By Bryan K. Wheelock, Principal
When a technology business fails, and the flesh of the going concern is stripped away, often the only thing that remains is a paper skeleton of potentially valuable patents. In 2011, Nortel Networks’ patent portfolio of wireless technology patents sold for $4.5 billion. A few years later in 2013, Kodak’s portfolio of digital imaging patents brought in $525 million. Now, Yahoo’s patent portfolio of nearly 3,000 patents is on the block, and experts estimate that it could sell for $1 billion. While “expert” valuations are not always accurate, (Nortel’s portfolio was initially valued at $1 billion, and Kodak’s portfolio was initially valued at $2.2-2.6 million; see http://spectrum.ieee.org/at-work/innovation/the-lowballing-of-kodaks-patent-portfolio) the estimates for Yahoo’s portfolio work out to more than $300,000 per patent, well in excess of the cost of acquisition.
According to the 2015 AIPLA economic survey, the median cost of preparing a patent application on a complex electrical or computer related invention in Yahoo’s Sunnyvale, California, location is $12,500, the median cost of responding to typical office action issued by the Patent Office is $3,500, and the cost of issuing the patent is about $750 (see AIPLA Report of the Economic Survey, Q32I, Pp. I-85 – 87). Together with the typical government filing fee of $1600 and issue fee of $960, each issued patent represents an investment of approximately $20,000 (see 37 CFR 1.16(a), 1.16(k), and 1.16(o) and 37 CFR 1.18(a)(1)). Where does the additional value come from? From the invention, of course.