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IP, Patent

When Is A Billion Dollar Patent Not Worth A Billion Dollars?

After several months, still no deal reached in the Nortel patent auction, which reported a flurry of activity back in September of last year.  This comes despite the fact that the portfolio was reportedly worth $1 Billion.  Now bidding has stalled, according to Joff Wild at IAM Magazine, and there might be an auction in March.  With interest from industry players like Google and RIM, and aggregators like RPX (bidding on behalf of Apple), how could this sale not have happened?

It’s possible that the value just isn’t there, but more likely the difficulty lies in splitting the portfolio up. As Joff points out, “[s]plitting it up into tranches gives you a better chance of maximising your return.”  This is no small task, but just as you might make more out of selling a vintage comic collection one piece at a time, than if you sold the whole bundle to a second-hand store, Nortel creditors may have to wait (even longer) to see their return under this model.

Granted, they won’t have to wait as long (and won’t realize as much value) as they would if they were to just hire a monetization advisor to help monetize the portfolio directly.  This process also takes time, but if the “billion dollar” value placed on the Nortel patents reflects the aggregate amount one would realize from licensing the portfolio, then no bidder would actually pay anywhere close to a billion dollars. Pawn brokers that buy silver coins for $25 and sell them at the same price don’t stay in business very long.

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Discussion

4 thoughts on “When Is A Billion Dollar Patent Not Worth A Billion Dollars?

  1. I agree Patrick – there is simply no way to monetize the portfolio to that extent with the remaining life of the patents and the amount of time and resources necessary to convert it into an offensive tool. It may have value on the defensive front for someone facing bigger exposure from a larger IP predator, but it would impossible to justify that kind of valuation unless you were a Chinese cellphone maker born yesterday and needed protection/leverage against… EVERYONE.

    Posted by JNG | February 16, 2011, 10:11 am
    • And in that case, where would you get a billion dollars?

      Thanks for the comment. I’ve found that the only thing that can get a patent seller with unreasonable expectations down to a more realistic number is time….

      Posted by Patrick | February 18, 2011, 11:59 am

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