PATENT TRANSACTION MARKET
or venture capitalists who had distractive assets on their books”, a vehicle to monetise the assets and inventions that they owned.
Patent value is difficult to pin down, but the market relevance and technical strength of the patent, as well as industry royalty rates, is how most buyers and sellers get to a point of view on price, says Mallouk. And people have very much woken up to the idea that their patents are valuable commodities.
He adds: “[However] a lot of this is still a relatively disorganised market without one kind of standard clearing house. We’re starting to see more liquidity and more participants in the market and I think what that does is it drives, as in any market, I wouldn’t say full visibility on pricing but better market clearing price mechanisms on the buying and selling of assets.”
RPX’s Yen agrees, and she says that it is her company’s mission to organise the patent transaction market and make it more efficient. “Te mission is to remove the risk of patent litigation and really become a patent clearing house of sorts,” she says.
She adds: “Patents can be valued as real assets,
but when you have the litigation dynamic it very much clouds the ability to have any real dialogue about patents. Most other entities have a complete lack of transparency; we have a much more transparent methodology.”
RPX operates a subscription model that has a “very transparent rate card”, according to Yen. Depending on a company’s net income, RPX will charge its clients a subscription fee of between $60,000 and $6 million. Tey sign up for multi- year membership agreements and get access to every patent in RPX’s portfolio, as well as the company’s data and intelligence on patents. RPX also obtains fully paid up, perpetual licences to patents that it divests for its clients.
Yen says: “In order for a programme like this to work, the more companies that join the more effective it would be, because it’s more dollars deployed toward reducing common risk. Our business model aligns with the interests of our clients. We don’t assert our patents, and that enables us to develop a strong and trusting relationship with our clients where they’re comfortable with telling us what might be an issue. Tat open dialogue is something that we value very highly.”
Giving back It is clear that NPEs can play a valuable role in the patent system, according to John Pegram, senior principal at Fish & Richardson PC. Tey create “alternative ways for innovators to monetise their inventions”, and they can be good news for lawyers too. “As lawyers, we may negotiate and/ or litigate for or against NPEs. Tat creates legal work and attracts some lawyers,” says Pegram.
However, NPE-instigated litigation does negatively affect innovation and the patent system. Pegram says: “Te troll model, of suing many defendants and settling with each for less than the cost of litigation, does not appear to advance the patent system and some judges feel those cases are unnecessarily taking up their time.” RPX and Intellectual Ventures both employ business models that have proven effective at achieving their objectives. RPX continues to stay out of litigation for the benefit of its clients and Intellectual Ventures continues to sign up licensees without litigating every patent in its portfolio. When it comes to NPEs, there is no simple answer. n
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World Intellectual Property Review November/December 2011
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