create an auction-
environment. Facilitating the Transaction.
Expertise in closing these transactions.
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Market Before Tynax
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Tynax Exchange
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Unique Trading System
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Active Lead Generation
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Timeline—Patent Sale
Tynax Listing Posted Online
Listing Syndicated & Promoted Online
Buyer RequestsInformation
Lister RespondsTo Questions
Initial Due DiligenceUndertaken by Buyer
Detailed Due Diligence by Buyer
Counter-OffersNegotiated
Pricing & TermsOutlined
"Tell-Me-More"Inquiry
Tentative InterestFrom Buyer
Serious InterestFrom Buyer
Pricing & TermsNegotiated
OfferTerm Sheet
Agreed
Final PaperworkPrepared
TransactionClosed
30-90 days 10-30 days 15-30 days 15-60 days 7-30 days 15-60 days
Patent Sale Process
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Q & A