One of the most frustrating things about the patent marketplace is its scarcity of information on price points. When a deal is publicly announced or reported in the press, it often lacks detail on just how much money has exchanged hands. Transacting parties have various reasons for withholding such information; and even if it were regularly made available, it is arguable what impact, if any, it would have on the pricing of patents more generally.
For a start, patents are ultimately worth only what a buyer is willing to pay for them and an owner is willing to sell them for. By their very nature, each patent is a unique asset, different from the next. Furthermore, the patent’s intrinsic value will depend on how its past owner or owners have managed it, protected it and exploited it. For example, prospective buyers will want to know the answers to the following questions: Has the patent had its validity challenged? Has it been successfully enforced? Has it been commercialised and contributed significant value to a product or service? Has it been bought or sold in the past? What licensing encumbrances does it carry? Each of these enquiries will be more or less important depending on the prospective buyer and how they plan to use the asset. In any case, it is obvious that any method that claims to be able to standardise patent valuation across the board must be viewed with scepticism and caution.
What’s more, even in those instances where prices are publicly revealed, they tend to relate only to large deals involving hundreds or thousands of patent assets that run into the millions of dollars. The reality is that the vast majority of patent transactions that take place are on a significantly smaller scale, many involving a single asset.
Fortunately, there are some datapoints out there that can, at the very least, provide some background for potential buyers and sellers. Each year since 2012 IAM and ROL Group have teamed up to publish an analysis of the brokered patent market in the United States. In this context, ‘brokered’ refers to patents that have been sold through third-party intermediaries. Of course, transacting patents via a broker can prove advantageous in a number of ways, but likely comes with additional costs; online platforms such as IAM Market aim to reduce these costs by providing a more direct link between buyers and sellers.
During the last data collection period (June 2014-May 2015), ROL Group identified 566 packages for sale – up slightly from 556 for the previous 12 months. These packages contained a total of 8,846 patent assets, including 6,127 issued US patents – up 7,021 and 4,271, respectively, on 2013-2014. Each package consisting of less than 200 assets overall contained a mean average of 15.6 assets (up from 12.6 the previous year) and a median average of five (up from three).
In terms of price, the average asking price per patent asset was $190,000 – down from $269,000 a year previously – with the lowest price at $16,950. Looking specifically at US-issued patents, the price per asset was $277,000, down from $360,000. Interestingly, internet and computing-related software patents still command the highest asking prices of any technology area, in spite of the US Supreme Court’s Alice decision.
Altogether this suggests that while today the United States presents a tough environment for patent owners in many ways, transactional activity at the lower end of the market remains healthy. The number of US patents for sale is rising and this, combined with falling prices, may make this the perfect time for diligent buyers to pick up a bargain.