Nelson Mullins LLP

Nelson Mullins Riley & Scarborough LLP

Primary Options for Monetization

Sale

Licensing

Enforcement

Collateralization

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Sale of Patent

Pass ownership to another party. Assign all rights to

the other party.

May be part of a bigger business transaction

Joint development agreement

Merger / consolidation.

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Sale – Caveats and Advice (1)

Be careful who you sell your patents to, especially if

party is a competitor.

Consider getting a license under the patents for

sale.

You may be obligated to cooperate in their

enforcement activities.

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Sale – Caveats and Advice (2)

Consider PR implications.

Consider how loss of the sold patents affects your

overall patent portfolio.

May want to limit transferability of patents.

Consider tax consequences. Do you transfer to a

holding company?

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Sale - Auction

How

Can be via organizations that specialize in auctions,

consulting firms or even law firms

Pricing

Consider setting a reserve price.

Understand likely value

- Get comparables

- Understand how much bidders are likely to pay

- Values vary greatly by industry, technology and

particular patent.

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Sale - Auction

Observations

Bidders may want to review file history, so make

available.

Bidders may want reps and warranties; Our advice is to

avoid if at all possible.

Bidders may have questions re. technology, products,

enforcement activities, so be prepared to answer.

Help create interest – identify potentially interested

parties.

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Sale - Private Sale

One of the keys to success is identifying viable

targets

How do you determine viable targets?

Understand scope of patent

Identify companies that would benefit from owning patent

Identify companies involved in litigation where patent

could be valuable; Identify who infringes patent

Identify companies that are interested in growing their

patent portfolio

Consider non-practicing entities (NPE's)

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Sale – Private Sale

Other Factors

Consider whether patents which are for sale are to be

publicized or not.

Consider press related issues.

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Licensing

Scale

Large scale – many targets. Like in a sale, you need to

identify targets.

Small scale – handful of companies.

Key Considerations

Any lump sum payments? How much?

- One strategy is low cost lump sum.

- Price below what legal costs, etc. would be to fight.

- Another strategy is a higher lump sum with royalties

Some discounted value of total damage exposure.

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Licensing

Royalties

Need to figure out rates

- Look to any industry examples;

- Varies dramatically among industries;

- Look up legal decisions on reasonable royalty;

- Keep tabs of whether abiding by terms of the agreement;

need an accounting per time period.

What products the royalty applies to and match with

scope of license

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Licensing

Other Considerations

Duration.

Exclusivity.

Related patents.

Obligation.

Control.

Right to enforce.

Right to sublicense.

Termination.

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Licensing – Observations (1)

Can be very lucrative – e.g., IBM, Microsoft.

Demonstrates return on investment (ROI) while

keeping ownership of patents.

With large scale program

Need a team to lead effort;

Need to keep track of all candidates;

Need to set policies regarding ability to tailor terms and

policies to be used;

Need to be able to convincingly show why they should

like a license;

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Licensing – Observations (2)

You will need to have the threat of litigation to get

parties to sign up.

Be careful regarding declaratory judgment (DJ) motions.

Decide what patents you want to license.

Consider bundling patents.

Get knowledgeable before seeking to license a

Standard Essential Patent (SEP)

FRAND terms, risks.

Be persistent. Expect most candidates to ignore you.

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Enforcement

File an action in

U.S. Federal District Court;

International Trade Commission (ITC) – prevent

importation.

Understand costs

$1 - $2 million a year for moderate cases.

Substantially more for large cases (tens of millions )

May get someone to handle on a contingency basis

- lay out percentages;

- lay out triggers;

- lay out control provisions.

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Enforcement - Observations

Do your homework on infringement before filing suit

Understand risks

- Invalidation of patents

- Counterclaims

- Duration of operation

Be prepared to settle case.

Your choice of counsel is critical to your result.

May take years to see money, but verdict can be

substantial.

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Collateralization

Use patents as collateral to secure financing.

Valuable business assets.

Make sure it is worth risking the patents.

Understand your obligation to maintain patents until

obligation is satisfied.

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Info

Lewis Lee

Patent Attorney @ Nelson Mullins

lewis.lee@nelsonmullins.com