What is Patent Monetization?

    "Patent Monetization" is the term used when a corporation or person sells or otherwise obtains value for patent rights by obtaining value for these rights from another party.  Although patent rights have been bought and sold throughout the history of the patent system, patent monetization as a widely recognized business model has emerged only in recent years.  Specifically, forward-thinking corporations and entrepreneurs increasingly understand that much unrealized value exists in intellectual property, of which patent rights comprise the most familiar type.
    New participants in the patent monetization game may be somewhat surprised that patents are subject to purchase and sale on unregulated markets.  While a patent may seem to some to be a special form of property requiring a lawyers and financial experts, this is not true.  A patent can be sold outright, licensed or traded like most other forms of property.  In truth, selling, licensing or trading a patent does not require specialized skill sets over those commonly held by business-focused IP professional.  Rather, the hardest part creating revenue from your patent rights is finding the organization or individual willing to pay you the most money for your patent rights.                                                
        
What are the Most Common Ways Today for a Patent Owner to Sell Their Patent Rights?

    To date, most patents are sold through patent brokers or at auction, however, a growing number of corporations seek to acquire patent rights to acquire proprietary new products or technologies without also expending effort and expense to develop comparable technology in-house.  

   Patent Brokers
    Patent brokers maintain relationships with institutions and entities that aggregate patents and patent portfolios, such as Intellectual Ventures, RPX and Allied Security Trust.  Brokers also facilitate patent sales to so-called "non-practicing entities" (which are sometimes referred to pejoratively as "patent trolls").  When patent owners engage a patent broker, they are effectively paying for the broker's credibility with the final patent buyer.  That is, most patent buyers do not have the "bandwidth" to examine each potential patent deal that comes in their door.  Patent brokers thus serve as the filter and are expected to bring only the most promising patent rights to the final buyer for consideration.
    Patent brokers no doubt serve a critical function in the patent monetization process.  However, since they primarily serve as intermediaries for patent aggregators and NPE's, patent brokers will be interested only in those technologies sought by these ultimate buyers.  Patent brokers thus will not be an option for a significant number of patent owners whose rights do not fall into the categories of technologies not currently sought by patent aggregators and NPE's. 
    Additionally, patent brokers typically do not have the resources to shop patent rights outside of their immediate networks of patent aggregators and NPE's.  Patent owners that engage a patent broker should therefore not expect that their patent rights will necessarily be offered widely for sale.  As a result, the price obtained from sale of patent rights through a broker may not represent the highest value possible.  Patent brokers should be viewed as a good source for monetizing patent rights in particular categories of subject matters where the monetization event is desired in a fairly short time frame.  
    Patent owners should also note that patent brokers typically obtain up to 25 % of the final selling price, which is paid out of the patent owner's proceeds.  
    Lastly, although the vast majority of patent brokers are no doubt ethical and seek to maintain the highest value possible within their network of patent buyers so as to maximize their final commission, patent owners must recognize that patent brokers comprise a currently unregulated class of professionals.  Patent owners who seek to engage a patent broker should thus take great care to conduct background checks and to obtain referrals from reputable sources.  

   Auctions
    Patent auctions have emerged in recent years as an avenue for patent owners to sell unwanted patent rights.  Ocean Tomo is a pioneer in this new model.  However, only a small number of patents in comparison to the number actually available for sale are accepted by Ocean Tomo for its twice yearly auction.  Moreover, Ocean Tomo typically keeps the categories of subject matter of patents accepted into its auctions to within certain classes identified as readily saleable.  The fact that Ocean Tomo serves as the gatekeeper for those seeking to auction their patent rights poses a significant obstacle for those wishing to monetize their patents using this model.  
    Also, buyers at patent auctions tend to comprise entities that seek to acquire patents for enforcement purposes, that is, to sue a company that is using the patented technology.  Other usual attendees at auctions are sophisticated companies seeking to purchase patented technology to augment their existing portfolios.  For owners of technology that does not fit into either of these categories, patent auctions do not serve as a viable option.

   Corporate Patent Buyers
    Corporations traditionally developed new products and technology in their own research and development facilities.  However, in recent years, there has been an increasing recognition that product and technology development costs could be decreased substantially by searching outside of the corporation for acquirable technologies.  In addition to cost reduction, external sourcing can markedly decrease time to market.  Many corporations have therefore recently begun looking outside of their corporate confines to acquire patented product and technology ideas.
    Unfortunately, many corporations that desire to acquire technology do not currently possess the infrastructure to search for, vet and select appropriate patented products and technology for in-sourcing.  Instead, these corporations must rely on trusted relationships to understand their product and technology needs and to bring promising candidates for acquisition to their attention.  Put simply, few patent owners will be able to gain the attention of potential corporate buyers for their patent rights without first associating with someone who has the ear and the trust of the corporation's decision-makers.  

A New Way to Create Value from Your Patent Rights: A "Patent Matchmaker"
    Patent owners seeking to monetize their patent rights may find the challenges and uncertainties facing them in learning about and executing on patent monetization to a daunting undertaking.  These patent owners likely to not currently possess the knowledge and infrastructure to know where to begin the process of identifying suitable patents for monetizing and then successfully capturing maximum value from these patent rights.  
    To allow these patent owners to capture value from their unwanted or under-utilized patent rights, a new business model has emerged--that of a patent monetization facilitator or "patent matchmaker."  Just as a traditional matchmaker introduces persons for the purposes of making a personal relationship, a patent monetization facilitator serves to connect patent owners with potential buyers.  Unlike brokers, patent monetization facilitators work for the patent owner and are motivated to ensure that the patent rights are sold for the highest value available today.  The final sale may be handled through a patent broker, however, the patent rights end up in the hands of the patent broker only when it is agreed that the broker represents the highest value attainable for the patent rights in the current market.
    Patent monetization facilitators are a new addition to the emerging marketplace for patents.  However, given the increased desire of patent owners to generate revenue from patent rights, it is expected that facilitation represents a necessary addition to the world of patent monetization.