Patent monetization refers to the generation of revenue or the attempt to generate revenue by a person or company by selling or licensing the patents it owns.

Some of these owners try to make money from patents on inventions they develop, manufacture or market. Others attempt to generate revenue by buying and enforcing patents against one or more alleged infringers in a manner considered by the target or observers as unduly aggressive or opportunistic, often with no intention to further develop, manufacture or market the patented invention. The latter group is pejoratively called patent trolls by their critics.

History

Texas Instruments is believed to be the first company to monetize in the 1990s its portfolio of patents[1] (more than 38,000 in total[2]) when the company was losing market share to competitors.[3]

After the Texas Instruments example, IBM was another company who used the same technique in the 1990s to monetize its own patents to make more than $1 billion annually in revenue.[1]

Microsoft uses its patents to make deals with the major Android vendors, which amount to more than 70% of Android's market share.[4]

Eastman Kodak is an example of a struggling company which use its patents portfolio to make additional revenue. For example, it is said that Kodaks' licensing programs have generated more than $3 billion in revenue since 2004.[1]

Nokia generated €500 million from patents in 2013.[5][6]

Guangdong Deal

Eleven high-tech companies in China's Guangzhou Development District, through a sales-and-licensing back arrangement, collectively securitized their patents in exchange for a proceed of CN¥300 million on July 31, 2019, which was reportedly the first patent securitization deal in China.[7]

Ant Group

Alibaba Group made an in-kind investment by contributing IPs appraised at CN¥12 billion to Ant Group in exchange for one-third shareholding.[8]

The IPs contributed through in-kind investment account to 90% of Ant Group’s IPs, including 26,279 patents applied or granted, 8,569 trademarks, 677 copyrights, 3,927 domain names, and 369 design patents and trade secrets in 40 countries and regions at home and abroad, covering the technological areas of artificial intelligence, risk control, security, and blockchain.

In November 2020 before Ant Groups’ IPO was put on hold, its estimated market capitalization was once about CN¥2.1 trillion, i.e., the CN¥12 billion becoming CN¥700 billion market value (1/3 of the shareholding), about 50 times investment return generated from Alibaba’s IP Monetization.[9]

See also

References

  1. 1 2 3 "Kodak in Crisis Mines Patents for Cash Copying Texas Instruments". Texas Instruments. 2012-01-13. Retrieved 2012-01-15. Texas Instruments, the second-largest U.S. chipmaker, wrote the template decades ago on techniques to exploit patent holdings when a company is struggling, said Joseph Siino, who runs patent-consulting firm Ovidian Group. Losing market share to competitors, Texas Instruments used an aggressive litigation strategy that extracted royalties from those using the Dallas- based company's technology without permission, he said.
  2. ↑ "TI Fact Sheet". Texas Instruments. Retrieved 2012-01-15.
  3. ↑ "How Texas Instruments Transformed the Eastern District of Texas". www.law.com. 2011-10-26. Retrieved 2012-01-15. For the answer, rewind to the early 1990s. That's when Texas Instruments devised a money-making litigation strategy intended to ensure customers renewed their licensing agreements with the Dallas-based tech company or face a patent infringement suit(...). "Truthfully, TI is the one that really discovered the Eastern District and took advantage of it," says Carl Roth, who was a patent lawyer for TI during the 1990s. "TI, which was very aggressive in those days at enforcing their patent portfolio, ended up loving the Eastern District and filed 25 or 30 suits during the 1990s in the Eastern District"
  4. ↑ "Microsoft, LG Strike Android Patent Deal". InformationWeek. 2012-01-12. Retrieved 2012-01-15. Microsoft said the deal with LG means that 70% of Android-based smartphones sold in the U.S. are now covered by its licensing program
  5. ↑ "Nokia Unlocks Significant Value With Microsoft Deal". Forbes. September 5, 2013. Retrieved 27 December 2013. patent business.. is healthy and has been consistently generating cash flows of around Euro 500 million annually
  6. ↑ "Nokia Earnings: NSN And Patents Drive Value". NASDAQ. October 28, 2013. Retrieved 27 December 2013. At the current run rate, Nokia's IP licensing arm generates about 500 million Euros in steady royalty income every year.
  7. ↑ Chung, Jili (2020-11-01). Innovation's Crouching Tiger. Ehgbooks. ISBN 1647840457.
  8. ↑ "Prospectus of Ant Group IPO" (PDF). Ant Group. 2020-11-27. Retrieved 2020-12-02.
  9. ↑ "Ant IP on Hold but a Great Showcase for IP Monetization". Innovation's Crouching Tiger. 2020-11-09. Retrieved 2020-12-02.
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