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Phone titans’ patents become treasure in selloffs

First Published      Last Updated Jul 11 2014 10:52 am

Washington - Squeezed out of the mobile-phone market by trendier offerings, Nokia, Ericsson and other one-time leaders are selling chunks of their patent portfolios, often to the litigious licensing firms the industry has derided.

The companies are being driven by their need for greater profit, and are finding that with changing business models, tough economics and investor pressure, there is little reason to hold on to patents for computer memory, wireless infrastructure and other technology that can still fetch a good price.

"There's a frenzy to try to monetize" these patent portfolios, said Nick Rodelli, a senior analyst at CFRA, a New York-based-based forensic accounting and legal research firm.

Ericsson, Panasonic and Hewlett-Packard combined sold almost 5,000 patents in the first quarter, according to Innography Inc., an Austin, Texas-based maker of software to analyze patent portfolios. Nokia said Monday it had sold a group of phone patents to licensing company Wi-Lan Inc.

Picking up the pieces are licensing firms whose sole mission is to buy castoff patents and then demand royalties from other companies in a strategy to make a profit.

"There's a whole industry of buying and selling patents," said Innography Chief Executive Officer John Martin.

While historical data is difficult to come by since the vast majority of patent transactions aren't publicly disclosed, the general trend is accelerating, said Martin.

The reasons for selling are often basic economics.

Ericsson, which helped to define the mobile-phone market in the 1980s and 1990s, lost so much market share in the 2000s it refocused on networks and other technology. Once-dominant Nokia met a similar fate and is now reshaping itself after selling its unprofitable mobile-phone unit to Microsoft in April; Panasonic also is restructuring to end losses from televisions, semiconductors, mobile phones and circuit boards.

"They're under even tighter economic pressure, and say 'If they want to continue to innovating, we've got to go beyond just getting money from our products,'" said Joe Beyers, CEO of licensing firm Inventergy Global Inc. "Large companies are willing to open their portfolios to the right people."

He said his Campbell, California-based firm, has bought patents from Nokia, Panasonic and Huawei Technology Co.

Some investors want companies to do more with patents. In a May 14 letter to Sony Corp., Third Point's Daniel Loeb said one way Sony might increase profits is to "review its world- renowned intellectual property catalog to determine whether any of its patents might be monetized without harming business prospects."

Google and Apple, two of the most-sued companies, have been pushing Congress and the courts to curtail the practices of some licensing firms. Google this week said it created a program with Canon that could curb some future infringement claims.

Participating companies pledge that if they sell some of their patents, all members of the group automatically get a royalty-free license to them. The goal of the alliance, known as the License on Transfer Network, is to limit cash demands when a company sells patents to licensing firms.

For companies like Nokia and Huawei, it's a matter of getting some compensation for the billions of dollars spent on research, while not having to deal with the costs and hassle of licensing and litigation or the fees needed to keep a patent in force.

"We have never done these divestments as a proxy for litigation," Paul Melin, chief intellectual property officer for Espoo, Finland-based Nokia, said. "They are purely about monetizing our investments."

Patent sales are "the normal course of business" in the technology sector, said William Plummer, a spokesman for Huawei, China's biggest maker of phone-network equipment.

"We optimize and adjust our portfolio from time to time to serve our best business interests, including occasional divestiture of small numbers of patents from what is a rather huge patent portfolio," Plummer said.

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