Year of the Patent Bull Market

2001 showed us a world economy in turmoil, financial instability in  the European Union and a looming recession in most of the major EU countries, falling prices on major stock markets.  How different the market for strategic IP was in 2011. The patent market did no less than transform itself into an astounding bull market, showing a true patent monetization frenzy in 2011.

The dramatic  increase in patent acquisitions should not be exaggerated, as the trend can only be seen in the mobile handset technology market, whereas more traditional technological areas as semiconductor, audio, video, TV, and other technology areas remained flat (at best). Especially if looked at the wild dollar figures floating around for mobile technology patents. The traditional  tech areas did not seem to show the same upward trend in 2011 as mobile did.

Most striking mobile tech patent deals of the year were no doubt a consortium of six companies led by Apple (Microsoft, EMC, Ericsson, Sony and RIM) that bought the patent portfolio from bankrupt telecoms company Nortel Networks for US$ 4.5 bn  for the 6,000 patents held by the bankrupt Canadian telecommunications maker Nortel Networks. That works out to $750,000 a patent or nearly four times the average price for computer, software and telecommunications patents over the last few years.

The Google Motorola deal transformed tech market in a true bull market. Google was willing to pay $12.5 billion for Motorola Mobility in no small part because of its stockpile of 17,000 patents. The patent portfolio, some analysts estimated, could represent more than half of the value of the deal, or more than $400,000 a patent [1].

Microsoft signed yet another Android patent deal, one of the latest with China’s Compal Electronics. The clist of Microsoft’s patent agreements include Samsung, HTC, Wistron, Quanta, Acer and General Dynamics Itronix. The Compal deal was the tenth agreement for Microsoft on Android patents.

Apple was not shy to deal with NPEs, as showed the deal with a patent troll called Digitude Innovations.  In a deal that effectively gives Apple immunity from attack by the troll, Apple agreed to some cross-licensing deals that gave Digitude the ammunition for a legal strike against its rivals.

Mosaid acquired about 2,000 patents from Nokia and Microsoft in a deal that closed in September, just weeks after Wi-Lan Inc made a C$532 million hostile bid that the licensing company said was too low, a deal mostly driven by large patent portfolios and its lucrative licensing income it generates.

As New York Times noted, while the recent blockbuster patent deals may make sense for the companies, analysts say, they are fed largely by legal considerations — asserting patent claims or defending against claims — rather than economic ones. And this time not, as many many feared, driven by NPE’s or Patent Trolls.

Research in Motion, confronted with a dramatic  fall of its shareprice in 2011, considers a Plan B option for  investors, as it is rumored that the Blackberry maker is seriously contemplating selling its trove of patents.

Kodak filed a statement with the SEC, stating that its “ability to continue its operations…is dependent upon the ability to monetize its digital imaging patent portfolio through a sale or licensing of the relevant patents.” Or, of course, obtaining the additional funding to feed its debts.

InterDigital opened its patent portfolio seeking bids in August. InterDigital invested some of the tech used in mobile broadband networks and has 8,800 patents on inventions currently used in smartphones. At the close of the year it was unknown to us whether any formal bid has been  made and where the sales process stands at this moment (see a December 2, 2011 video, part of the “Motley Fool Conversations” series, in which Motley Fool financial editors Andrew Tonner and Austin Smith discuss their favorite stocks, among which InterDigital (IDCC). Just over 50 percent of the current 3G market is already under license with InterDigital. Its partners include Samsung Electronics Co Ltd, Apple, Research In Motion Ltd and HTC Corp, among others. The company’s 4G portfolio is relatively unlicensed.

HP opened up its patent portfolio for a sale of approx. 1,000 in various areas including mobile, telecommunication, computing, printing, networking, and even life sciences.

Some other published patent deals in 2011:

In late January 2011 Rambus Inc., a technology licensing companies, announced it acquired the lighting and display portfolio of patents and technology from privately held Imagine Designs Inc. The patented innovations include technology for general lighting, LCD backlighting, and microelectromechanical system (MEMS) displays.

On December 29, MoSys, Inc. and Invensas Corporation, a wholly owned subsidiary of Tessera Technologies, announced that they entered into a patent purchase agreement, whereby Invensas purchased 43 US and 30 foreign memory technology patents from MoSys for $35 million in cash. MoSys retained a royalty-free license to the patents to cover its Bandwidth Engine product line and technology partners, along with related rights to offer sublicenses to current and future partners.