Structuring Patent Transactions

Many patent sales are relatively simple transactions: a transfer of patent rights in return for a cash payment. Often, this limited transaction scope is best for both buyer and seller. However, in other cases, patent sales can be used to structure a transaction with wider benefit to both seller and buyer. Here we offer some suggestions for broadening the transaction scope.

Patent Sales Are a Good Opportunity To Secure Additional Patent Licenses

Additional Patent Licenses

Consider licensing some patents in addition to the patents being sold. The seller can grant a license to additional patents to increase the transaction value. The buyer can grant a license to some of its patents to reduce the price of the sale transaction. Often, patent licensing negotiations are long and tortuous, thus incurring a high transaction cost. However, in our experience, adding patent licenses to a patent sale transaction can be a quick negotiation. If the buyer and seller operate in different industries or in different parts of the value chain, there may be limited impact on the business from these additional licenses, making the negotiations especially easy.

Including Product Sales Gives Line-Of-Business Units A Stake In The Transaction

Product Sales

Consider selling product together with the patents. In one of our brokered transactions, the patent seller was an existing supplier of components to the patent buyer. As part of the transaction, the buyer also agreed to purchase a large quantity of components from the seller over a period of several years. Given that this was a highly competitive industry, the sale of these products greatly benefited the seller.

Leverage Patent Transactions For Strategic Gains

Strategic Alliances

Consider forming a strategic alliance between the two parties. Startup companies often need to buy patents to strengthen their portfolios but do not have a lot of cash. They may offer equity in their company as payment for the patents. Alternatively, one party to the transaction can gain manufacturing, distribution, marketing, or sales channels from the other party. A patent transaction can also be the catalyst for forming a broader research and development relationship.

Think Broadly

When structuring a patent transaction, intellectual property professionals often only consider intellectual property rights. However, by looking at the broader business context, patents can be leveraged for a much greater strategic advantage. This can be highly rewarding for both patent sellers and buyers.