Generating Revenue From Lapsing Patents

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Vision IP is now representing clients seeking to make repeated purchase of patents about to lapse in hi-tech technology areas.

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The recent increases in patent maintenance fees has led many patent holders to abandon an increasing number of patent assets because the cost of maintaining a large portfolio. One option is to sell such patents that are about to lapse. However, doing so presents two primary concerns.

First, most buyers will not pay a significant price for patents that are about to lapse (or patents nearing the expiration date). A lower five figure sales price is the norm. Thus, even if a buyer could be found, the cost of executing the transaction, which includes (among other things) negotiating the patent purchase agreement, can make selling the patent cost prohibitive.

Second, in many instances the buyer (or a subsequent owner) may elect to enforce the patent. Discovery during such enforcement may result in costs to the patent holder, which makes selling a patent for a lower five figure sales price undesirable.

Vision IP has found a solution to both concerns. First, to overcome the transaction costs of selling patents for a low sale price, the patent holder must lower the transaction cost. This is best accomplished by using the same negotiated patent purchase agreement for repeated transactions. More specifically, once the first transaction is completed, the patent holder and buyer can use the same patent purchase agreement for subsequent transactions.

Most companies will evaluate their portfolio on a quarterly basis. Vision IP assists one of its clients in reviewing the patents each quarter and to make such repeated purchases from the same patent holder. Because the transactions use the PPA negotiated during the first purchase, there are virtually no transaction costs to the patent holder.

The second concern, related to the cost of responding to discover if the patent is litigated, is primarily driven by the sale price of the patent. Most companies would be comfortable in selling the patent if the sale price of the patent significantly exceeded the cost of responding to discover.

While it may not be realistic to sell a single patent (that is nearing expiration or about to lapse) for significant revenue (into the six figures), selling groups of such patents can generate significant revenues so that the low cost of responding to discovery (if any) for those few patents that are ever litigated is quite tolerable.

In summary, by selling groups of patents to the same buyer throughout the year, a patent owner can virtually eliminate the transaction costs while generating six (or even seven) figure annual revenue from patent assets that would otherwise soon become worthless.

Vision IP currently represents clients seeking to make repeated purchase of patents (nearing expiration or about to lapse) in certain technology areas (e.g., electrical, electronics, communications, etc.). If your company has such patents that it might be interested in selling, contact Vision IP to explore the options available to you.

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Douglas Bridges
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