On December 14, 2020, Alarm.com, a big company in security solutions added Gunshot detection to its business line by acquiring Shooter Detection Systems (SDS).
Source: https://www.alarm.com/about/press/PressGeneric.aspx?cmid=730
M&A generally, is a good step towards enhancing a business line. Further, any M&A deal is always well thought of and includes multiple parameters that are assessed before giving the green light to the deal.
One of these parameters is the IP assets that the companies hold. In fact, intellectual property or patents are considered as a value add-on during M&A. Patent assets not only increase the value of the company but helps the company to grow as well as diversify into various sectors, explore the market, and obtain new resources. Over the years, IP has become the dominant force in M&A transactions and thus it has become important to thoroughly assess these assets before getting into an M&A deal.
Coming back to the deal between Alarm.com and SDS, Alarm.com is quite a big name in the security solutions industry.
This acquisition got us curious to identify how much research is being done on the IP assets to call them valuable. And so, we decided to study this M&A deal.
And during our patent research, we uncovered few insights that can help in M&A activity.
So what does the Patent data say about this M&A?
Exploring the IP owned by SDS, we found 4 US patents with a priority date of April 26, 2016. And like every other patent, the priority date of these patents too is of great importance. We’ll get to it shortly, but before we do, here are the 4 patents that were the highlight of this M&A-
US10586109B1 – Indoor Gunshot Detection With Video Analytics
US10627292B1 – Indoor Gunshot Detection Analysis During Ongoing Fire Alarm
US10830866B1 – Testing Of Gunshot Sensors
US10657800B1 – Gunshot Detection Within An Indoor Environment
Now, these patents seem to be good and backed SDS’s much-advertised gunshot detection technology. These four patents can be called the base that can help Alarm.com in its security solutions business.
What can we learn more from this acquisition?
A deeper dive into the prosecution of these patents revealed an angle that may pose a potential opportunity worth considering for Alarm.com.
Generally, the prosecution history of the patents is reviewed during the due diligence process. But, that is more from a perspective of judging the patent strength, reviewing the examiner rejections, differences between the patent and already cited prior-art, etc. This review mostly does the work. However, there’s another review that is necessary but often left out.
Reviewing the prosecution history to identify if there are other companies working on similar tech around the time the patents were filed and prosecuted. For example – researching whether there were other companies that were patenting similar tech at the time SDS (entity being acquired) filed these patents uncovered another important name – Onalert Technologies LLC.
‘Onalert Technologies’- how is this name important in this acquisition?
Well, Onalert also has a proprietary tech in gunshot detection and owns a US patent which has a priority date of February 26, 2013, i.e. ~3 years earlier than Shooter Detection Systems patents. So, it seems that Onalert started patenting gunshot detection tech before SDS.
This patent, US9886833B2 – System, and method of automated gunshot emergency response system [US20160232774A1, Noland et. al.], owned by Onalert, caused a lot of rejections during the prosecution of US‘109 patent and its family member ‘292 patent (owned by Shooter Detection Systems). In fact, it resulted in 4 rejections against the ‘109 patent. Out of these 2 were 102 rejections while the other 2 were 103 rejections. And a 103 rejection for the ‘292 patent. SDS also had to make amendments to their claims for both the patents to get them granted.
Here is a quick snapshot from its prosecution history:
Source: Snapshots from prosecution history of ‘109 patent
Source: Snapshot from prosecution history of ‘292 patent
Hence, Onalert is very well possibly owning a basic technology that SDS was trying to protect but couldn’t. Thus, the company had to get a narrower version granted.
This implies Alarm.com can also consider acquiring Onalert and make a strong fence for competitors to enter into this domain OR Onalert can become a potential acquisition opportunity for the other players in the domain.
What do you think? Onalert would be acquired by Alarm.com or its competitors?
Conclusion
With the economic downturn in the post-COVID world, M&A activities- according to Russell Thomson, national managing partner, Deloitte & Touche LLP– is going to be the lever corporations and private equity investors can pull to accelerate their recovery through a combination of opportunistic, offensive, and defensive strategies. But in order for these strategies to work, one can also look at various other factors related to IP (patents). A deeper dive in IP can throw light on these risks and can help companies make better decisions.
Interested in minimizing the risks associated with your next M&A deal?
Authored by: Rohit Sood, Infringement team.
