what's inside intellectual ventures' patent portfolio
TRANSCRIPT
Copyright 2014 ROL Group 1
Intellectual VenturesPortfolio Analysis - PreviewErik Oliver and Kent Richardson
March 2014
Copyright 2014 ROL Group 2
Notes
This is a preview of a longer analysis that ROL Group is undertaking
The final results will appear in IAM Magazine later in 2014
Sources (when not otherwise noted)
• IV public patent list• Patent metadata from Thomson Innovation
Still finalizing data, please do not redistribute this version outside the Gathering
Copyright 2014 ROL Group 3
Intellectual Ventures BackgroundBasics
• Founded 2000, total acquisitions of 70,000 IP assets• 35,000 IP assets/year evaluated (for purchase/license)
Funds raised• $6B as of 2014• Form of capital commitments with a 10 year draw
Expenditures as of 2014• $2.3B
• $730M to large companies• $240M to mid-sizes• $720M to startups/SMEs• $510M to independent inventors• $110M to universities
• Does this include: management fees, salaries (500-800 emps), portfolio/prosecution fees?
Return to investors and revenues• Licensing revenues of $3B as of 2014
News/Context• IIF1 vs. IIF2 investor returns?• IIF3 Status?• Broker community on payments?• Recent layoffs
http://www.intellectualventures.com/about/investor-relations2014 spend from IV Talk slides
Copyright 2014 ROL Group 4
IV Universe
IV Portfolio*
IV Portfolio•~70K patents/apps
IV Portfolio in monetization•~40K patents/apps
Public List•~33K patents/apps
US Published/Issued•~22K patents/apps
Business Segmentation
Invention Investment Fund 1 (IIF1)
Invention Investment Fund 2 (IIF2)
Invention Science Fund (ISF)
University/Licensing (IDF)
http://patents.intven.com/finder
+ Invention Investment Fund 3 (IIF3)
Copyright 2014 ROL Group 5
IV Analysis Process and Focus
Fund Monetized Listed US Pat + Pregrant Pub
Assignment to IV id’ed
RemoveISF
IIF 1 and 2 ✓ (32.0K) ✓ (25.8K) ✓ (18.2K) ✓ (17.4K) ✓ (17.4K)
ISF (Science) ✓(3.7K) ✓ (3.7K) ✓ (2.4K) ✓ (2.4K) ✗ (0K)
IDF (Univ. Licensing)
✓ (~4.0K) ✓ (~3.5K) ✓ (0.7K) ✗ (0K) ✗ (0K)
Asset Count (Approx)
40K 33K 21.3K 19.8K 17.4K
IV’s FAQ explains gap between 70K 40K: http://patents.intven.com/faq, in brief cost controls, patent sales, and expirations.The US list has issued US patents and US patent publications only; reissues have been removed (425); applications with no publication number have been removed (276).
IIF – We are including the Digimarc licensing agent agreement as part of IIF, approximately 700 assets.ISF – We believe that they have listed substantially all of their ISF portfolioIDF – We know that Asia is a focus for the program, we did not have access to the assignment records in those countries; however, we estimated that the Asian listed IDF portfolio was 4x the size of the US listed IDF portfolio and scaled that to approximate the monetized asset count..
We primarily performed analysis of US IIF subset and then back-estimated to
the purchased IIF patentsReminder we have a
snapshot today... What did the portfolio look like
2, 3, 4 years ago?
Copyright 2014 ROL Group 6
When was IV Buying?
2001 2002 2003 2004 2005 2006 2007 2008 2009 2010 2011 2012 20130
1000
2000
3000
4000
5000
6000
Scaled Acquisitions by Year (Monetized IIF)
IV was buying when the market was down and continued to buy throughout the downturn
Assignment data reflects opportunistic purchases from struggling companies
Low numbers may reflect expiration/sales of IIF1 patents or early
buying selectivity
Copyright 2014 ROL Group 7
Estimated Spend by IV per YearTotal Est. Spend $1.7B
2001 2002 2003 2004 2005 2006 2007 2008 2009 2010 2011 2012 20130
50
100
150
200
250
300
350
400
Scaled Spend per year ($M) (Monetized IIF )
Comparable acquisition #, but paying less per
patent by 2011
Copyright 2014 ROL Group 8
When do the IIF portfolios expire?Estimated Expiration Using 20 Years from Earliest Priority
<2010
2010 2011 2012 2013 2014 2015 2016 2017 2018 2019 2020 2021 2022 2023 2024 2025 2026 2027 2028 2029 2030 2031 20320
500
1000
1500
2000
2500
3000
3500
4000
4500
Scaled Assets by Estimated Expiration Year (Monetized IIF)~50% of portfolio expired by 2021 (7 years)
~80% of portfolio expired by 2024(10 years)
If your company were to consider a deal with IV and the deal runs 5-7 years (2019-2021) what would a future deal look like? Where is the distribution of patent value from IV’s perspective vs.your company’s perspective?
Copyright 2014 ROL Group 9
Remaining Asset Life at Time of PurchaseCalculated based on estimated expiration
Robust continuation practiceApprox 8% of portfolio today
20 19 18 17 16 15 14 13 12 11 10 9 8 7 6 5 4 3 2 1 00
500
1000
1500
2000
2500
3000
3500
Scaled Remaining Asset Life at time of IV Purchase (Mone-tized IIF)
Further ProsecutionPurchased
Copyright 2014 ROL Group 10
Remaining Life over Time is DecliningEstimated Average Remaining Life Over Time (US Pats & Pubs; Continuations Excluded)
IV seems to be buying assets closer to expiration over time!Why? Is IV cherry picking patents with greater adoption certainty?
1999 2000 2001 2002 2003 2004 2005 2006 2007 2008 2009 2010 2011 2012 2013 20140
2
4
6
8
10
12
14
16
18
20
Estimated Average Remaining Life Over Time (US Pats & Pubs; Continuations Excluded)
Copyright 2014 ROL Group 11
Sellers are DiffuseFrequency of Assets Assigned by Sellers
100+ 90-99 80-89 70-79 60-69 50-59 40-49 30-39 20-29 10-19 <100
200
400
600
800
1000
1200
1400
1600
Frequency Distribution of Number of Sellers with Indicated Quantity of Assets Assigned (US Pats and Pubs)
~100 total companies~60% of assets
~300 total companies~75% of assets
~1350 individualsbut only 25% of total
assets
This distribution generally foots with IV’s reported spend to IV entity size
Copyright 2014 ROL Group 12
Who is Selling?Ordered by Number of Patents Sold (at least 30 sold)Top 20 Next 20 Next 20 Next 20Kodak Nortel Recursion Software MosaidDigimarc Cubic Wafer Hong Kong Technologies LapisNXP Genesis Microship Nippon Steal CasioRaytheon Marconi IP Fujitsu ThalesMangachip Delphi Chunghwa Picture Tubes Alcatel-LucentTelcordia Verizon Sonic Dowling ConsultingTransmeta Aplus Flash AT&T Lockheed MartinSpyder Navigations Autocell Katrein-Werke Pulse-LinkAmex Crosstek Capital California Inst of Tech Lightspeed LogicPolaroid Tier Logic Be Here PSS SystemsCypress Semi Mindspeed Technologies Digital Imaging Systems DuPontDaimler Cirrus Logic Ideaflood Lightsmyth TechFrance Telecom Kimberly-Clark UMC ST MicroPrimax Electronics Airnet Communications Microsoft RockwellConexant Idelix Software Airip Cooler MasterBAE Icefyre Semi Discovision XeroxSanyo Mitsubishi Motorola ArraycomNokia Neomagic Triquint BelieveBellsouth Oki Electric Terabeam General DynamicsEntorian IPWireless Exclara
Many “blue-chip”/household names among sellers of patents to IV
Implications? How would something like a license on transfer impact a future aggregator?
Copyright 2014 ROL Group 13
Technology Market AreasBased on CPC code analysis
Circuit
ry
Semico
nduc
tors
Regist
ers an
d Ran
domne
ss
Materia
l Prop
erties
Optics
Signal
Proces
sing
Teleph
ony/S
ignal
Transm
ission
Inform
ation
Stor
age
Data P
roces
sing
Naviga
tion
Money
Han
dling
Medica
l Dev
ices
Climate
Cha
nge
0
1000
2000
3000
4000
5000
6000
7000
8000
Relative Size of Portfolio by Market
Hardware Software Other
Copyright 2014 ROL Group 14
2001 2002 2003 2004 2005 2006 2007 2008 2009 2010 2011 2012 2013
Relative Size of Market Category Purchases by Year
HardwareSoftwareOther
Technology Market Areas over Time
Less subject matter focus in 2010?
Pivot into hardware?Or did hardware patents
expire/sold sooner?
Copyright 2014 ROL Group 15
International Asset DistributionMonetized IIF – Not Yet Filtered for Pub vs. Patent
IIF portfolio has limited foreign coverage ~10K assets—weak in BRIC
Issued foreign portfolio likely significantly smaller—publications were listed
JP WO EP AU DE CN KR CA GB AT Other TW FI FR IL ES SE BR NO MX HK DK0
500
1000
1500
2000
2500
Estimated Foreign Asset Profile (Monetized IIF)
Copyright 2014 ROL Group 16
ROL Group Automated Ranking System
•How to decide where to spend time first in a portfolio?
Problem
•Quick and easy to calculate•Scoring vectors make intuitive sense•Easy to explain
Constraints
•Heuristic ranking system based on static characteristics
Solution
•# independent claims•# forward citations adjusted for age•Remaining patent life•Claim 1 word length•Means claims reduces rank•Current age reduces rank•Etc.
Sample Characteristics
•Used across projects for over 5 years – regularly helps us find where to focus in a portfolio•Have benchmarked in the past versus human selection and alternative (more complex) scoring systems and generally found similar—but not identical subsets for value—but high return for low computation costs/explanatory simplicity
Results
Copyright 2014 ROL Group 17
IV PortfolioComputer-based Ranking by Assignment Year
2001 2002 2003 2004 2005 2006 2007 2008 2009 2010 2011 2012 20130
500
1000
1500
2000
2500
Scaled Asset Rank by Assignment Year (Monetized IIF)
• High selectivity in purchases - Overall portfolio is relatively evenly distributed between H/M/L, this is atypical
• Selectivity has varied over time, e.g. 2008 (bulk) vs. 2010 (quality)
Copyright 2014 ROL Group 18
ReissuesDemonstrates IV’s focus on patent development
IV Before IV0
50
100
150
200
250
300
Who Reissued? (n=386)
2004 2005 2006 2007 2008 2009 2010 2011 2012 20130
10
20
30
40
50
60
70
IV Initiated Reissues by Fil-ing Year (n=250)
IV focused on reissuing patents for value and bought reissued patents for value
The vast majority of reissues were filed by IV in the first 24 months after purchase
Copyright 2014 ROL Group 19
Litigation Analysis
Coming soon
Lex Machina data under analysis:~430 US patents where assignment was found ever been litigated
~182 litigationsTo do: Figure out which litigations occurred after the IV purchase
Copyright 2014 ROL Group 20
Gathering Discussion Topic
What other questions could be asked?• Tech area specific analysis, e.g. Expiration time line vs. spend• More fine-grained analysis of IV’s purchases in “my company’s” market segments• Assignment analysis, e.g. holding companies used and intra-IV transfers as indicators• Analysis of sellers• Is there overlap to companies who complain about NPEs?• Are there common characteristics of sellers, e.g. financial distress for corporates?
• Better quantifying the amount of patent development IV performs after the purchase• When IV purchases a patent how much of the TAM is potentially consumed by the IIF members?• E.g., the revenue of all the corporations in that IIF fund for the area of the purchases patents• Further follow up, publicly announced IV licensees?• Royalty modeling, e.g. Microsoft v. Motorola (Washington; Apr 2013)• Apply a similar analysis to IV’s portfolio, what is the proportion of total patents in the area vs.
size of IV’s portfolio• Could be performed on a segment-by-segment basis, e.g. what % of active patents in a given
CPC class does IV own? • Note the Washington case was a RAND case
• How would you use the information to counter an IV assertion? Prepare for IV to knock?
What would you like to know?
Copyright 2014 ROL Group 21
Gathering Discussion Topic
What else would you like to know?• What would you do (differently) if IV approached
based on this data?• What else would you like to know?
Possible future IV scenarios?• No change: IIF3 moves forward, licensing continues• Funds unwind/time out: What happens to portfolio?• Legal shift: FTC action vs. NPEs, CLS/Alice Bank
@ SCOTUS reduces SW patents, other (e.g. Licensing approach shifts to IBM/Twitter style licenses)?
Copyright 2014 ROL Group 22
BACKUP
Copyright 2014 ROL Group 23
Technology Market Areas by Year
2001 2002 2003 2004 2005 2006 2007 2008 2009 2010 2011 2012 2013
CircuitrySemiconductorsRegisters and RandomnessMaterial PropertiesOpticsSignal ProcessingTelephony/Signal TransmissionInformation StorageData ProcessingNavigationMoney HandlingMedical DevicesClimate Change
Copyright 2014 ROL Group 24
Technology Market AreasDrilldown on Telephony/Signal and Data Processing
Electric
al Digi
tal D
ata P
roces
sing
Recog
nition
/Pres
entat
ion of
Data
Financ
ial A
dmini
stativ
e or F
oreca
sting
Imag
e Data
Proc
essin
g0
500
1000
1500
2000
2500
3000
3500
4000
Data Processing Subclasses Relative Size
Digital
Sign
al Tra
nsmiss
ion
Video R
ecord
ing an
d Tran
smiss
ion
Teleph
onic
Commun
icatio
n
Broadc
ast C
ommun
icatio
n
Transm
ission
Meth
ods
Multipl
ex C
ommun
icatio
n
Amplifie
rs
Aerials
0
500
1000
1500
2000
2500
3000
3500
Telephony/Signal Trans-mission Subclasses Rela-
tive Size