Patent Law Practice Center

Maintaining low-quality patents isn’t a winning strategy

Getting whatever you can sneak by a patent examiner probably never was a wise strategy, but it is true that there was a time in the industry when patents were viewed as a numbers game. Once upon a time, the patent business viewed patent acquisition, whether by organic growth or outside purchase, as aking to a corporate version of global thermonuclear war. If you want to succeed, the thinking went, you needed to have more warheads (i.e., patents) than your enemies. At times, the quality of those patent assets were considered at best secondary, if not completely irrelevant.

While the size of a patent portfolio isn’t completely irrelevant, it is worse than useless to have a portfolio full of low-quality patents. Not only is there a growing cost associated with obtaining patents in the first place, but there is also a growing cost of keeping patents alive. The seldom told story in the popular press is that many patents do not enjoy the full patent term because there are three separate and increasing maintenance fee payments that must be made to keep the patent alive for its full term. Specifically, maintenance fees are due at 3.5, 7.5 and 11.5 years after a patent has issued. For a large entity, these fees are $1,600 for the first maintenance fee payment, $3,600 for the second, and $7,400 for the third.

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Lenovo Buys Mobile Patents for $100 Million from Unwired Planet

Unwired Planet, Inc. (NASDAQ:UPIP) and Lenovo (HKSE: 992) recently announced that Lenovo has agreed to purchase a portfolio of patents from Unwired Planet and to take a term-based license to Unwired Planet’s patent portfolio. The aggregate consideration for the combined transaction is $100 million payable in cash. The transaction is expected to close by the middle of April.

Under the terms of the agreement, Lenovo is now licensed under Unwired Planet’s intellectual property portfolio, which covers standard essential, implementation, and application layer technology for mobile devices. Following the transaction, Unwired Planet’s portfolio will consist of approximately 2,500 issued and pending US and foreign patents. The patent purchase consists of 21 patent families owned by Unwired Planet, including patents for 3G and LTE mobile technologies and other important mobility patents.

“We are pleased to have reached an agreement with one of the world’s leading global technology companies,” said Philip Vachon, Chairman of Unwired Planet’s Board of Directors and head of its Intellectual Property Committee. “We wish Lenovo continued success going forward.”

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Kodak Closes $848 Million Financing Deal

Several weeks ago, Kodak announced that it closed its previously announced $848 million financing with members of the Steering Committee of the Second Lien Noteholders and other holders of Kodak’s Senior Secured Notes.

Under this new financing agreement, Kodak borrowed a total principal amount of approximately $473 million and converted $375 million in Senior Secured Notes into loans. The proceeds from this financing, together with proceeds from the much discussed sale of the Kodak imaging patent portfolio, will be used to repay the term loans outstanding under Kodak’s existing debtor-in-possession credit agreement, make an adequate protection payment to holders of the Senior Secured Notes, and support ongoing business activities.

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Facebook Continues to Load Its Patent Arsenal

The patent wars are all the rage amongst tech companies these days. Not too long ago, Microsoft Corp. made news when announcing it purchased approximately 925 patents from AOL, Inc. for an estimated $1.1 billion dollars. The commentary regarding that purchase was equally focused on the impressive sale price for the amount of patents purchased as it was on the fact that tech companies are looking twice at their patent portfolios as litigation and licensing tools.

The latest development is that Facebook, who is currently in a patent infringement battle with Yahoo, recently purchased 650 of the AOL patents from Microsoft for an estimated $550 million dollars. This recent acquisition comes just one month after Facebook purchased 750 patents from IBM. (more…)

Is IP Management Part of a Board’s Due Diligence?

This week’s PLI seminar, IP Driven M&A, highlighted the important role intellectual property plays in determining the value of a company or in strategizing a merger or acquisition. The intangibility of IP is no longer viewed as a hindrance to its monetization, thus it is now treated like any other corporate asset. If purchasers are now recognizing IP as a part of their strategic due diligence, it makes sense that a major AOL shareholder is bringing IP mismanagement issues to the attention of their company’s board of directors.

According to news reports, AOL investor, Starboard Value LP, filed a request to replace five members of  the company’s board of directors based on the belief that AOL’s patent portfolio has “gone unrecognized and underutilized”, thus causing Starboard to call for replacements on the board of directors because they feel “increasingly uncomfortable with the direction of the Company and the leadership of the Board.” Leaves one wondering if IP mismanagement is a breach of fiduciary duty on the directors’ part, such that their removal from the Board is the best remedy for the benefit of the shareholders. (more…)