Last year, we observed the operating companies picking up with respect to patent buying. But this isn’t true for all aspects of the market. So the question remains, “Has 2021 brokered patent market rebounded from the effects of the Covid-19 pandemic?”
To answer this question we looked into the 2021 Brokered Patent Market Report. This exhaustive report by Richard Oliver Insights reflects some significant changes in the patent market. To highlight a few,
- The ‘for sale by owner’ category stood at an all-time high of 10 years in 2020. But in 2021, it fell to 1.1%.
- On the other hand, the packages listed on the brokered market in the 2021 market year rebounded from the 14% drop observed last year.
- As we have observed that ‘user’ is the most frequently used word. It was derived that this resulted from EOUs targeting more consumer software over business and backend.
All-in-all, the patent market has seen some upward and some downward trends post-pandemic. But will we see the same pattern this year as well?
The summary of this report can help you understand the patent brokered market behavior for the coming years. So, without further ado, let’s dive right into it!
Market Size
While approximately $11 billion in sales was expected to be reached by the second quarter of 2021, if we sum the asking price of all the 250,000 assets in the market, tracked by ROI, the amount is somewhere over $10 billion. This is $0.4 billion less than the sales in November 2020.
Moving on to the role of patent brokers in 2021.
Patent Brokers
Over the past decade, there has been an increase in private deals, which signals a more mature market where the deals are closed by in-house teams. This may give an assumption that broker skills are now overlooked. However, we observed that brokers’ skills, such as
- experience in identifying assets of value,
- setting buyer and seller expectations, and
- sales acumen,
remain an irreplaceable part of the market, especially for those sellers and buyers who do not have in-house experts in managing patent deals. This is why our patent brokers list from different countries has been making rounds over the internet.
As per the ROI Report, in the past decade, the number of brokers listing 5 or more packages for sale is changing over time. This number was the highest in 2016, when 28 brokers listed five or more assets.
Table 1 lists the brokers that offered five or more packages in 2021. The number stands at 17, which is a huge decline from 2016. However, based on the 2021 market year, among all packages listed by brokers, these accounted for 91% (an increase from 89% last year).
| Adapt IP Ventures |
| Blackhawk Technologies |
| Darwin IP Advisors |
| Dynamic IP Deals |
| Hillco Streambank |
| ICAP |
| Iceberg |
| IP Approach |
| IP Offerings |
| IPInvestments Group |
| Morgan, Lewis & Bockius |
| OCEAN TOMO |
| Red Chalk Group |
| Rui Zhi Ventures |
| Tangible IP |
| TransactionsIP |
On the other hand, the total number of brokers that listed packages this year dropped to 40 (last year, the figure stood at 41).
Hopping onto the ‘For sale by owner’ listings, they now account for 1.1%, a significant drop from 6.8% in 2020. These figures could result from the decreased sales activity for various companies during the Covid-19 pandemic. It will be noteworthy to see the changes in the numbers as the world rebounds from the pandemic.
Packages
In 2020, the package count reported was 14% which was the lowest in the past five years. However, the digits have rebounded, and as per ROI’s report, packages listed on the brokered market in 2021 stand at 17%.
Even though the packages and US assets listed increased, there was an overall drop in Total assets in 2021. This is because of fewer international assets on the market.
Technology-wise, software packages have jumped back to their first spot in 2021, comprising 38% of all packages. In 2020, it stood second. Notably, the ‘other’ category has taken the second spot, rising from 7% of the market in 2014 to 32% in 2021.
The consistent rise of the “other” category can be due to the following reasons:
- Rise of Automotive, energy, and medical device packages, and
- Several brokers substantially increased their volume of ‘other technology’ packages
Figure 1 depicts the report’s package distribution by technology group.
Source: ROI Brokered Patent Market
Similar to 2020, the biggest giants (e.g., Google, Apple, Microsoft, and Amazon) continue to be the favorite targets of patent sellers’ EOU materials.
Additionally, in the 2021 market year, the word ‘user’ has been used tremendously, given the EOUs focus on consumer software rather than business and backend.
Let’s talk about the pricing of these patent assets.
Pricing
As a result of the maturation of the market and increased concentration of listings by knowledgeable brokers, the pricing has become more consistent. However, pricing transparency has been a topic of constant debate as it benefits some while obstructing the market as a whole.
When discussing pricing, they can only be standardized for some industries. A seller asking for more than the average price must explain the reasons. Similarly, buyers offering lesser prices should have a valid explanation for the same. These reasons can be formed with the help of patent audits, or using our Business Opportunity for Sales (BOS) tool and finding out which patents are being blocked by your patent asset.
The average asking price per asset this year dropped by 10% from $162,000 in 2020 to $146,000. Studying the asking prices by tech category, the ‘software’ packages remain the highest-priced category.
A notable change in the asking price of the communication category has been observed as it has lagged significantly behind other categories in 2021. In the 2020 market, it was more in line with other categories, but in 2021, they were priced way below in relation to other tech categories.
Asking price and impact of EOU
The median and average asking pricing simply initiate the conversation on the starting price of a package. If a package should have a higher asking price, it depends upon the technology’s current use, i.e., the EOU document attached to it.
As per the report, the packages with EOU have reduced from 39% to 33%. However, they continue to hold premium pricing.
Sales
According to ROI, brokered sales only make up a small portion of the patent market as private sales continue to increase. The 2020 sales figures stand at 6.7%, a slight drop from November 2019’s 8.5%. This is heavily affected by extremely depressed sales in the first quarter of 2020. The depression may result from more-older discounted packages sold in 2020 than in previous years.
Further, factors such as receipt date and EOUs also play a significant role in modifying these figures.
Sales by Receipt date
It has been commonly observed that the best deals are received when buyers act quickly.
Lower buying activity was observed in the first half of 2020, indicating that packages remained in the market for long. However, 60% of the sales in 2020 happened within 8 months of receiving the package.
Impact of EOUs
EOUs or an indication of use adds value to the packages. Hence, ROI reflects a proportional increase in the sales price if there is a seller-provided EOU document. With a combination of an 82% increased likelihood of a sale and a 28% price premium associated with an EOU, the expected value of a package with an EOU is 133% greater (2.33 times the price).
Life After Alice
The effect of the 2014 Alice decision has eased out, and the packages that belong to the Alice-affected technology continue to perform well. For the 2019-2021 market, Alice-related packages are 40% more likely to be sold than other packages.
Sellers
For a buyer, tracking the seller’s behavior, both in aggregate and individually, allows for operationalizing the buying activities. Knowing who is willing to sell and the type of assets available allows one to review listings faster and presents the opportunity to make a direct approach for a private deal.
The above holds true, especially for repeat sellers. These account for 54% of the transactions of packages in calendar years 2020 and 2021. Additionally, Figure 3 shows that the deals from operating companies increased from 63% to 70%. Considering that operating companies file most patents, this is not particularly surprising.
Figure 2: Distribution of seller type- 2020 and 2021 sales
Source: ROI Brokered Patent Market
Buyers
Just like we discussed, the importance seller tracking has for buyers, vice-versa is also vital. Keeping track of the same can give an edge over the competitors by knowing the status of their buying in the market.
Coming to the market analysis of sold packages, as per ROI, corporate buying has reduced by 53%, making room for package purchases to NPEs. The report not only suggests an increase in NPE buying but also observes the activity of defensive aggregators, which stands at 11% in the 2021 market.
Additionally, an analysis of the market from 1 Jan 2020 to 5 August 2021 has shown that 107 buyers have bought 178 packages. Of these, 29 have been repeated buyers.
With the increase in NPE buying, the next question is, how will the litigation trend look like in coming year?
Litigation
A large pool of litigation risk is present in the brokered patent. Any package listed on the market for sale obviously means the seller plans to monetize it. Buying a patent with no litigation potential will harm your portfolio even if bought at a price less than on the market.
The litigation risk is high for the sold packages, which is almost 19% and almost doubles to 40% if sold to an NPE.
Full Market Size
The ROI report predicts the 2021 market size to be $166 million, which has decreased from $197 million in 2020. ROI has utilized a new methodology to reach these numbers; hence, they vary from the previous report.
Opportunities, insights, and reflections
“The patent market is maturing.” quotes Samuel L Jackson.
What this denotes is that now more and more regular buyers, sellers, and brokers are aware of a reasonable deal and can close it successfully. As an added benefit, in-house attorneys have often used the market to buy and sell patents to strengthen their business strategies.
The situation could be improved since some sellers cannot justify their aspirational asking prices despite the experienced players being aware of the fluctuations in the deals. The same is true for buyers relying solely on their last deal to justify their present buying cost.
As the market keeps baffling us with its trends, transparency is the best practice to ensure efficient and more-data driven decisions.
How can GreyB help?
Entering the patent market as a buyer or a seller without being prepared for the present scenario can take you aback and cause serious loss. Studying the Brokered Patent Market Report summary can be a blueprint of essential decisions you might take on entering the market.
Additionally, finding the TRUE value of your patents or patents you might plan to buy is a good practice, and that is where GreyB comes into the picture.
Over the years, our team has acquired technical and manual skills to deliver the best service to our clients. These include
- Patent portfolio analysis and smart planning in case of a licensing demand or lawsuit from an NPE;
- Deeper analysis of competitors’ and the general ecosystem’s licensing and sales activities;
- Bifurcating patent assets and identifying gold ones to sell; (Sometimes identifying good patents and keeping those rather than abandoning them is the key task, read more);
- Curating a list of viable sellers and buyers; (Check out our list of patent brokers and marketplaces to buy and sell patents)
- Filtering through patents and identifying important ones, focusing on their claims. This is vital as it allows buyers to focus on the most important parts of a package first; and
- Developing evidence of use (EOU) materials. (Read our documented thoughts on what makes good EOUs here and here)
Get in touch to make sure you know the value of the patents you hold or plan to acquire.
Authored By: Annie Sharma, Marketing Team
