Analysis of Sale Transactions Reveal Sobering Market Prices for Patents

Inventors sometimes misguidedly believe they've hit the jackpot when they get notice from the patent office that their application has been approved, and the patent is to be granted.  Patents are all worth millions of dollars, right?

Actually, no. The vast majority of patents are unsellable at any price, and the patents that are sold are traded at surprisingly sobering prices.  There was a moment of insanity in 2010 when Steve Jobs realized that Google and Android were about to imitate the iPhone. Steve had deja-vu all over again and the painful experience of losing the Macintosh advantage to Microsoft and Windows sent him into a rage that resulted in Apple buying Nortel patents at never-before seen prices.  The average price per patent paid by Apple was $750,000. This was far higher than the prices seen in the market up to that point. Jobs and Apple triggered patent buying activity in the tech sector, but the Nortel deal was something of a high water mark and prices didn't exactly go through the roof.

As patents often form the basis of costly litigation, information on the prices paid in patent acquisition transactions is usually kept secret.  It is customary for the patent purchase agreement to contain a confidentiality provision restricting disclosure of the price or any details of the transaction. So finding information on the prices paid for patents in a transaction is something of the exception rather than the rule.  However, some buyers and sellers are required to disclose information for shareholders, especially SEC reporting companies and companies in Chapter 7 liquidation.

Here's a list of the publicly disclosed patent transactions over recent years. I compiled this list when writing my books Patents, Cloaks & Daggers--Inside the Secretive Patent Trade and Dollar Value--The Valuation of Patents, Startups, Software & Other Intellectual Property Assets.

Year	Seller	Buyer	Field	Total Price	# of Patents	Type	Average Price Per Patent[1]
2013	Alvarion	WiLAN	4G/LTE	$19,000,000[i]	150	All	$126,666
2012	Kodak	IV, RPX, et al.	Digital Imaging	$525,000,000[ii]	1,100	All	$477,272
2012	MIPS Technologies	AST	Semiconductor Cores	$350,000,000[iii]	498	All	$702,811
2012	Digg	LinkedIn	Social Media	$4,000,000[iv]	15	All	$266,667
2012	Fujifilm	Universal Display Corporation	OLED	$105,000,000[v]	1,200	All	$87,500
2012	Precision Optics	Intuitive Surgical Operations, Inc	Medical	$2,500,000[vi]	17	All	$147,059
2012	Elpida	Apple	DRAM	$51,000,000[vii]	259	All	$196,911
2012	Interdigital	Intel	Mobile Telephony	$375,000,000[viii]	1,700	All	$220,588
2012	Motorola Mobility	Google	Mobile Telephony	$5,500,000,000[ix]	17,500	All	$323,529
2012	Microsoft	Facebook	Internet	$550,000,000[x]	650	All	$846,154
2013	AOL	Microsoft	Internet	$1,100,000,000[xi]	925	All	$1,189,189
2012	IBM	Ultratech	Semiconductor Packaging	$8,000,000[xii]	70	U.S.	$114,286
2012	Adaptix	Acacia	Mobile Telephony	$160,000,000[xiii]	230	All	$695,652
2012	Real Networks	Intel	Video	$120,000,000[xiv]	190	U.S.	$631,579
2012	Unity Semicon.	Rambus	Flash Memory	$35,000,000[xv]	299	U.S.	$117,056
2011	ADC Telecomms	HTC	Mobile Telephony	$75,000,000[xvi]	82	U.S.	$914,634
2011	Glenayre Electronics	Wi-LAN	Mobile Telephony	$8,000,000[xvii]	60	U.S.	$133,333
2011	Undisclosed	Wi-LAN	Digital Video	$8,000,000[xviii]	1400	All	$5,714
2011	Nortel	Apple/Rockstar	Mobile Telephony	$4,500,000,000[xix]	6,000	All	$750,000
2010	Novell	Microsoft/CPTN	Networking	$450,000,000[xx]	882	All	$510,204
2010	ICAP Auction Results			$84,316,395[xxi]	704	U.S.	$119,768
2009	Avistar Comms.	Intellectual Ventures	Comms.	$11,000,000[xxii]	42	U.S.	$261,90

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[i] http://www.wilan.com/news/news-releases/news-release-details/2012/WiLAN-Acquires-Patent-Portfolio-from-Alvarion1131229/default.aspx

[ii] http://www.nytimes.com/2012/12/20/business/kodak-to-sell-patents-for-525-million.html

[iii] http://www.nasdaq.com/article/mips-technologies-agrees-to-sale-of-patent-properties-to-ast-and-acquisition-by-imagination-technologies-20121106-00030

[iv] http://techcrunch.com/2012/07/12/digg-sold-to-linkedin-and-the-washington-post-and-betaworks/betaworks%2F&ei=SPmfUJvsMcPiiwKupYGICg&usg=AFQjCNGF-md5rjL8yNjAkOYCtZRaPUETZQ&sig2=AyYYDK4_k68LLcvWDHVoLg

[v] http://www.fujifilm.com/news/n120724.html

[vi] http://www.prnewswire.com/news-releases/precision-optics-corporation-announces-agreement-with-intuitive-surgical-and-receipt-of-25-million-126761798.html

[vii] http://www.lexisnexis.com/community/mealeys/blogs/mealeys/iptech/2012/09/28/elpida-wants-to-sell-259-patents-to-apple-inc-to-honor-51m-agreement.aspx

[viii] http://www.reuters.com/article/2012/06/18/us-interdigital-intel-idUSBRE85H17S20120618

[ix] http://blogs.wsj.com/digits/2012/07/24/google-says-patents-tech-were-less-than-half-motorolas-price/

[x] http://online.wsj.com/article/SB10001424052702303592404577361923087607762.html

[xi] http://online.wsj.com/article/SB10001424052702303592404577361923087607762.html

[xii] http://sec.gov/Archives/edgar/data/909791/000119312512287927/d374286dex101.htm

[xiii] http://online.wsj.com/article/SB10001424052970204409004577157470455118362.html

[xiv] http://www.realnetworks.com/press/releases/2012/intel-to-buy-patents-and-next-generation-video-codec-software-from-realnetworks.aspx

[xv] http://www.rambus.com/us/news/press_releases/2012/120206.html & http://assignments.uspto.gov/assignments/q?db=pat&asne=UNITY%20SEMICONDUCTOR&page=1

[xvi] http://www.cellular-news.com/story/48579.php

[xvii] http://www.wi-lan.com/news/news-releases/news-release-details/2011/wilan-acquires-of-mobile-communication--pioneer-patents/default.aspx

[xviii] http://www.wi-lan.com/Theme/WiLan2012/files/111209%20WiLAN%20Acquires%20Portfolio%20of%20DTV%20Patents_Final_v001_h65p86.pdf

[xix] http://sec.gov/Archives/edgar/data/320193/000119312511192493/d10q.htm

[xx] http://www.sec.gov/Archives/edgar/data/758004/000119312510265964/d8k.htm

[xxi] http://www.iam-magazine.com/blog/articles/ICAP_Ocean_Tomo_Summary.pdf

[xxii] http://www.businesswire.com/news/home/20100126005733/en/Avistar-Communications-Monetizes-Patent-Portfolio-Closes-Transaction

Author David Smith is President of Silicon Valley Business School, where he is teaching a class on Entrepreneurship & Startup Management.
David Smith also Brokers Technology Transfers and Patent Sale Transactions with Tynax, the Global Patent Exchange.