New M&A Service Offerings from Genaesis

How could Yahoo's patents be worth $4b?

Meet the Nostradamus of IP social media litigation (it's a niche specialty if there ever was one). http://t.co/WkjGrCBu

— Axiom (@Axiom_Law) March 15, 2012

Four years later - I appreciate the compliment, but still think they were only half right.

Understanding the dynamics and patent issues for these IP rich companies is definitely a niche, and though I worked pretty hard to see where the value might be in this complex data for investors, the Nostradamus part was a lot more logic than anything else.

Back in 2011-2012 there was real uncertainty in how these patent wars would play out. When I first looked at the patent data, it was clear that there was real value in the Yahoo patent portfolio as it applied to Facebook. Connecting the dots that Yahoo would sue Facebook as soon as the social network filed to go public, just like Yahoo sued Google when that company IPO'd, seemed like a reasonable extension, which turned out to be correct.

Today Yahoo is still looking to monetize their patent portfolio and some fairly large numbers are being reported as to their valuation. I had the opportunity to briefly walk through this yesterday on CBS Radio's KNX Money Hour with Frank Mottek and Charles Feldman:




There were some connection issues at the end and we cut a bit short, but I wanted to lay out my thinking as to how to realistically value these assets.

At a high level: the Yahoo patent portfolio has vastly different values, depending on the buyer. 

For example, another content company in a similar space to Yahoo, like Twitter or even a news organization, would not see the patents as a major deal driver and likely assign very little value to the portfolio - though the innovations that they protect and have developed at Yahoo could be interesting. Those companies are obviously looking to grow reach, add content, drive impressions, etc. and would value the operating business along those more traditional metrics.

A purely financial buyer like Intellectual Ventures looking to enforce or more strategically license those patents, would assign significantly more value to the patent portfolio than a content company, but would likely offer far less than the $1.1B AOL received in their portfolio transaction. From a pure financial buyers perspective, there are three reasons that these valuations are depressed: the US has made IP much more difficult to enforce - which hurts patent owners and negatively impacts valuations, there is significant transition going on within these specialty IP shops adjusting to the market's "new normal" and so a lot of smart money is on the sideline, and Yahoo may have already licensed much of the portfolio to the most valuable targets, especially Facebook.

The most interesting acquirer could be companies like Comcast, Verizon, Cox, or AT&T, all of whom are starting to compete with new products like Google Fi or Google Fiber. If the Yahoo assets are substantially free from Google encumbrances, then a firm like Verizon could very reasonably assign $1b or more in value because of the applicability of the assets to Google. Verizon especially has been growing their patent portfolio at a rapid rate, and should have significant interest in assets that could meaningfully impact Google with respect to direct licensing, or forcing them to develop alternative technical approaches which could slow their growth. Over the last 5 years, there has been no company better at adjusting both their own IP position as well as the global IP environment to their favor than Google. Since Yahoo likely licensed only a portion of their portfolio to Google, and since those companies are looking for new advantages against what could become an important competitor, this seems like the most obvious fit.

That, to me, this is why companies like Verizon or Comcast would make the most sense. They have divisions which would have significant value for the IP, and divisions which would have real value for the content assets. It would make sense strategically and financially.

There are a number of assumptions in that analysis, but this should help connect the dots a bit. A big part of why I've founded Genaesis was to help companies and investors understand how to make the most of intangible assets in a credible and reasonable way. Hopefully this Yahoo analysis seems a bit more logical and lot less fortune-telling.

Erin-Michael Gill, CEO, Genaesis

Acting on House of Cards Season 4

Last summer I took some vacation time and got cast as "Senior White House Staff" on Season 4 of the Netflix series, "House of Cards". I had done some acting in high school and went to the open casting call with about 5,000 other hopefuls in Annapolis - though my day job more than prepared me to look concerned talking into a phone as the camera was panning to Kevin Spacey:

I ended up in about half this seasons episodes and had an incredible experience with some very talented professionals. Great times.

Asked by the White House to Present "The Value of IP in Attracting Financing" at APEC

Last year, I was invited by the White House Office of the US Trade Representative to present at the Third APEC Senior Officials Meeting (SOM3),  "Workshop on the Role of Trade Secrets for Micro, Small and Medium Enterprises in Attracting Financing and Integrating into Global Supply Chains" Cebu, Philippines 22 August 2015.

APEC Intellectual Property Experts Group Meeting room, Cebu, Philippines

The meeting went well, and it felt like the the participating countries had a genuine desire to move the ball forward on enabling global business growth. The event almost had an Olympic feel - to the point that when my flight was delayed to a 1 AM arrival from Tokyo, the Philippine hosts still had the welcome staff of about about 50 waiting and a shuttle van with police escorts (front and back) ready and waiting as well.

Police Escort From Airport to Hotel in Cebu, Philippines

As for the meeting itself, there is a lot of complexity in these topics, but there are three fundamental points which - in my experience - are critical to creating favorable business environments, and seemed to make sense to the representatives:

I was able to speak to each of those points for about an hour and got some thoughtful follow-up questions from a number of the delegates. Helping to inform and advise these Asia Pacific economies on their IP policies, in a way that is going to help both foreign and domestic business grow, is a great privilege and one which hopefully will show meaningful results in the near term. 

Speaking at the US-China Innovation Dialogue

The final outcomes aren't public yet, but I thought this would be okay to share - I was invited by the White House to speak to the leaders of the United States and China’s innovation policies at the “6th US-China Innovation Dialogue” held at the US State Department on June 22. The meeting was co-chaired by China’s Ministry of Science and Technology head Minister Wan Gang, and The White House Office and Science and Technology Director Dr. John Holdren (both pictured having a quiet moment before the sessions began). I advocated for stronger IP rights as a way to reduce outside investor risk and enable a more diverse, innovation centric, economic base.

I won't characterize the discussions other than to say that it was an impressive group of senior representatives from both the US and China, and in a very real way, the right people were brought together. Beijing sent leaders from China's Ministry of Finance, the State Intellectual Property Office, the National Development and Reform Commission, and the Ministry of Industry and Information Technology, as well as the Ministry of Science and Technology, while the US had representatives from the White House Office of Science and Technology Policy, U.S. Treasury Department, U.S. Department of State, Office of the U.S. Trade Representative, U.S. Department of Commerce, and the U.S. Patent and Trademark Office.

Minister Wan and Director Holdren's leadership of the proceedings truly fostered a collaborative and constructive dialogue. Also noteworthy was Deputy Chief of Mission and Minister of the Chinese Embassy to the US, Wu Xi (pictured far right) who gave a beautiful and moving opening statement about how innovation and a culture of innovation can bring nations together.

I'm looking forward to seeing the outcomes of this meeting, and hope it can be a catalyst for more positive collaborations in the future. 

Launching Synthos Technologies

Will have much more to come, but wanted to post a quick link to our introduction video...

Interviewed by Fox Business

Helping the Markets Understand BlackBerry

This week I helped Bloomberg News understand some of the BlackBerry dynamics a bit better. Unfortunately, BBRY is down about 2% since this went out, but it was important for investors to understand 1) that the extent to which BlackBerry's patent portfolio is licensed is key to generating a transaction value, 2) the portfolio is both large and young and 3) Apple has been citing this portfolio at a significant rate. A few high points from the story: 

"(V)alue may be lower if BlackBerry has already licensed much of its technology, said Erin-Michael Gill, managing director of MDB Capital. Widely licensed patents have less use for new deals or court challenges.

“If that’s the case, the financial buyers no longer have much interest -- and the strategics don’t need them,” Gill said. “Then it would go from multibillion dollars to a trivial amount, probably just a few hundred (million).” 

Patents last 20 years from the date of their application, making BlackBerry’s 3.4-year average appealing, Gill said. 

“There’s 15-plus years of useful life to this portfolio, which is significant,” he said. “Anybody that cares about Apple is going to care about this portfolio -- including Apple.” 

Since similar portfolios generate more than $1 billion a year, BlackBerry should be able to average at least $100 million in licensing revenue annually, Gill said.

“Even if strategic buyers like Apple, Google or Samsung don’t have the same enthusiasm that they might have had two years ago, the floor value a financial buyer would put on the assets means it’s still going to go for a meaningful amount,” he said.

They ended up turning the analysis into a short "Global Outlook," segment with Bloomberg's Mia Saini on Bloomberg Television's "On The Move Asia." (Source: Bloomberg)

Explaining Patent Trolls to a Wall Street Audience

Asked to detail the President’s patent troll initiatives to an investor focused viewership.

Recent segment on Bloomberg TV

Discussing the Samsung-Apple patent wars with Sara Eisen and Erik Schatzker on Bloomberg Television's "Market Makers." (Source: Bloomberg)

DoE Panel on IP Strategy

My firm, MDB Capital, is a sponsor of the Department of Energy's ARPA-E Energy Innovation Summit in Washington DC. Earlier this year I was asked to speak on a panel with a few experts about IP issues and strategy. Also presenting: 

• Dr. Robert D. Atkinson, President, Information Technology and Innovation Foundation, 
• Sarah Harris, Senior Vice President and Deputy General Counsel, Intellectual Property, AOL,
• Brian P. O’Shaughnessy, Shareholder, RatnerPrestia
• Dr. David Parekh, Vice President, Research and Director, United Technologies Research Center

A bit basic for some, but might still be interesting if you have the time. 

 
Get Smart about IP: Pros, Cons and Costs of Your Patent Strategy from DOE ARPA-E on Vimeo.

Discussing Samsung IP Strategy On Bloomberg Asia TV's "First Up"

The Washington Post picked up the related long form story from Bloomberg, where I was quoted about how the the endgame for Samsung could well be designing around Apple's portfolio. This is supported by the fact that Apple is Samsung's largest components customer, and an injunction could cost Samsung north of $8B in revenue per year; Samsung has said that it will not be negotiating with Apple, as a licensing agreement similar to HTC could cost over $200B over the life of the agreement; and the fact that the ITC has already stated that the "Samsung products that were designed around Apple patents weren't in violation." At least on the face of it, while winning an injunction would provide game changing leverage to Samsung, extending out these proceedings seems to be an additional goal, in and of itself.


Play

On Market Makers this Morning

Great discussion this morning on Bloomberg TV. At 3:41, I mentioned it's likely that the case might get thrown out. A couple hours later the case was dismissed with prejudice: (http://allthingsd.com/20121105/google-says-wisconsin-court-throws-out-apple-suit-versus-motorola/?mod=tweet)

Interviewed by Public Radio on SurfCast v. Microsoft

On Bloomberg TV's "Market Makers" discussing Apple innovation

Interview with BloombergTV on tech IP strategy and execution

Interview w/ TechCrunch TV on Predicting Facebook-Yahoo IP Issues

Negotiating Patent Purchase Agreements

Randomly saw this in my twitter feed. Actually useful overview:

Invention extraction made simple

Hello everyone. 

Just posted the below to twitter regarding how to grow a companies IP, thought it was useful and wanted to republish here: 

Stay simple - focus on the 5 core stages in invention extraction: brainstorm, synthesize, prioritize, expand, protect.

Brainstorm w/ individuals or groups, look for both whitespace ideas and current development projects. Critical point - ID the right problems

Synthesize ideas by generalizing and grouping to focused themes. Remove the unnecessary. Ask if X is a specific example of Y. Find the Y's.

To prioritize ideas 1) set the criteria 2) choose a ranking schema 3) assemble a diverse ranking team 4) rank in private 5) discuss together

To expand inventions - take every descriptor in the synthesized idea, and treat it as an axis about which an invention can be developed.

To protect ideas, understand the strategic landscape from a business, tech, and legal perspective, then apply the best IP tool (patent, etc)

Hope this is useful. 

Best,

Erin-Michael

Good reporting

(Reporter Sara-Jayne Adams of the UK's Intellectual Asset Management and Erin-Michael Gill)

Sara-Jane Adams has pulled together a number of IP professionals for this months cover story (registration required) on fighting back against the IP backlash, especially with respect to international perceptions of IP. Interesting topic and bit of a surprising read.

Also, I recently started Twittering (http://twitter.com/gillip_com). While it is not exactly an outlet for the kind of in depth IP journalism one might find in IAM, it is a good place to park small interesting insights from time to time. Here's my latest tweet:

gillip_comNote the portfolio license option - MSFT offered all YHOO's IP at a discount b/c of search deal. Good value for both -http://bit.ly/13yQ4m

The longer point is that the IP provisions in the Yahoo search deal could seed a broader collaboration with Microsoft. Allowing MSFT to incorporate YHOO technology - even at a discount - would at least be new revenue into YHOO, and could be a valuable test drive of sorts leading to something far more significant down the road.

Anyway, if you would like to follow my feed, feel free.

Cheers,

e^(ip)