Intellectual Ventures (IV) has confirmed to IAM Magazine that it is winding down acquisitions for its most recently established patent aggregation fund. The impending exit of the patent market’s top buyer could have a significant impact on pricing and deal flow in the wider marketplace.
Speaking to IAM Magazine, IV’s senior vice president of global licensing, Cory Van Arsdale, said that the cessation of buying activity in Invention Investment Fund III (IIF3) was an investor-driven decision. A number of major operating companies, including Microsoft and Sony, are among IV’s investors – and it seems likely that the evolution of the wider patent system over the past few years has influenced their intervention at IV. Rumours were circulating as early as 2013 to the effect that IV was struggling to secure backers for IIF3. “Given changing priorities in tech and IP, it makes sense to move this fund to monetisation now and end the acquisition period,” said Van Arsdale. “The fund has several thousand valuable assets,” adding that the performance of IIF3 has so far been “pretty good.”
While Van Arsdale did not rule out a return to substantial acquisition activity in the future, he did say that IV had no plans in place for further aggregation funds. “The market is not right at the moment for the type of fund we set up in the past although that’s not to say we won’t come up with a different model,” he told IAM Magazine. “There’s a huge market right now for purchasing patents but there’s not a huge market for the value seen in the aggregation of patents. That’s changed with the current pressure around software patent owners and patent owners generally.”
As alluded to by Van Arsdale, IV will now focus its efforts on monetising the extensive portfolio at its disposal, through licensing, assertion and sales. Recent events suggest this process is already well under way; in addition to sales to the likes of monetisation firm Equitable IP, IV has also made what looks to be its largest ever divestiture, with the transfer to Dominion Harbor of more than 1,000 patent families that it had originally acquired from Kodak back in 2012.
IV is often credited with kickstarting the secondary market in patents when it was launched in the early 2000s – and the impact of its departure from the market is likely to be felt far and wide. According to analyses performed by IAM Market vendor ROL Group, IV has been the leading buyer of brokered patent assets for four of the past five years. In 2016, there were already signs that the firm had significantly slowed down in terms of purchases, when defensive aggregator RPX leapfrogged it to become the brokered market’s top acquirer. However, as the IAM Market blog noted last week, IV did accelerate buying activity towards the end of the year, beating RPX into second place during the fourth quarter.
Nevertheless, the concern for brokers and vendors alike will be that the loss of the market’s biggest buyer over the past five years could have a chilling effect on patent prices overall. With IV out of the picture, demand could drop significantly, as there may be less of a defensive imperative to take assets off the market. On the other hand, some canny players may see the gap in the marketplace as presenting an exciting opportunity. Time will tell.