Patent Portfolios as Securities
66 Pages Posted: 3 Mar 2013 Last revised: 1 Jan 2015
Date Written: September 19, 2013
Companies of all types are buying, selling, and licensing patents — not just one patent, but many patents bundled into large portfolios. A primary problem with these transactions is that the market is illiquid: parties cannot identify holders of relevant portfolios, they cannot agree on the value of the portfolio, and the specter of litigation taints every negotiation.
This article presents a new way to improve market formation and integrity by proposing that patent portfolios be treated as securities. If patent portfolio transactions are treated like stock transactions, sellers steering clear of fraud laws may be forced to disclose information about patent value. This has some unexpected benefits for curbing high-volume demand letter type patent assertions.
Furthermore, patent transactions previously consummated in “dark markets” might now be traded in public clearinghouses. Ultimately, parties openly transacting will develop objective pricing methodologies that reduce the costs of negotiation and decrease the leverage portfolio holders exert on potential licensees.
Keywords: patents, aggregation, securities, trolls, PAEs, royalty stacking, licensing
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