Patent Market Update 2022

Inventors and patent owners interested in entering the patent marketplace typically find out rather quickly that the market is heavily opaque and difficult to navigate. This is in part due to buyers’ prevalent use of cloaked Limited Liability Companies to acquire and hold assets, but it is also due to thin public reporting requirements related to IP transactions. Without industry connections and insider experience, it can be nearly impossible to take stock of the market and get a sense of transactional volume, pricing trends, the most active market movers, tech areas of most interest, and other crucial information a potential seller or buyer ought to have before entering the patent waters.

In this environment, an annual report from Richardson Oliver Insights has become an industry mainstay for insights into at least a sliver of the market – namely, the semi-public brokered market. ROI recently issued its latest report, and while much attention tends to focus on the price estimate data, of particular interest to Vitek is ROI’s breakdown of the varying sales approaches taken by brokers, and their accompanying success rates. 

Despite clear evidence that patent portfolios are more likely to sell – and for a higher price – when accompanied by clear documentation and expectations, the majority of packages currently offered by brokers surprisingly lack:

1. Clear evidence of use (“EOU”) that documents third-party implementation of the patented technology in claim charts, and

2. Explicit and reasonable upfront pricing expectations.

Overall, ROI found that brokered packages listed from 2016-2020 sold only 21% of the time. Tracking individual broker performance over that same time, the report editorializes that a relatively heavy portfolio churn in combination with a success rate of 30% makes for a “particularly successful” brokerage business.

As a firm that has monetized every portfolio we have taken to market from our brokerage arm, Vitek respectfully disagrees, and believes the market and all of its participants (buyers, sellers, and brokers) would be better served if all portfolios went to market only after the comprehensive diligence, analysis, and presentation work is done to optimize the probability of its sale.

A good patent broker is invaluable to their client. They utilize their market knowledge, experience, connections, and goodwill to recognize opportunities to connect interested buyers with willing sellers, creating value for both. The best brokers will:

– identify true standout assets of a portfolio,

– research the addressable market,

– create tailor-made analyses and presentations,

– lead negotiations, and

– traverse inevitable pitfalls to smoothly guide the sales process to its end.

As ROI’s report notes, and Vitek’s industry experience corroborates, without a broker’s skillset “many patent packages would never be reviewed in the first place” [by a prospective buyer].

A broker who can set reasonable pricing expectations and provide supporting EOU shows prospective buyers that they understand the technology underlying the portfolio and its relevance in the marketplace. Simply put, patent brokers should be willing to show their work and stand by it.

Packages released without pricing or EOU indicate that the seller might not know where to make a stand, and in effect shift the burden of determining a portfolio’s relevance almost entirely to each buyer. In the case of an operating company, these may be the General Counsel or IP Counsel, who are already busy and disinclined to independently investigate every unsolicited offer arriving in their inbox. Nor are buyers typically interested in diving deep into a portfolio, only to eventually learn that the seller harbors unrealistic and unbridgeable price expectations.

Looking back at data collected over the last 10 years, ROI found that packages with pricing guidance sold 73% more often than those without, and also sold faster. Packages with EOU were 82% more likely to be purchased, and at an estimated 28% price premium, over those offered without EOU.