IAM / AST Quarterly Report: Operating company dominance of the patent deals market continues, latest data reveals

19 July 2019

Operating companies continue to dominate the patent deals market in the US on both the buy and sell sides, according to the latest data from Allied Security Trust (AST). Qualcomm, Fujifilm and Samsung were all among the top sellers, with Intellectual Ventures once again leading the pack as it disposed 350 assets. On the buyside TSMC, Nokia and TiVo all feature in the top 10, which is led by the NPE PanOptis Equity Holdings.

The data cover January to March 2019 and is part of AST’s regular quarterly analysis of the deals market. Overall, Q1 saw 275 new patent sales involving a little under 3,500 assets. This is  broadly in line with the level of activity over the last couple of years.

That suggests that the deals market has settled into a fairly steady state. These numbers do not yet reflect the large Intel sale, which looks set to be finalised at some point this year after the chip giant recently entered into a period of exclusivity with an unnamed buyer. Should that deal ultimately close it will produce a significant spike in activity, but it will be worth tracking whether it prompts a broader uptick in the market in general.

As we reported yesterday France Brevets has recently put two portfolios up for sale, with one focused on the wireless 5G space. As AST’s analysis shows, there are plenty of operating companies which continue to see the secondary market, with prices still at relatively depressed levels, as a valuable source of assets to boost their portfolios.

For comparison you can see highlights Q4 of last year here. As ever AST has provided some analysis on each table with additional commentary from CEO Russell W Binns Jr.

Top sellers by number of assets

Worth noting:

Intellectual Ventures sold assets in nine deals to:

• Six NPEs—Steephill Technologies LLC (51 assets), Quest Patent Research (48), InnoMemory LLC (40), Robert A Westerlund (23), Jonathan Szarzynski (19), Virtual Watchdog Solutions (15)
• Three operating companies—Facebook (72), Seagate Technology (55), TiVo Corp (27)
• Quest Patent Research sued Acer and MediaTek on 29th April 2019, using three Intellectual Ventures assets.

Top seller by number of deals

Worth noting:

• IBM sold 10 software assets to an NPE, WRP IP Management LLC. IBM also sold assets to four operating companies:
  • Ecobee—38 smart home assets
  • SailPoint Technologies—19 security software assets
  • GreenPrint—four tracking software assets
  • Samsung—two semiconductor assets
• Panasonic regained a spot in the top seller list by selling 90 assets in four deals; it sold 79 assets to two NPEs and 11 assets to two operating companies.

Twenty-five different individuals sold 93 assets in 25 deals to operating companies, NPEs, defensive consortiums, and a law firm.

Top buyers by number of assets

Worth noting

• Nokia purchased 88 wireless communication assets from two operating companies – Samsung (86) and Bouygues SA (2).

Top buyers by number of deals

Worth noting

• Philips purchased assets from a broker, Tynax (2), and four operating companies – Hitachi (30), Xenio Systems (3), GenKey (1) and Vip1 APS (1).

• Jonathan Szarzynski purchased 38 assets from three NPEs in three deals, and three assets from an operating company in one deal. Entities affiliated with Szarzynski have filed lawsuits:
  • Using four assets out of 18 bought from Robert A Westerlund, against Bank of America, Dow Jones and Co, Macy’s Inc, and Wal-Mart
• North Plate Semiconductor, an NPE, purchased 10 assets from Panasonic and nine assets from Toshiba. North Plate filed a lawsuit against Omnivision Technologies, SMK Electronics, Smart Eye International and Texas Instruments using seven assets acquired from Toshiba.

Assets and deals by industry category

• In this quarter, 22% of deals related to software, the category with the most deals every quarter since 2010.
• Overall, the primary asset categories for Q1 deals were software, electronics, industrial and medical.  Electronics and communication assets top the list of transacted assets.

Key question:  With software leading the number of transactions for eight years, how long can this trend continue before oversaturation?

Commentary from AST CEO Russell W Binns, Jr:

The first quarter of 2019 saw 275 new patent sales involving 3,478 assets, with 247 unique sellers and 251 unique buyers. Overall, the secondary patent transaction market has been stable with a quarterly average of 275 transactions since Q1 2017. 

A few important observations:

• Interestingly, while software continues to be the most transacted technology category over the past decade, the industrial and medical categories have been increasing.
• Nine non-practicing entities (NPEs) filed 15 new lawsuits involving 24 transacted assets. NPEs continue to be active in litigation and have been buying more assets over the past couple of quarters, perhaps indicating more lawsuits to come.
• PanOptis, an NPE, acquired 303 circuits and electronic device–related assets from ST-Ericsson. It was the quarter’s largest deal.

Various developments in Q1 raise key questions for operating companies. Among the most important questions:

• NPEs have participated actively in buying software patents. Since more than 80% of NPE lawsuits use patents previously purchased, does this mean NPEs have become comfortable with the Alice decision and its fallout, and can we expect more future litigation in the software space?
• Intellectual Ventures (IV) continues to sell assets and sold assets to six NPEs this quarter. Could this lead to more threats to operating companies?