Patent Sale Transactions
A patent sale is an outright transfer of all patent rights from the seller
to the buyer. Technically, in patent speak, the sale of these rights
is called an "assignment"--as the patent is usually issued to the individual
inventor and then assigned to the company-employer. The sale is recorded as an
'assignment' at the patent office.
Click here for a detailed guide to selling your patents.
Patent sale transactions take place in all technology sectors--virtually any
patent is sellable where a willing buyer is matched with a willing seller.
However, patent sales are very popular in fast-moving high-tech sectors
where successful organizations often switch strategies in response to the
dynamics of the market. As the patent portfolio must support the
product offering, shifting corporate strategies and new product releases
lead to patent sales and acquisitions. As the patent filing process
takes several years, it lags behind the shifts in corporate strategy and
companies are forced to acquire patents from outside if
they want their portfolio to reflect the current business activity.
Some buyers acquire patents and portfolios with a view to asserting them against infringers--they are essentially in the business of selling licenses, but will bring infringement actions in court where necessary. Clearly, infringed patents are top of the shopping list for these buyers. Many corporate sellers refuse to sell patents to this type of buyer.
An anonymous listing is then written and posted on the Tynax exchange. The listing is syndicated to targeted buyers and brokers/agent representing buyers all over the world.
Upon execution of confidentiality agreements, details of the patents and associated assets for sale are provided to buyers. Buyers often have questions relating to licenses and other potential encumbrances to clean title. Some buyers have questions related to potential infringement. One of the first questions asked by the buyer is the price. For this reason, the sales process can be more effective when an asking price is circulated with the listing. For larger, more complex transactions, technical questions may be posed.
Following this question and answer process, the buyer may make a tentative offer. If there are several interested buyers, a bidding process may take place. Following the negotiation on price and other terms, the preferred offer is accepted by the seller.
The buyer then usually provides a patent purchase agreement to the seller and commences the due diligence process. Due diligence in this type of transaction generally focuses on validity of the patents and ensuring the sellers title is clean. Prior art investigations may be carried out by the buyer. Any licenses, liens or other encumbrances need to disclosed and discussed during the due diligence process.
After the due diligence process is complete, the closing process involves transfer of payment in exchange for patent rights and recording of the assignment with the patent office.
Many corporate sellers are highly selective about the type of buyer they are prepared to engage with. They are usually reluctant to sell to enforcement-focused buyers. This is particularly true of corporations that have become the target of patent infringement suits from these buyers in the past. Often the seller will refuse to sell to a direct competitor. The role of the intermediary is important here in presenting the divestment assets only to buyer-types approved by the seller. When the concerns of the seller are known by the intermediary, promotion of the assets can be restricted to the type of buyer that would make a good match and fit within the seller's guidelines.
A seller with an existing client base and an established product line that is not being sold as part of the sale transaction will usually request a license back that enables them to continue servicing their customers without the fear of a future patent infringement suit from the buyer.
The scope of a license back can be a source of much discussion. The seller wants to maximize flexibility in the scope of the license back while the buyer wants to restrict the scope so that it does not interfere with their patent rights.
Where the seller is suspicious that the buyer may be overly-zealous in enforcing the patents, the seller may wish to incorporate a covenant into the assignment contract that restricts the buyer from aggressive litigation and threatening licensing activity. This may become a topic of some negotiation.
Click here for a detailed guide to selling your patents.
Typical Technology Sectors
Patent sale transactions take place in all technology sectors--virtually any
patent is sellable where a willing buyer is matched with a willing seller.
However, patent sales are very popular in fast-moving high-tech sectors
where successful organizations often switch strategies in response to the
dynamics of the market. As the patent portfolio must support the
product offering, shifting corporate strategies and new product releases
lead to patent sales and acquisitions. As the patent filing process
takes several years, it lags behind the shifts in corporate strategy and
companies are forced to acquire patents from outside if
they want their portfolio to reflect the current business activity.
Typical Organizations
Although the patent buyers are often large corporations and patent pools, patent sellers are made up of individual inventors, startups, R&D labs and all types of organizations. Many patent holders do not have the sales and marketing channels in place to commercialize their inventions and they find that the most profitable strategy for monetizing their patents is to sell them to a large corporation with matching products and channels. As well as the individual inventors and startups, large corporations often sell patents when they are pruning their portfolios and selling off patent assets that are no longer core to their business needs.Some buyers acquire patents and portfolios with a view to asserting them against infringers--they are essentially in the business of selling licenses, but will bring infringement actions in court where necessary. Clearly, infringed patents are top of the shopping list for these buyers. Many corporate sellers refuse to sell patents to this type of buyer.
Transaction Process
The process starts with identification of the patents and intellectual assets to be sold. This may be the result of a cataloging activity that maps the claims of existing patents against the current and future requirements of the business.An anonymous listing is then written and posted on the Tynax exchange. The listing is syndicated to targeted buyers and brokers/agent representing buyers all over the world.
Upon execution of confidentiality agreements, details of the patents and associated assets for sale are provided to buyers. Buyers often have questions relating to licenses and other potential encumbrances to clean title. Some buyers have questions related to potential infringement. One of the first questions asked by the buyer is the price. For this reason, the sales process can be more effective when an asking price is circulated with the listing. For larger, more complex transactions, technical questions may be posed.
Following this question and answer process, the buyer may make a tentative offer. If there are several interested buyers, a bidding process may take place. Following the negotiation on price and other terms, the preferred offer is accepted by the seller.
The buyer then usually provides a patent purchase agreement to the seller and commences the due diligence process. Due diligence in this type of transaction generally focuses on validity of the patents and ensuring the sellers title is clean. Prior art investigations may be carried out by the buyer. Any licenses, liens or other encumbrances need to disclosed and discussed during the due diligence process.
After the due diligence process is complete, the closing process involves transfer of payment in exchange for patent rights and recording of the assignment with the patent office.
Common Concerns
Clients are often concerned that their patent sale activities are kept confidential and they're not disclosed to the market. The identities of the seller can be shielded until the NDA confidentiality agreement is signed by the buyer and the patent numbers are disclosed.Many corporate sellers are highly selective about the type of buyer they are prepared to engage with. They are usually reluctant to sell to enforcement-focused buyers. This is particularly true of corporations that have become the target of patent infringement suits from these buyers in the past. Often the seller will refuse to sell to a direct competitor. The role of the intermediary is important here in presenting the divestment assets only to buyer-types approved by the seller. When the concerns of the seller are known by the intermediary, promotion of the assets can be restricted to the type of buyer that would make a good match and fit within the seller's guidelines.
A seller with an existing client base and an established product line that is not being sold as part of the sale transaction will usually request a license back that enables them to continue servicing their customers without the fear of a future patent infringement suit from the buyer.
Key Negotiation Points
Pricing is always a significant factor in these negotiations, however, other issues are sometimes even more important in finding win-win deal structures that meet the demands of each of the parties.The scope of a license back can be a source of much discussion. The seller wants to maximize flexibility in the scope of the license back while the buyer wants to restrict the scope so that it does not interfere with their patent rights.
Where the seller is suspicious that the buyer may be overly-zealous in enforcing the patents, the seller may wish to incorporate a covenant into the assignment contract that restricts the buyer from aggressive litigation and threatening licensing activity. This may become a topic of some negotiation.
Why Tynax?
With global reach via its online exchange and broker network, Tynax has access to more buyers and an efficient process for reaching them. Patent buyers subscribe to Tynax for new listing alerts. More buyers generally leads to higher prices for the seller.- Largest marketplace. If you browse the Tynax Exchange, you will see that
there are literally thousands of listings representing many thousands of
patents. The Tynax Exchange represents the world's largest marketplace
of patents available for sale.
- More buyers.
Following an extensive process of research and analysis,
the Tynax database of buyers is the most comprehensive and accurate in
the industry. Tynax not only identifies and communicates directly with
the largest, most active, patent buyers but has access to thousands of
operating companies, patent attorneys and agents representing buyers of
all types. More buyers means more competition and better prices.
- More brokers. The Tynax network of brokers extends across the U.S.,
Asia, Europe and all the most active technology hubs. When engaging with
Tynax, you are engaging with over 30 active brokers, all with access to
their own pools of buyers. All these brokers act to promote your
patents to their communities of buyers.
- Global reach. Of course, the Tynax Exchange website is available to
viewers all over the world, but Tynax also has representative offices
and brokers located in key markets such as Japan, Taiwan, Korea, China,
U.K., France and Germany. Much of the buying activity for U.S. patents
takes place offshore today, especially in Asia and Tynax has unique
access to these markets.
- More offers. Access to more buyers and promotion by more brokers
translates to more offers. More offers leads to better prices.
- Better prices. Better prices are achieved through two main activities:
1) The presentation of patent analysis information justifying a higher
price; and 2) The outreach to multiple buyers. Basic economics principles
apply and the price is maximized when there are multiple competing
bidders.
- Quicker process. As the Tynax Exchange involves email alerts targeted at
buyers and agents with an interest in specific areas, the process of
listing and promoting the patent is quicker on Tynax than through any
other channel. A patent-for-sale listing can be posted on Tynax within 1
hour and can be syndicated to every major buyer and agent within 24
hours of listing.
- Better terms. Tynax often waives the listing fees, and relies
exclusively on commissions from Tynax-generated transactions. The Tynax
commission structure is lower than average, and Tynax shares its
commission with other brokers that participate in the transaction.
- More confidential. Listings on Tynax are confidential--the patent numbers
and identities of the parties are not disclosed in the listing. This
allows for patent sale and acquisition to take place under discrete,
stealth-mode transactions.