Wednesday, 14 January 2009

Has the Great Patent Fire-Sale started?

IP Finance thanks Richard Gallafent for drawing its attention to this item on Bloomberg by Howard Mustoe, "Cash-Strapped Technology Small-Caps Hold Patent Sales (Update 1)". This feature describes how small-cap technology companies, struggling to raise enough money to survive amid the credit crisis, are selling their prized patents to stay in business. Ocean Tomo's Andrew Ramer is quoted as saying:

"They can essentially raise cash without diluting existing investors. Selling their patents and keeping a license back allows companies to have their cake and eat it, too”.
Numerous other expert opinions are cited, including that of seasoned IP lawyer Marija Danilunas (Dewey & LeBoeuf LLP), who warns:
“Watch out for venture capital buying the patents of companies that have gone bankrupt. They’ll take advantage of bargains”.
This blogger believes that the best way to stop venture capitalists buying bargain-basement patents from bankrupt businesses is to bid against them and raise the fire sale price -- but market forces dictate that this will not happen unless potential bidders (which presumably include the bankrupt business's competitors) reckon they can make more from these patents than it costs to buy them, while the elimination of a competitor may itself correspond to the elimination of any good reason to bid high for the deceased firm's IP.

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