Japanese corporates are warming to the idea of monetising their vast patent portfolios

IAM Market's Knowledge Centre recently took a look at the patent transactions marketplace in China, analysing buy and sell-side trends and highlighting opportunities that the country presents for foreign companies and investors. This week, in the second excerpt from IAM Market’s brand-new overview of the Asia-Pacific patent deal-making landscape, we turn to Japan.

Standing in stark contrast to their counterparts in China, Japanese corporates own some of the largest and longest-established patent portfolios in the world as the result of many decades
of investment in R&D and IP
protection. Today, Japanese
companies sit alongside US peers in dominating rankings of US patent ownership. They also have a good showing in Chinese patents due to longstanding business links and investment on the ground in China.

However, the bulk of this bonanza has remained underutilised. Until recently, Japanese companies typically saw patents as, first and foremost, a way of protecting market share and making a statement about
their innovative capabilities, and little else besides. Large portfolios enabled incumbent companies to broadly cross-license one another, removing much of the immediate threat of litigation – among domestic competitors, at least. Further, the prevailing ‘not invented here’ attitude has meant that, in general, monetisation, open innovation and other forms of IP-based collaboration and co-development have been off the cards for many Japanese businesses.

While there is nothing wrong with that approach, current market pressures are forcing a change in mindset, with Japanese IP managers increasingly called on to cut costs and increase value. Japan’s own economic difficulties, coupled with the rise of competitors in neighbouring countries – especially China – appear to have been the main instigating factors in making Japanese companies reconsider the ways in which they view their IP portfolios. They are realising the need to protect the market share they retain, as well as the crucial importance of protecting seminal new inventions that could find their way into products and services in the future.

On the one hand, there is an increasing recognition that patents can generate cash if sold or licensed. Moreover, as traditionally ‘patent-happy’ Japanese companies have had to exit markets where they can no longer compete, they find themselves left with vast stockpiles of intellectual property that are no longer integral or relevant to their product and service offerings. Maintaining such large portfolios is far from cheap; and senior management are pressing IP functions to find ways to make these dormant assets sweat. This means that Japanese companies that were previously reticent when it came to purchase enquiries are more willing than ever before to sell their IP assets, or to partner with NPEs in order to license them.

On the other hand, the need to develop new products and services and to enter new markets has also made Japanese companies think more carefully about sourcing intellectual property from outside their own R&D functions, either through collaboration, licensing-in or acquisitions.

Prospective buyers

  • Companies moving into new business areas may want to engage in pure patent transactions, as opposed to broader M&A, to ease their transition (eg, Fujifilm’s purchase of magnetic tape patent portfolio from Kao). 

  • Fast-growing ‘digital economy’ companies have also been avid patent buyers (eg, Rakuten, which was the world’s 13th most active buyer of US patents globally between 2010 and 2014, according to research from Allied Security Trust). 

  • NPEs have had a low-key presence in Japan, but a few (eg, Acacia, WiLAN) have successfully partnered with Japanese operating companies. Japanese SPF IP Bridge has also been an active buyer of both Japanese and foreign-owned IP assets. 


Prospective sellers

  • Typical sellers in Japan are large corporates focused
on consumer electronics, telecommunications, semiconductors and other high-tech areas. Many are transitioning out of certain business areas and therefore want to monetise assets that are no longer core to their offering, or to streamline their portfolios to make cost savings.

You can download IAM Market’s full report on the Asia-Pacific transactions marketplace here.

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