Why it’s so important to understand your sellers when buying patents Post in Patent Market Blog Why it’s so important to understand your sellers when buying patents The team at Richardson Oliver Insights (ROI) recently wrote an article offering advice to patent sellers on how to effectively market and sell your patents. There is some strong advice that sellers should take into account. It’s worth reading if you’re looking to sell patents. However, the piece is one-sided in its guidance on navigating an antiquated patent market. We first off would like to point out that the team at ROI (and additionally the team at Richardson Oliver Law (ROL)) are excellent at representing buyers. They provide considerable benefit and guidance to the patent market performing the difficult job of advising corporate patent buyers, which at times can be a little like herding cats. These thoughts are not intended to be averse to their advice. A lot of the advice provided in the article is excellent, particularly the guidance for sellers to put themselves in the shoes of buyers and to structure information accordingly. We simply want to pushback on portions of the article in order to offer a broader market perspective, specifically that more buyers should put themselves in the shoes of sellers and review offerings accordingly. The article purports that patent sellers can glean learnings from how real estate transactions occur, which is great advice. . IAM Article: “Now, what if your agent said that six of the listings were priced at “make us an offer”? You would not be happy, and you sure would think twice about your agent.“ . We agree with ROI. You would not be happy if you were trying to buy a house with no guidance on how much the house cost. However, let’s also see what patent buyers can learn from the real estate market. Imagine if you were selling your house and there was no transparency into the overall real estate market. Imagine if you had no comparable sales at which to point because every relevant sale was hidden and treated as confidential. You would not be happy about having to put a value on your house with woefully limited data would you? So, placing the onus for pricing of patent portfolios entirely on the seller misrepresents the fact that patent buyers have been complicit in the making of market reality. . IAM Article: “We supply brokers and sellers with the technology areas where we have buyers together with specific companies that are the focus of our buying programmes; for example, a read on the focus company would be useful to our buyers.“ . ROI does an excellent, excellent job of supplying the relevant technology areas of interest of their buyers, but they are the exception unfortunately, not the norm. While some buyers provide background information into their buying interests, many buyers provide no guidance at all into what technology areas they have interest in acquiring. Even more than that, very few buyers let sellers know what “focus company” is most interesting to them. Imagine trying to sell homes and asking buyers, “Do you want 3 bedrooms? 4? How many bathrooms? 2? Is 2000 square feet ideal?” and the response you get is, “Maybe.” So, in the spirit of reciprocity, our call at Vitek mirrors that of ROI’s—buyers should put themselves in the shoes of patent sellers. Imagine you’ve spent 10-20 years working on an innovation or building a company. Imagine you have come to the difficult decision that it is now time to sell the patent portfolio you’ve built, sometimes because the economic realities your company faces demand it. If we’re truly interested in improving an antiquated patent market that lacks transparency and places excessive power into the hands of the patent buyers, here is beneficial information buyers can provide sellers in their efforts to grow and expand their patent portfolios. Improve the quality of the patent portfolios you see as a buyer by improving the quality of the information you provide to sellers. . Better Quality Patent Portfolios through Better Quality Information . Information patent buyers can (and should) provide patent sellers: . Technology Areas: Provide details on key technology areas of interest. Be as specific as possible. For instance, “cloud computing” is limited in its usefulness, while “cloud file sharing and file synchronization technologies related to UIs” is much more beneficial. . Targets: Yes, companies need to be selective to whom they disclose their target companies, and they should always be sure to do so confidentially. However, providing key competitors of interest is vital in receiving effective portfolios from patent sellers. It not only allows sellers to curate offerings providing only relevant portfolios, but also sets the table for sellers to perform some of the dues diligence for you and create EOU materials for your specific needs. . Buying Funds: What is your ideal deal value? Do you like deals in low six-figures or are you selectively targeting valuable portfolios in mid-7-figures? Do you have funds earmarked for acquisitions this fiscal year already? The same way it is difficult for patent buyers when the seller says, “make us an offer,” it is equally difficult for patent sellers when the buyer provides no insight into their idea portfolio values. It creates a horribly inefficient market. . Deal Size: How many patents are you hoping to acquire? Some buyers are looking to acquire a couple key patents, while others want to target a larger portfolios with a mix of key patents and supplemental technology to bolster their existing portfolios. Providing guidance on your preferred deal size allows patent sellers to not only curate offerings for you, but potentially customize them to fit your objectives. . Number of Deals: Are you looking to make one acquisition this year, or would you ideally like to make 5-10 different acquisitions? . Buying Aggressiveness: Are you looking to buy immediately to accomplish a very specific and looming need? Or are you merely passively tracking the market and opportunistically considering offerings? Or maybe your needs are somewhere in the middle. Let patent sellers and patent brokers know your intent so they can effectively support your objectives. . Feedback: This is probably the most valuable aspect missing in the market. Too many buyers are overly confidential on their portfolio review and don’t provide sellers feedback. While there is certainly a risk of litigation on one end of the spectrum and risk of invalidation on the other, buyers could be more transparent with their diligence than they currently are. Is the offering not the right technology specifics? Is it the right technology, but it’s applicable to a feature you’re not interested in? Do you have priority concerns? Did you find the claim construction to be unsupported, or the documented evidence to be unconvincing? Providing feedback offers many benefits. One, if the patent seller is good at what they do, they may have already considered some of the concerns you have as a patent buyer. Maybe they have additional analysis that would be beneficial for your team, but they won’t know you want to review it without knowing it’s relevant to the discussion. Two, it allows the seller to adjust market expectations in real time, which is a clear benefit to the patent market as a whole. Three, you have now calibrated the seller to better understand your buying goals and what’s important to you for future offerings. . We reiterate: ROI’s advice to patent sellers is very strong. Anyone considering to sell patents should review their guidance in the article. Patent sellers, and particularly the majority of patent brokers, have fell far below the standard of quality by any metric. Patent brokers need to up their game to help sustain a historically volatile and illiquid patent market. But patent buyers have a burden to bear as well. For years now they have pouted and screamed about the poor quality of portfolios, overly aggressive sellers, ill-informed brokers, and an inefficient marketplace. Yet there are very few patent buyers that are doing their part to improve the patent market. Very few buyers provide any of the quality information outlined above. Patent buyers need to up their game as well. . Need assistance with your patent portfolio? Looking for patent analysis support? Wanting to sell your patents and maximize the value? Contact Vitek today. . Vitek IP’s blog provides active thoughts on the state of the patent market. The words written here are not intended to be legal or investment advice, nor should they be taken that way. We know you are an intelligent, rational human being and you are not considering an opinion blog to be anything more than that–an opinion. Glad we all agree.