As readers of the IAM Market blog won’t have failed to notice, the patent transaction trade is currently at something of a low ebb. Generally speaking, sellers outnumber buyers; and some of the top spenders on patent assets are pulling back from the secondary market, or exiting it altogether.
What’s more, patent values overall have been on a downwards trend over the past few years, compounded by legal and legislative developments in the United States which have introduced heightened risk into the process of licensing and asserting patent rights.
Against this backdrop, recent reports indicating that mobile photography app company Snap just purchased a single patent for $7.7 million are all the more extraordinary.
According to TechCrunch, Tel Aviv-based start-up Mobli sold its patent relating to ‘geofilter’ technology to Snap (previously known as Snapchat) last month, in what is thought to be the highest value transaction by an Israeli company involving a single patent ever. The patent is US9459778 – ‘Methods and systems of providing visual content editing functions’ – and has equivalent applications pending with the European Patent Office and the World IP Organisation under the Patent Cooperation Treaty.
Snap’s location-based filter – or ‘geofilter’ – feature enables special graphic overlays for photos taken in specific locations. This opens up huge opportunities for advertisers, who can offer such graphics to app users in order to promote their products and services. Snap is thought to generate a substantial portion of its revenue from selling geofilter opportunities to brand owners, so the company’s need to secure appropriate patent protection in this area is clear.
Nevertheless, the price it has reportedly paid to obtain this protection is quite remarkable – particularly taking the current market conditions into consideration. According to research from law firm and IAM Market vendor ROL Group and published in IAM, the average price for a single US patent on the brokered market in 2016 was $271,440, with the maximum known price for the same being about $1 million. Snap’s deal with Mobli appears to have been done privately – indicating that there could be much greater variation in price points outside of the brokered context – and perhaps suggesting that the general picture when it comes to patent values isn’t quite as negative as most of us would have thought.
Then again, it may simply be the case that Snap has been amateurish, and has paid massively over the odds. Alternately, Snap may have calculated that the perceived threat of litigation in the future is so great – and potentially so costly to its business – that it far outweighs the millions it has just paid to Mobli, and the purchase is more than worth the hit. In any case, the apparent fact that there are still those out there willing to pay these kinds of sums for patents will be seen as a positive among intermediaries and would-be vendors.