1. Patent Valuation
2. Patent-Selling Process
3. Choosing a Patent Broker

Intellectual property brokers include patent experts who assist with sales by valuing the patent, analyzing its assets, creating a marketing and sales portfolio, finding potential buyers, and provide general guidance throughout the transfer process. Although most intellectual property (IP) brokers represent those selling patents, some brokers specialize in assisting buyers of IP.

When selling a patent, the brokerage firm will enter into a formal agreement with the patent owners. This agreement requires exclusive representation for your patent and includes details of the collaboration, compensation, and the term of the representation.

Most patent buyers are either non-practicing entities or operating companies. Some companies buy patents in areas outside their industry and are known as non-practicing entities (NPE). They tend to offer flexible payment arrangements that share risk with the seller while operating companies pay cash for a patent. A cash sale tends to be at a discounted price because the buyer is shouldering all the risk, whereas with a licensing agreement the risk remains with the original owner. 

Patent Valuation

The value of a patent portfolio depends on how many assets are in the portfolio, their dates of priority, specification and claims quality, the history of prosecution, and the number of citations both backward and forward. Single assets are more difficult to sell than multiple assets grouped together. However, it's difficult to price a portfolio realistically because of the lack of public pricing data and comparable sales.

Patents can fluctuate in value over time for many reasons, including infringement and relevant prior art findings that impact validity. Common factors include:

  • Whether someone is currently infringing on this patent and whether that infringement can be proven.
  • How much life is left in the patent.
  • Whether the key patents in the portfolio have open continuations.
  • What areas of technology are currently in demand.

Patent-Selling Process

The process of selling patents is similar to that of buying real estate. The broker prepares a sales package for the patent portfolio, then reaches out to potential buyers and provides details that market the assets available. Buyers who could potentially infringe on the patents receive information with details redacted.

Buyers who reach a purchase agreement for a patent have a formal patent purchase agreement (PPA) created to record the details of the sale. These contracts are often standard but are subject to independent legal review on the seller's behalf. Once all parties sign the contract, the funds and title go to the respective parties.

Individual owners of IP should avoid contacting potential buyers as they may infringe on the patent. Providing high-quality brokerage materials protects your assets and supports the value of the patent.

Patent holders must pay maintenance or issuance fees to protect their IP; otherwise, the patent will lapse. In some cases, however, the U.S. Patent and Trademark Office will reinstate the patent, but doing so carries hefty penalties.

Choosing a Patent Broker

You should interview several brokers before making your final decision. Questions that you should ask each candidate include:

  • What is your experience in my specific market?
  • Who buys and sells patents in this market? 
  • What types of patents are hot in this market right now?
  • What common issues come up in due diligence?
  • How many patent portfolios do you market each year and how many of those sell?
  • Can you provide sample packages for past deals you've closed?
  • How would you price my portfolio?
  • How long do you estimate it will take to sell?
  • How is commission calculated?
  • How are broker costs covered? Is there a cap on cost?
  • How long will the broker continue to receive commission after the sale closes?
  • Will you have to waive any rights?
  • Do you charge upfront fees?

You should make sure that a broker is a person you like and respect since you will have to work closely with them for the sales process' duration. It's also important to represent yourself well to attract the services of the top brokers in your industry. These individuals sell at a rate of more than twice the market value. So put in the time necessary to learn about the patent market, sales process, and potential brokers before taking the next step.

If you need help with finding a broker for your intellectual property assets, you can post your legal need on UpCounsel's marketplace. UpCounsel accepts only the top 5 percent of lawyers to its site. Lawyers on UpCounsel come from law schools such as Harvard Law and Yale Law and average 14 years of legal experience, including work with or on behalf of companies like Google, Menlo Ventures, and Airbnb.