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ACHIEVING A FAST SALE OF YOUR PATENTS

By Michael A. Shimokaji

Whether the seller of a patent portfolio or single family residence,

most sellers want to sell their property fast, or at least in the shortest amount

of time possible. So, is there something a patent owner can do to shorten the

sales cycle time?

Unlike the market for single family residences, there is not a

comprehensive system for tracking patent portfolio sales. Nevertheless,

some patent monetization experts have indicated that, in 2012, the average

price per US patent was $200K, after excluding atypical sales such as

Nortel. They have also indicated that, in 2012, about 13% of portfolios sold

in six months and about 31% sold in two years.

First, to shorten the time it takes to sell a patent portfolio, the portfolio

needs to be priced “right.” For example, Kodak eventually sold its portfolio

of 1,100 patents for about $500M, after it originally priced it at about $2.5B

a half year earlier with no success.

Most sellers tend to overvalue their patent portfolio. They also tend to

have an emotional investment or attachment to their portfolio. This tends to

make it difficult for sellers to adjust their sale price expectation to match

what the market is willing to pay.

Another challenge for sellers is that they view their technology as

revolutionary and capable of making a significant contribution to the market.

This tends to increase the sales price. But if potential buyers do not have

that same view, they will not be open to pay for the value perceived by the

seller.

So when we talk about pricing the portfolio “right” for a fast sale, it’s

a price that matches what buyers are willing to pay, rather than what a seller

hopes to get.

Second, faster sales can also be achieved by allowing more potential

buyers to buy. For example, some sellers wish to avoid sales to certain

entities, such as non-practicing entities. Others may wish to avoid sales to

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certain competitors. There can be rationale reasons for excluding certain

buyers. But as the number of potential buyers decrease, the time for

achieving a sale may increase. In other words, if you want to catch a fish,

you have to put your bait in front of more fish rather than fewer fish.

Third, and in a way related to factor two above, some sellers have the

ability to conduct portfolio due diligence faster than others. These sellers

are often experienced in buying and selling portfolios in multiple

transactions throughout a year. Non-practicing entities fall into this

category. The trade-off, however, might be a lower price in comparison to a

sale to a practicing entity.

Fourth, find evidence of use of the patented technology. Evidence of

use can tend to increase the number of potential buyers. More potential

buyers can decrease the time to complete a sale, as already noted above.

Evidence of use can also tend to increase the offering price. A higher

price means it could be closer to the seller’s price expectation. If closer,

then there may be less time needed for negotiations between the buyer and

seller.

In summary, the above ways to shorten the time to complete a sale are

based on ways to make it easier for a buyer to buy.

MICHAEL A. SHIMOKAJI

Tel: (949) 788-9968 Fax: (949) 870-3310

Email: mshimokaji@shimokaji.com Skype: ma.shimokaji

Mr. Shimokaji is a shareholder in the law firm of Shimokaji & Associates, P.C., located in Irvine, California. The firm is engaged in intellectual property litigation, patent monetization, and the procurement of patent rights domestically and abroad. For more than 30 years, Mr. Shimokaji has supported clients in industries as diverse as aerospace, apparel, chemicals, computer software, household products, medical devices, photo imaging, and semiconductors. His expertise includes infringement litigation, patent and trademark portfolio development, and intellectual property monetization. He has lectured for local and national organizations in the US, as well as abroad, on various intellectual property topics. He has been a member of the Steering Committee for the California Minority Counsel Program. He was a founding director of the Orange County Japanese-American Lawyers Association and has served as an instructor in the paralegal program at the University of California, Irvine. Mr. Shimokaji is a past president of the Orange Coast Optimist Club which is part of an international organization that supports programs for children. He served for three years on the Executive Committee for the California State Bar Intellectual Property Section, and another three year term on the California State Bar Federal Courts Committee. Mr. Shimokaji has been a member of the editorial board for The Journal of the Association of University Technology Managers. For the Pro Bono Civil Rights Panels of the US District Courts in California, Mr. Shimokaji is a volunteer attorney. Mr. Shimokaji has been formally trained at the Straus Institute for Dispute Resolution and is a mediator for the US District Court, Central District of California. He has also served as a mediator for the Los Angeles County Superior Courts. He is the author of articles that include “Inducement and Contributory Infringement Theories to Regulate Pre-Patent Issuance Activity” 37 IDEA 571 (1997); “Type of Use Determines Whether Use of Web Content Will Be Infringing” L.A. Daily Journal, August 22, 2002; and “Cease and Desist Letters May Contain Some Hidden Perils” L.A. Daily Journal, February 27, 2003;

“Contingency Defense in Patent Lawsuits” L.A. Daily Journal, August 1, 2006; “Putting Designs to the Test” L.A. Daily Journal, October 30, 2008; “Mind Over Matter” Los Angeles Lawyer, April 2009. Following graduation from the University of California, Irvine with a bachelor’s degree in chemistry, Mr. Shimokaji received his Juris Doctorate degree from Southwestern University School of Law. In law school, Mr. Shimokaji was an executive editor for the school’s law review. He has served as a judicial extern for the Honorable Robert M. Takasugi, Judge, United States District Court. Mr. Shimokaji is admitted to the California Bar and the United States Patent and Trademark Office.