Patent portfolios represent the foundation that many technology companies are built on, but as those companies mature, grow, and become more consumed by product development, marketing and sales as all the other aspects of operating successful technology businesses, such companies may fall into a posture of not doing much more with their patents than protecting them through litigation from other firms that may seek to leverage them without consent.
When litigation works, it can result in millions of billions of dollars in settlement funds and additional future licensing revenue, but in other ways can be bothersome: It is time-consuming, expensive, and even when big lawsuit settlements land they have a way of distorting quarterly earnings results, and confusing investors and company watchers.
All of this serves as a strong argument for why a company with a stacked patent portfolio might want to outsource management of that portfolio to a third party like IPValue Management, Inc., a Santa Clara, California, company focused on licensing and negotiating deals for patent rights that the patent portfolio owners do not have the time or desire to handle.
Firms like Seiko Epson, Cypress Semiconductor, and most recently, Intel, have turned large patent portfolios over to IPValue to maximize their returns. The companies that have licensed patents from portfolios IPValue manages include Nvidia, SK hynix and a host of others. Licensing out to a third party may make particular sense for semiconductor firms, which have many patents, many generations of products simultaneously spread over many markets (meaning older patents continue to have value), and face a ton of bottom-line scrutiny from investors every quarter.
“We have heard concerns from executives at operating companies that episodic revenues, for example from litigation, can be problematic for expectations and long term financial profile,” said Keith Wilson, executive vice president of partnerships and acquisitions at IPValue. “Given our approach for getting value from major patent portfolios, as well as our resources, we can offer solutions that provide a higher level of predictability and stability, over multiple quarters.”
The company does so primarily through opportunistic marketing and negotiations, and to a lesser extent, litigation. “We take a long-term, strategic approach to our licensing programs, which by the way are geared to business negotiations rather than litigation,” Wilson said. “Only a small fraction of our revenues is the result of litigation.”
Wilson added that IPValue’s mission and efforts align with the goals of companies that want to put more focus on innovation and operational goals than on the busywork of licensing, managing and protecting their already-established intellectual property.
He declined to discuss particular details of IPValue’s arrangement with Intel or other companies, but said, “When we approached Intel, we were confident we could offer Intel a valuable package that made sense for us and for Intel, and we did that. We developed successful relationships with many enterprise patent owners with that approach, of deeply understanding patent owners’ goals and creatively crafting packages for premier patent portfolios. We continue to look for opportunities to deliver solutions and value to other semiconductor and other technology firms who hold such portfolios.”