At Bottom, Nowhere to Go But Up, Patent Investors Say

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By Tony Dutra

Nov. 17 — Patent valuations have gone as low as they possible can, making bargains available, and foreign patents can boost the value of portfolios, members of the intellectual property investment community said.

“There’s a lot of unspent money set aside for transactions that hasn’t been spent yet,” Peter Toto, Sony Corp of America’s vice president for IP said. “We’re waiting for signs.”

There are a number of reasons for tentative optimism in the market for intellectual property investors and IP portfolio managers, from U.S. court decisions to the election of Donald Trump, said participants at the IP Dealmakers forum held Nov. 17 in New York.

Oddly, one of the most promising “signs” might be patent owner wins in China, after years of perception that the country has little respect for IP rights.

Tentative Optimism.

“Since we’re starting from rock bottom, it can only go up,” said Louis Carbonneau, CEO of IP monetization firm Tangible IP.

Presenters and audience members cited prospects for change in U.S. patent law, such as Federal Circuit rulings that software inventions are patent-eligible and a prediction that the regulatory environment under President-elect Donald Trump will be friendlier to small and medium sized innovative companies.

But what makes a good patent portfolio didn’t depend on changes to U.S. law, speakers said. Instead, it’s the inclusion of foreign patents parallel to the U.S. versions.

The problem for companies licensing patents is the inability to get an injunction in the U.S. since the Supreme Court’s decision in 2006 in eBay Inc. v. MercExchange LLC. Without the leverage that a U.S. infringer will be barred from a market, prospective licensees ignore licensing offers.

However, countries such as Germany and China are highly likely to grant an injunction. The ability to get an injunction may make investing in China’s developing IP market a key strategy for patent investment companies.

Erick Robinson, chief patent counsel for Asia Pacific for Rouse China said that Chinese courts have granted injunctions to winning U.S. companies against Chinese defendants in 100 percent of the recent cases. Damages are small, he said, but it’s basically a “guaranteed injunction” if you win, and the win rate is running 75 to 95 percent.

Significant Leverage Possible .

There are no examples yet, but if the success rates continue, significant leverage, usable back in the U.S., would accrue to the U.S. owner of a Chinese patent asserted in China against a U.S. defendant. And the best hypothetical example is Apple inc., Robinson said, because 100 percent of the iPhone is made in China.

Also important to the patent investment community is that Chinese courts have no bias against non-practicing entities, he said. NPEs make a profit from acquiring patents and licensing them, but don’t make a product themselves.

An NPE win against Apple in China and a subsequent manufacturing injunction would provide leverage for the NPE in the U.S. under this scenario.

“Imagine Apple enjoined from shipping goods from China,” Charbonneau said.

Russell Binns, CEO of Allied Security Trust, a member-based patent holding company, distinguished the current way his firm evaluates patent portfolios from just a couple of years ago.

Foreign patents are “no longer a throw-in,” he said. “We still want to see the U.S. assets. But foreign assets are driving up the value a little more.”

To contact the reporter on this story: Tony Dutra in Washington at adutra@bna.com

To contact the editor responsible for this story: Mike Wilczek at mwilczek@bna.com

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