Tracking the Sale of Patent Portfolios

Finding out about patent sales and prices is notoriously difficult, yet critically important for patent valuation. Brian Love (Santa Clara Law), Kent Richardson, Erik Oliver, and Michael Costa (Richardson Oliver Law Group) have helped us all out by posting An Empirical Look at the "Brokered" Patent Market to SSRN. Here is the abstract:

We study five years of data on patents listed and sold in the quasi-public “brokered” market. Our data covers almost 39,000 assets, an estimated 80 percent of all patents and applications offered for sale by patent brokers between 2012 and 2016. We provide statistics on the size and composition of the brokered market, including the types of buyers and sellers who participate in the market, the types of patents listed and sold on the market, and how market conditions have changed over time. We conclude with an analysis of what our data can tell us about how to accurately value technology, the costs and benefits of patent monetization, and the brokered market’s ability to measure the impact of changes to patent law.

The article provides some really useful data about brokered patent portfolios - that is, groups of patents sold by brokers rather than "secretly." While brokered transactions are also confidential, their public offering makes them more visible than company to company direct transactions.

The information is quite interesting: the number of patents in each portfolio is quite small - most are less than a dozen. The offering prices have dropped over the last five years (shocker). Operating companies sell a lot of these, and PAE's buy them (something I pointed out five years ago in Patent Troll Myths, and which gave rise to the LOT Network framework- in fact, Open Innovation Network is a now a key buyer). There is a lot more data here, and I don't want to preempt the paper by just repeating it all - it's worth a look. I will note that, as the authors point out, this isn't the whole market and they can't accurately capture sale prices, so they use a "spot check" to estimate what they expect them to be.

Having introduced the paper, I do want to ask, like every good academic, "But what about my article?" Here I'll note a couple takeaways from the paper that bear on my own work on this subject, Patent Portfolios as Securities. First, the first portion of that paper was dedicated to the notion that buying and selling portfolios isn't just about patent trolls. I told anecdotes and used some data, so I'm glad to see a broader based survey provide stronger support for that assertion. Second, my argument was that treating portfolios as securities would force more transparency in sales and valuations. This paper's results support this notion in two ways. Itt shows how difficult it is to get any kind of transparency, even when you have brokered transactions. It also shows how easy it would be to jump from a brokered transaction to a more transparent clearinghouse that might provide the type of valuation information that market participants crave. I view this paper as a useful followon to my own, and hope to write more about how it might bear on the treatment of patent portfolios as assets.

Anyone interested in real-world patent market transactions should give this paper a read. It provides a view into the system that we don't often see. I found it really useful.