Why Patent Attorneys should talk to Corporate Finance (and why Finance should listen)

Attention patent attorneys- if you could show your clients an extra $5 or $10 million in ‘found money’, would that be helpful? It’s easy to find and odds are that you helped your client in making it. I’m talking about patents of course. The question is- now that you’ve found it how do you get to the cash that’s in it? There are a few ways to go about it- most of them are hard but one is fairly easy. You are probably familiar with hard paths to patent cash- out-licensing, selling non essential assets or litigation. These ways are hard because finding the parties to complete the deals is hard or in the case of litigation expensive to initiate. Plus these deals are not a sure thing as to whether you can net out the cash after all your hard work and that can make clients very unhappy.

The easier way is monetization. Monetization is recapitalizing patents based on how useful they are in making money for the client. Your clients understand where they use patents for their own businesses, so there is good and reliable information that is easy to obtain and calculates the patent cash value. The counterparties to monetization deals are banks or investors that are eager to invest in your clients’ continuing successful use of those same patents. They are on your client’s side which can’t always be said about prospective licensees and certainly is never the case with infringers.

With monetization, each patent can easily represent US $1-5 million in cash value to the client’s business so even a portfolio of four or five patents can have US$ 4-25 million in ‘found money’ value. Decisions to monetize most often depend on decision makers in your client’s corporate finance department. This is where Carthage Intellectual Capital can help patent lawyers and their firms to close the deal with corporate finance on the ‘found money’ opportunities in patent portfolios. We know the translation values of invention claims and cash. And corporate finance can control the timing and quantity of patent monetization transactions to their maximum benefit. As patent attorneys, you will know where the future transactions will come from. I’m talking about the future patent estate of course. It’s a lot easier to get paid on new patent dockets with the found money of previous patents. Learn more at www.carthageic.com.

It’s a Demand World- Really??

Everyone is talking about the need for consumer demand to pull the global economy out of the tank. On this there even appears to be political consensus.  The only issues are taxes and government spending. Some want more taxes and more government spending to fund the demand that the unemployed consumers can’t afford. Others want to cut taxes and government spending to leave money in the hands of the remaining employed and encourage them to purchase more things that they don’t need. Is it me, or are the current strategies just a choice of economic suicide by poison or drowning?

As a capitalist I believe in supply and demand, free markets, and rule of law. So if demand isn’t working maybe it’s time to check out the supply source. Is there a demand for better means to supply our markets? You bet- it’s called innovation. And the asset that fuels innovation is intellectual property. So far, it is untouched by the credit markets. More importantly, it is already an existing group of assets.

Innovation is about doing something better. It can be a bucket, a light bulb, a car, solar collector or a shoe.  Or it can be a better way to furnish an existing good or service. Innovation builds the demand for new means to supply the innovation. Intellectual property like patents is a first means to build the structure needed to furnish the new means of supply. The investment in structure is usually a multiple of the existing market. The key is to access secure asset based credit to build the new means.  Let me again suggest- patents. They are an under recognized and non-capitalized resource representing trillions of dollars in assets. We can access this credit reservoir through the sale and lease mechanics of real property. It’s called the sale license-back of intellectual property. This is not phony demand or stupid consumerism. It’s time to stop being crazy and start being innovative. Really.

Sale/License-back; A new source of capital for smaller companies

If you have been following our blog, you will have noticed that for the last several weeks we have been introducing a new transaction type–sale/license-back of intellectual property. We’ve concentrated on the property type more than the transaction, which is really quite familiar in another context.

Everyone is familiar with a sale/lease-back of real estate or equipment or software–a company sells property in return for cash and executes a lease (or for software, a license). The lease gives the company continued use of the property in return for periodic payments of rent.

As a property class, intellectual property is treated a little differently than a tangible asset when it comes to valuation and legal status. However, a sale/license-back of patents, trademarks, or copyrights is really just the sale/lease-back we all understand for a new class of property.

Carthage Intellectual Capital Management has introduced this new business process. We are looking for deals now. If your company has intellectual property and could benefit from new capital, we’re at info@carthageic.com.

 

 

Cash without Benefits

There is more cash sitting on balance sheets or hiding in mattresses than ever before. What is it waiting for? Not to get screwed out of it again is one answer. Another is what is there worth investing in that can’t get screwed up? As to getting screwed, that’s always part of the risk premium we pay on cash and being careful with who we deal with. But I’d like to suggest one investment that will be hard to screw up and capable of making a very secure return. That investment is intellectual property or IP for short.

We don’t buy or invest in IP today for three reasons. First is, most investors, though they have heard of IP, don’t know what it is, where it comes from or how it is made. The second reason is that we don’t value IP when we make it and we don’t record it on our balance sheets. So even if you do have IP, you treat it as if it were worth nothing. The third reason is that even for those few who know what IP is and what it’s worth, they don’t have any notion of how to turn into an investment without getting screwed.

Capitalism is wonderful for cash in that it can finance the means of supply and the price of demand. Modern capitalism has been particularly good at chasing down price differentials in the cost of supply amongst developing economies to supply the demand of developed countries. But it does involve screwing the wage base of developed economies out of jobs to pay less to workers in the LDC’s. And that’s OK if developed countries keep developing. That is what IP does. It makes IP a unique feature of first world economies.

Unfortunately, the financial sector has been too busy out-placing the current supply side of the current first world economies to learn how to invest in new development. To do that you need to understand investing in IP. As a result not understanding IP as an investment asset, financiers have artificially down sized the pool of credible investments available to investors. When the pool of available investments is limited, then speculation in a perceived finite asset pool is the only way to make money out of assets. This is how financial depressions start. And we are still there.

For those of you yearning to become first world investors here are three things to know. First- IP is patents, trademarks, copyrights and secrets. Concentrate on the first three and you will become rich. Second- you can value IP in use today to know its price. Third- you need to know that Carthage intellectual Capital Management has the people, experience and IP to make your IP a real and ‘screw-proof’ investment that is the future. Learn more at info@carthageic.com.