I had the pleasure to sit on the opening Plenary Session panel of the recent IP Business Congress 2013 entitled “The Changing Face of the IP Market.”
Here's how the conference program described the session:
“In hard times only the strong survive: the biggest innovators are the biggest winners. Investors, technology leaders and senior industry observers discuss how the market for IP assets is evolving and implications for stakeholders of every kind: investment opportunities ... new players, perspectives and horizons ... monetization and beyond”
The panel spent a good bit of time discussing the valuation of patents. These were some of the main points that I aimed to impart to the audience.
1. The starting point for valuation is Evaluation, i.e., until you have evaluated the patent properties, you can’t talk about valuation.
2. If you think about the stock market, there is an analogy to the book “Security Analysis”, which pioneered by Graham and Dodd and was followed by their student Warren Buffet. This provided the intellectual foundation for Value Investing by evaluating the underlying business as a basis for buying or selling when the stock market "Value" (i.e., price) diverged from the business "Evaluation." This brought “consistent, repeatable, data-based analyses” to the valuation and investment in securities.
3. Today, patent analytics are starting to provide the equivalent "Evaluation Metrics" for IP.
4. One of the biggest challenges and terms you hear most when discussing IP is “context.” Analytics are the best way to shine light on this subject and to explore multiple contextual perspectives (position, quality, strength, quantity, age …) in a timely, cost-effective and repeatable process.
Here's an example: my colleagues and I contributed an article to Intellectual Asset Management magazine that described analyses we performed on over 9,000 venture capital backed companies' patent portfolios. These analyses were done as part of due diligence for a later stage venture fund where we are venture partners.
There was a clear correlation between a company's patent portfolio (amount, landscape positioning, management) and investment success. 86% of companies with top quartile ratings were "successes," i.e., IPOs or acquired.
Throughout the conference there was discussion about the rapid increase in the number of patent portfolios being “shopped” and the problems companies were having in dealing with this. The answer is “Patent Analytics” such as described in the above IAM article, the incorporation of these analytics into an existing process, or the design of more efficient and effective processes that bring to the patent arena the “Graham and Dodd” type analyses that shaped modern capital markets.
Interested in learning more? Please contact IPVision on how we can share our knowledge of these types of analytics to help your company.
