Comments for A typology of IP intermediaries

As the importance of IPR increased for innovators, the growth of intermediary services to IPR gained momentum. One such intermediary service is that of IPR Insurance. it almost sounds paradoxical to have protection for a protective instrument. But, IPR insurance does have its advantages.

For starters, it protects patent holders against legal expenses to pursue infringements by other parties, to defend infringement accusations, or even just to cover damages and financial loss. In the light of the existence of “patent trolls”, for example, it is easy to see how IPR Insurance would be a boon to patent holders.

I do think though that this in a way encourages patent trolling. It would not be far-fetched to imagine a situation where an organisation profited from both patent troll organisations, as well as from the organisations that provided insurance against the same – much like the situation of some of the leading financial institutions in the US during the sub-prime crisis.

It seems that IP intermediaries have built a huge side-business within the IP industry. The number of about 38 different (main) IP typologies, registered at Fraunhofer MOEZ, shows the size of this “sub-industry” in IPR.
However, the core of Intellectual Property Rights (IPR), is still the same: “protect a firm’s tangible assets” and “allowing enterprises to profit from their creative and broadly innovative activities”(European Commission on IP, http://www.ec.europa.eu).

To get an impression of the IPR landscape was formerly done in a more old-fashioned and less sophisticated way: companies, wanting to invent new products or services could see a “patent book” at the town hall, which contained all registered patents, to see whether a certain patent is already registered in the market or if there might be opportunities for new inventions.

Nowadays, and that is the IPR typology I would like to focus on, a rising business opportunity within this industry are IPR exchanges. Those exchanges are similar to stock exchanges, such as the NYSE and the NASDAQ or simply put: marketplaces to match IP sellers and buyers.
Exchanges also allow to hedge IP exposure (risk management), speculate on the value of developing technologies or invest in patents directly as an alternative to equity markets.

Now when we ask for social values, that are IPR exchanges might carry I consider three major ones: Sharing, Community and Social Contribution (“giving back”). To illustrate each of the values, I selected the following three stakeholder groups, which sort of represent those values: IP buyers/sellers, investors and the society in terms of technological development.
Let me quickly address each of those stakeholders to see the social value that IPR exchanges contribute:

Small or large businesses have an interest in IPR exchanges, as they can monetize their IP or know-how in an easier way and, if done in a more professional way (e.g. patent trolls) even create a new revenue stream. In markets we often find big companies seeking for technologies, that are often discovered by smaller companies in fragmented markets. IPR exchanges display a broad range of patents highly transparent and therefore enables buyers to have a first impression about the IP market in general. The same approach can be considered for the seller.

Investors have different intentions to participate in exchanges. Among others, investors can speculate or manage their risk. Investing in IPRs is similar to invest in knowledge of firms for the future. When speculators put their money in a certain IP, this could create some buzz around it and companies start to show more interest. This could work as marketing machine: The more speculators invest their money, the more the markets show interest and a patent could have more support.
When talking about hedging risk, usually bigger companies are interested to diversify their risk. Often, technology companies run the risk to be specialized too much in a certain technology. By investing in IPRs that are anything, but not tech-biased, larger companies can diversify properly.
Last but not least, where IPR exchanges probably brings most of its social values is the society. As mentioned in the previous two aspects, the exchange helps to make the IPR market more transparent and accessible for the society. Patents are used more efficient by small and big companies and overall accelerate the progress of future technologies or industry changing achievements.

At the end it’s the society, that benefits from the R&D of companies and specialized firms. The IPR exchanges play an important and supporting role within this process.

Firstly, I think that patents encourage people to develop ideas, to make some researches, to innovate and that they protect them from the copyright. Patents reassure these thinkers and makers which is in itself a great invention.
According to the text, “markets for patents are typically difficult to organize” and it exists some intermediaries. In my opinion, this is a big business to develop. It is difficult for companies and freelancers to take correctly care of this because they often have other knowledge that how to get a patent? So I think that intermediaries are helpful.
However, a patents is a right which everybody should have access. And with all these complex procedures and the business developed around it, patents are not enough accessible anymore. I think that this is a problem that the governments should solve because it will be harder and harder to regulate this business. Governments could simplify the procedure to reduce the business and to make it more accessible.
Finely, public could be more educate and better informed about all of this. Like that all this discussion will perhaps be avoid one day.

With this article, we can conclude by two differents ways: a positive way and a negative way. In other words, Ip intermediaries is improving the social value by solving market inneficiencies but also decreasing that by “stealing” patent which they don’t exploit basically. Its a particular problem which becomes increasingly discussed, mostly in universities place.

Positive: As it is said, search cost are very high and, therefore, it becomes very difficult to find ideal trading partner. With thoses new companies, so-called patent troll, it facilitates the incentive of investment for partners. Also, with patent troll’s occurence, reals basics authors will be more careful to not make market failure and ensure patent clearly. Finally,it is absolutely benefic for social value that patent are combinated by another patent which create value

Negative:Mostly, Ip plateform or patent troll are seen as a money buisness where companies serve itself by taking back patent of company author. It seems to work as a public good.

Anyway, It still possible to make a patent auction which facilitate decisions of buyer and seller because a lot of website were been made to control that and also make a clear transparence information.
For more information for Ip and Innovation: http://www.crai.ca/sites/default/files/publications/IP-Literature-Watch-September-2014.pdf

There are many kind of IP intermediaries, however I will focus my analysis on patent brokers .In fact ,patent brokers are defined as “ organizations whose business is to match supply and demand of technology and to facilitate IP based transactions” (Rush et al.2007).On the one hand ,brokers can buy patents from some technological firms and sell them to other firms. On the other hand, they can transfer a patent without buying it.
The presence of brokers in some fields became essential to achieve the transactions like in real estate,where the sellers usually don’t have any idea about the value of their buildings or in which conditions they can sell them…,but why the presence of a broker is necessary in this case as in much other cases? To find answers to this question, we should do a simple economic analysis. If there are two parties included in a given transaction and the both are perfectly informed, therefore the presence of a broker is not required.So,there is a broker where there is a market failure, especially with the existence of incomplete information and externalities namely the free riding effect . However, some brokers may be the cause of this market failure if they hide the relevant information ,but with the mature of the concerned industry this problem begins to disappear.
Despite the high number of brokers in the patent market ,there is a lack of sufficient liquidity and transparency ,in addition to the high fee required after each transaction .
”Burt (2005) suggested two possible ways to control for the effects of brokerage.One is to study returns to the people connected by brokers,the other is to study returns to the broker”.
I finish this commentary by this sentence stated by Lemeley in 2007 “a market for right of exclusion has a lower value for society than a market for knowledge“.

Mario Bennasi,Alberto Di Minin(2009),“Playing in between:patent brokers in markets for technology”, Journal Compilation ,<> ,30/09/15.

Andrei Hagiu and David B. Yoffie ,”The New Patent intermediaries”,<>.30/09/15.

Julien Pénin (June 2011),strategic uses of patents on markets for technology:Technological firms,brokers and trolls,University of Strasbourg,<>.30/09/15.

We all know the market for patents is unstable for multiple reasons (uncertainty about prices, difficult valuation of patents because of their uniqueness, owners and buyers that can’t come together…). These patent market failures can lead to failure of small companies or individual inventors, that depend highly on those patents. But society needs small firms because they create jobs and revenue for the country. As small firms also contribute to economical and social development, we need to protect them. Therefore, several Patent Intermediaries tried to find a way to have small companies and independent inventors to be paid for their findings, which is essential if we want them to survive.

I think standard-setting organisations can be helpful for small organisations because of the shared knowledge in this system. If firms create standards that every participant has to agree on, it means that they’ll all share the same technology. And this could possibly foster innovation among the participating firms. Standard-setting organisations earn money thanks to payments of firms that agree to align those standards. Some will argue that small firms won’t participate in this kind of organisation. But if some rule imposes that this Intermediary has a limited access (namely to small firms), I think it could help those firms (and individual inventors) to be paid for their ideas. Social value will be increased because (1) small firms will survive, which may foster our economy, (2) shared knowledge can lead to more innovation, (3) different firms with different cultures share the same knowledge and can thus give their opinion on the standards, and (4) participating firms face lower transaction costs and have access to affordable patents.

For these reasons, I think standard-setting organisations are a good solution to an unstable patent market, if the access is limited to small firms. Therefore, laws or government intervention can be useful. Moreover, the use of the Internet can accelerate the process of sharing knowledge. This would help small firms to focus on developing better standards rather than losing time to look for buyers for their patents.

In some literatures (Wang, 2010; Hagiu & Yoffie, 2011), IP intermediaries are categorized in 3 types: brokers, who play a bridging role between sellers and buyers of intellectual property; defensive aggregators — like PLEC’s or privateers (see previous comment) — who acquire patents to payback their subscribers with revenues and give them safety from litigation; and finally aggressive aggregators, who acquire patents to realize revenue through filling lawsuits, licensing or asserting their portfolios.

It seems that the majority of these IP intermediaries share the objective of rewarding patent owners/inventors, which satisfies at least one goal of the patent system. Indeed, “there is little evidence, however, that their activities fulfil the other goal of the system by encouraging members of the public to innovate outside of exclusive rights” (1)

I will not focus my comment on a specific category of IP intermediaries, as in my opinion: the perfect intermediary being able to bring social value in IP markets is an hybrid model. In the past decade we have already seen an hybrid alternative to NPE’s and defensive aggregators so called “platform transaction facilitator” such as online exchange platforms or live auctions. Nevertheless, they did not meet a large success as Hagiu & Yoffie explained:

“While the idea of creating platforms for matching and facilitating transactions between patent buyers and sellers is in principle quite appealing, so far none of these platforms has been able to gain significant traction.”

I personally think that before trying to find the best “social responsible” IP intermediary, legislators all around the world — like the US International Trade Commission (ITC), should do a strong effort in order to improve the “shadow” on IP market. As Laurie (3) said :

“The current patent trading market is inefficient and immature, due to the lack of transparency and liquidity as compared with real estate or corporate securities.”

It seems now clear the liquidity and transparency of the IP market can only goes through common legislation. As, the social value is a large concept; we can imagine that people can find different advantages into various IP intermediaries.

An “open access bank” model can be an good alternative as it can lead to mutual exchange between firms. With an annual membership (i.e.), they will benefit of other firm’s patents if they five also free access to their patents. This model can lead to social value to the end-consumer, as producers will no more support licencing and royalties costs.

Bibliography:

1) Allen W. Wang, Rise of the Patent Intermediaries, 25 Berkeley Tech. L.J. 159 (2010). Available at: http://scholarship.law.berkeley.edu/btlj/vol25/iss1/7
2) Andrei. Hagiu & David. Yoffie. Intermediaries for the IP market: Working paper, 12-023. Harvard Business School (2011). Available at http://www.hbs.edu/faculty/Publication%20Files/12-023_0e95cdce-abbf-46ea-b8cb-15a3ebb054ed.pdf
3) Ron Laurie, Foreword to Matthew Y. MA, Fundamentals of patenting and licensing for scientists and engineers, at xvi (2009). Available at http://www.worldscibooks.com/etextbook/6993/6993_foreword.pdf

In this humble take on the subject, I would like to explore the role and value brought by Online IP Platforms and IP Auction Houses. Both instruments work as transaction facilitators in IP markets and I will argue that they perform complementary services in order to reduce failures in their markets.

On the one side, the function of online IP platforms is to help potential patent buyers connect with the adequate seller in order to purchase the patents they desire, and vice-versa. Examples of such platforms are http://www.patentauction.com/ and http://www.ideaconnection.com/. IP auction houses, on the other side, organise online or onsite public sales in which (groups of) patents are sold to the highest bidding participant. ICAP Patent Brokerage and Ocean Tomo, LLC are examples of such institutions.

These mechanism thus address the two biggest sources of inefficiency in IP markets: the high costs of matching buyers and sellers and the difficult valuation of patents. Indeed, online IP platforms greatly limit the cost of matching buyers and sellers of patents by providing structured marketplaces which these actors can enter against reasonable fees (registration, memberships, etc.). Once potential buyers have found the right patent for their development needs enter IP auction houses, which will allocate the patent in question to actor with the highest willingness to pay for the patent.

Online IP platforms thus enable companies to save time, money and other resources in their process of finding potential buyers or sellers of patents. This may lead to the production of cheaper and better products, as the saved time and manpower can be allocated to the further development of products and the lower costs of finding patents may drive product prices down. Also, patent auction mechanisms act as effective proxies to determine the value of (groups of) patents and therefore considerably limit the probability of disagreement over their prices among buyers and sellers. This may contribute to decrease the number of legal rows over intellectual property, which would have similar resource-saving consequences for companies involved and, subsequently, for society.

Sources:

Belleflamme, P. (2013). A Typology of IP Intermediaries – Report for PATLICINFO. Retrieved from http://perso.uclouvain.be/paul.belleflamme/Patlicinfo/Papers_files/IPIntermediariesTypology2.pdf on 06-12-2014.

Maicher, L., Tonisson, L., Bartsch, F., Jha, P. (2014). Intellectual Property Services Classification (IPSC). Fraunhofer MOEZ. Retrieved from http://ipib.ci.moez.fraunhofer.de/ipsc on 06-12-2014

Currently, as pointed out in this blog post, markets for patents are not functioning well. This kind of market failure creates opportunities for intermediaries, and there exists several types of IP intermediaries that try to intervene and offer solutions for mitigating the impact of the malfunctioning IP markets. An important type of intermediary is the so-called “transaction facilitators”. Here I will provide some comments about this kind of intermediary and look into to what extent transaction facilitators can contribute with some social value.

Transaction facilitators are an important category within the IP intermediaries as one of the main reasons mentioned in this blog post for why patent markets work badly, is that search costs are very high. This means that potential buyers and sellers of IP have troubles finding the right trading partner. In this respect, transaction facilitators are helpful as their main role is to match buyers and sellers of IP through either direct matchmaking or by providing a market place, hence they contribute to lowering search costs (Belleflamme 2013).

There are four different main types of transaction facilitators (Belleflamme 2013). The first one is online IP platforms. These are online sites made to match potential buyers and sellers of IP and make it easier for sellers and buyers to find each other. This is an important function that can be argued to add social value, as a common problem within IP is that sellers and buyers have troubles finding each other in the first place. Online platforms can facilitate the interaction between IP sellers and buyers and make the whole process faster and easier, thus arguably contributing to social value as search costs are lowered.

A second kind of transaction facilitator is IP auction houses. It functions like any other kind of auction house where you can either bid for a single IP asset or a bundle of several IP assets. This kind of intermediary can be claimed to contribute to social value because it also facilitates the interaction between potential sellers and buyers. However, I would argue that the online IP platforms seem to have a greater potential to reduce search costs and add more social value than an IP auction house can. This because the online platforms more easily reach a bigger pool of sellers and buyers than the auction houses do.

IP patent brokers and licensing agents are another type of transaction facilitator, and they help patent owners to sell or license their technologies in exchange for a fee conditional on successful sale of the relevant patent. In my opinion this kind of intermediary do not necessarily add much social value as it is acting as a middleman that could have been eliminated in this process. The price of the patent likely increases due to the patent broker/licensing agent’s involvement, and thus had the sellers and buyers of IP managed the process without these middlemen the patent price could have been cheaper as there would be no middlemen cost to cover. However, if it would prove very demanding for sellers/buyers to manage this process in addition to their normal work, it could be argued that having middlemen taking care of the sales process could give the sellers and buyers more time to focus on their IP work, and like that contribute to social value if the IPs they are working on are valuable for social welfare. Still, I would argue that both the IP online platforms as well as the IP auction houses seem more likely to be more beneficial for aiding the creation of social value than patent brokers and licensing agents.

The fourth and last main type of transaction facilitators is IP transaction exchanges and trading platforms. This kind of intermediary does not yet exist, but there have been ideas to create traded exchanges (could both be physical and online exchanges) where IP-based financial instruments would be listed and traded similar to what is done on stock markets today. When it comes to social value, I am doubtful to whether this particular kind of intermediary would be helpful, as being able to trade IP-based financial instruments does not seem to me as something that necessarily will enhance social value. However, this could be an interesting mechanism to implement and the future will show what it could lead to.

Conclusively, one can say that transaction facilitators are intermediaries that in many cases can contribute to social value because they help sellers and buyers of IP to find each other and like this lower search costs that often tend to be very high when it comes to the field of IP. When search costs are lowered the social value would also commonly increase. Belleflamme (2013) identifies four main types of transaction facilitators which have been analysed above. It is concluded that they can all bring about social value, but that the online IP platforms probably hold the highest potential for this.

Additional sources to the blog post:
Belleflamme, Paul (2013): PATLICINFO Research on markets for technologies in Belgium – A Typology of IP Intermediaries (presentation made January 2013, revised February 2013).

Creating a stable market for patents is a major challenge in the innovation management. Supply and demand are intensive, but why is it difficult for them to meet ? Why does the patent market works badly ? There are different reasons.[1] Firstly, there are many uncertainties about patent values as patents are idiosyncratic and they must sometimes create value in combination with other patents. Secondly, search costs are very high, it is thus difficult for sellers and buyers to find an interested person on the market. Thirdly, the fear of litigation creates lots of pressure around patent transactions and thus distorts the value. Let’s analyse this complex situation by analyzing the roles of new actors on the market trying to play the role of IP intermediaries and to make patent transactions easier.

We can wonder first how can patent be evaluated ? One possible way is to evaluate a patent according to the monetary return, but as we explained it in the first paragraph, it is difficult to put a real value on patents since returns are different according to the combinations with other patents. Another way to evaluate patents is to focus on the social welfare: we can put a value on a patent according to the increase of social welfare it induces. Despite this method seems to be fairer, there are still some difficulties: increase in welfare can be variable according to patent combinations as well, and a patent which maximizes the social welfare by creating positive externalities but not that much returns for the company wouldn’t be interessant to buy for firms in the sense that they would pay without the certainty to have enough return on investment.

Let’s focus on the new intermediaries : are they benefic for the implementation of a patent market and for the society ? we can differentiate different kind of intermediary according to their goals and their methods on the market.
First, let’s talk about patent platforms [2]. The goal of two-sided patent platforms was to facilitate patent transactions without taking titles or ownership of the patents involved. We can differentiate two types: online marketplaces and patent auction. Nevertheless, despite the fact that meeting between supply and demand is facilitated, there are still some weaknesses: online market have limited scale, while patent auction collect small amounts of money in comparison with huge amounts collected thanks to some patents.
After, let’s give more details about « defensive aggregators »[3]. These kind of intermediaries try to collect patent before NPE get them. « Thus, these pools result in multiple operating companies – who may not previously cooperated, done business or even respected each other – joining financial and other resources to create an independent entity to acquire potentially « problematic » patents, and license them to anyone willing to share the financial cost of acquiring the patents and the management overhead of administering the pool ». In my opinion, this kind of actor represents a good intermediary between supply and demand, even if there is still little kind of weaknesses: difficult valuation, limited scale, but nevertheless, a fair transaction is possible, and the purpose of this method stimulates innovation.
Finally, let’s focus on « offensive aggregators »[4]. The patent offensive aggregators are NPEs (non practicing entity) which obtain patents without practicing or producing on the inventions. They acquire the patents with the goal of suing the other companies of infringement and thus obtaining large profit. We can call these companies patent trolls. In practice, this is not an illegal method, but there is a harmful effect on innovation and social welfare. Indeed, getting patents without using them and threating other companies impedes the innovation process and is the source of a fear climate. Nevertheless, where is the limit for an enterprise to be a patent troll ? For example, a firm which invested in R&D and finds an innovation useless for his activities has the honest right to keep his patent and expect a return on investment on the R&D fees. In my opinion, if a company doesn’t practice a patent related to an innovation funded within this company, we can’t consider it as a patent troll. But if a company buys patents but doesn’t plan to use them, we can consider it as an offensive aggregator.

As a conclusion, I would say that some IP intermediaries can facilitate patent transactions between interested actors, but it is still an inefficient measure. Indeed, there are lots of welfare lost despite the fact that these actors play an important redirecting role between supply and demand. I think the whole problem is that we must make an arbitration between « individual profit (money) » and social welfare. Unfortunately, in my opinion, implementing strong measures is inefficient because people will always find a way to circumvent the problem: the solution would be to change mentalities and values…

[1] https://www.ipdigit.eu/2013/03/a-typology-of-ip-intermediaries/
[2] Yoffie D. B., Hagiu A., “The New Patent Intermediaries:
Platforms, Defensive Aggregators, and
Super-Aggregators », Journal of Economic Perspectives, Vol 27, No1, pp. 53,54.
[3]http://www.ipwatchdog.com/2012/12/10/defensive-patent-pools-there-are-surprisingly-few-options-2/id=31233/
[4]http://patents-in-china.com/patent-trading-facilitator/patent-offensive-aggregator/

I want to analyze the Super-aggregator which is a type of patent merchants for defensive,but actually it combines the defensive and the aggressive attitudes.Super-aggregator means that a company acquires lots of patent,typically from individual inventors or small companies,and then seeking licensing revenues from operating companies through the investment.People always think that the super-aggregator is the same as the NPE which is always called ‘Patent troll’.However,there are some differences between super-aggregators and patent trolls.Patent trolls are more aggressive than super-aggregators,they gain profits from operating companies through litigation or the threat of litigation,they just like enemies for big companies,but super-aggregators seems more ‘friendly’.Many big and powerful companies would like to invest in super-aggregators to make sure that they can use its huge patent trove.So the relation between super-aggregators and companies is more like cooperation.

The best example of this type is Intellectual Ventures which is the patent holding company founded by ex-Microsoft CTO Nathan Myhrvold.This company has raised more than $5 billion from a variety of investors and as of mid-2012 it has spent approximately $2 billion building the world’s third largest patent portfolio—roughly 35,000 patents.It seems that this company make itself become a large patent union to attract the investment from big companies.And this strategy is undoubtedly successful,many of its investors are strategic and include prominent technology companies such as Amazon, Apple, Cisco, eBay, Google, Intel, Microsoft, Nokia, SAP, Sony, Samsung and Verizon.For these companies,Intellectual Ventures functions as a defensive patent aggregator.These investors use licenses acquired by Intellectual Ventures to against lawsuits from patent trolls or competitors.

In my opinion,super-aggregators have obvious social value.The enormous scale of the super-aggregator helps reduce search and transaction costs,and the super-aggregator make it become a linkage between innovators and buyers.Because of its size,the super-aggregator can single-handedly create the illusion in the patent market.It seems like a credible outlet for those small patent owners because the super-aggregator can provide legal and technical support for them,and of course,it can give the nice price to their innovations.So,in a sense,the super-aggregator can stimulate the innovation.And on the other side of the patent market,the super-aggregator can provide patent buyers a simple and efficient process for their licensing needs.So the buyer can find patents quickly and clearly through the super-aggregator,and buy it just through a negotiation.It really can saves costs and time for buyers.That the reason why I think that super-aggregator make the patent market more efficient.

However,there are still some problems and risks with that type.As I mentioned above,super-aggregators have lots of patents,but most of these patents were bought from other companies or individuals,and none of innovation has been turned into a commercial product.For instance,Intellectual Ventures holds more than 30,000 patents,about 1,000 of them were developed in house,the rest were bought.And some critics think the Intellectual Ventures is the world’s largest patent troll because it just seeks patents and holds them,but never put these innovations into production.Indeed,there are many famous companies are investors of Intellectual Ventures,but from another point of view,these companies are forced to be investors.Because if they do not have relation with Intellectual Ventures,they might face a lot of lawsuits.

All in all,I think super-aggregators can help companies reduce the threat of patent trolls and many unnecessary lawsuits.Moreover,it can also help buyers find useful patents quickly and efficiently.It seems that cooperating with super-aggregators is a feasible strategy for big technology companies.

Reference:
1.Who does patent-trading firm intellectual Ventures work for,anyway?
http://www.businessinsider.com/intellectual-ventures-2011-7

2.The new patent intermediaries.
http://www.law.northwestern.edu/research-faculty/searlecenter/workingpapers/documents/Hagiu_Intermediaries_IP_market.pdf

A patent would be not useful, if it did not use in the real world. For more efficient to release patents’ functions, the patent market needs intermediaries to do some trade. Patent intermediaries also solve three main problems as the post said:
1. Many uncertainties surround the value of patents. This is mainly because patents are idiosyncratic (and escape thus any type of metrics) and because they often need to be combined with other patents to create any value (so-called “portfolio effects”).
2. Search costs are very high. That is, potential buyers and sellers have a hard time to find the right trading partner on the other side of the market.
3. The fear of future litigation puts a heavy weight on patent transactions and bias their valuation.

However, some patent intermediaries are more like “privateers”. They don’t create any new technology don’t produce patent products or offer patent services. They get patents by buying bankrupt companies which own patents or the using right of patents and then they obtain profit by incessant patent infringement litigations. Even though intermediaries have that many disadvantages, they are still in society. That means intermediaries have their own value for society so they aren’t eliminated. What value do they bring for society? As we all know, intellectual property is not the same as normal products or goods. When an undertaking focuses on its new technology, it might has extra ability for protecting its patent. In the 21st century, every products are produced by the division of work. In that product, patent, is also no exception. The function of intermediaries is to help allocating resources called patent. As a consequence, Inventors can acquire capital by selling their patent and producers can create technological products by buying patents from intermediaries. That will be a cyclic market economy.

In conclusion, with patent development and complication, intermediaries to patents are more and more important. Patents can apply more and more efficient on producing and reduce search costs, thus producers can let more capital on invention. By intermediaries’ management, Buyers and sellers can acquire objective prices on trade. Preventing market failure is also one of intermediaries’ advantage. If we say patent is the mechanism of invention, intermediaries will be its lubricant. Anyway, both patent system and intermediaries are the essential elements for balancing the invention market. Each of them are necessary for the market growing healthily.

Reference:
https://www.ipdigit.eu/2013/03/a-typology-of-ip-intermediaries/
https://www.ipdigit.eu/2013/11/markets-for-technologies-do-they-really-work/

Intermediaries in any trade may perform a bunch of activities, and the most basic one would obviously be to bring the seller to the buyer.
As the complexity of the commodity/service under consideration increases the role of the intermediaries is bound to get more extensive and complicated. The above statement actually puts some perspective to the fact that why intermediaries hold special importance in case of patents.
Patents, these days, tend to involve leading edge technologies; this fact leads to a number of repercussions in itself: one being the fact that how to fairly place a value for the patent, how to rationally understand the importance of the patent and where it would be an ideal fit considering the heavy technology dependence, and to finally paint a picture which would simplify the USPs of the technology under consideration to the would be buyers to complete the trade cycle.
The above few lines refer to the responsibilities of one very important intermediary – Patent broker – the fact that brokers involved in patent business have to ensure a lot more than just bringing the would-be-sellers and would-be-buyers on the same table, shows how much intermediaries have to contribute to the patenting cycle in its entirety.
I have just discussed the role of the brokers, but the fact remains that and which can be further substantiated with extrapolation, is that intermediaries are as much important to the patent business as are the buying and selling entities, and there proper functioning is necessary for the economic good which patents are supposed to bring about.

I would like to talk about Litigation finance/investment firms. Litigation is the process through which litigants can finance their legal costs through a third party funding. The third party funders provide the litigant with cash in exchange for a percentage of the settlement.
In case the litigant loses in trial, however, the third party receives nothing and loses the investment. A litigant finance firm is therefore a firm that consists of people with law and finance backgrounds that invest in litigation on the plaintiff or defendant side.
Lately there has been a growth in this relatively new industry (http://www.dandodiary.com/2012/04/articles/securities-litigation/litigation-funding-a-us-growth-industry/).
Legal financing has several advantages and disadvantages.
One of the most important advantages is the fact that legal financing can cause a levelling of the playing field for smaller firms against bigger opponents. Losing a lawsuit or even the
longevity of certain lawsuits can be a big financial burden for smaller companies
sometimes resulting in financial troubles or even foreclosures of these smaller firms.
Litigation funding can also provide a financial means to allow meritorious cases
to go forward. However, there are also several disadvantages : The most common concern is that the spreading availability of litigation funding will encourage non-meritorious or even frivolous litigation, by removing litigants’ financial constraints.
Although litigation funders argue that they are in this to make money and that the funders’ financial incentives will act as a screening mechanism through which only cases likely to provide an appropriate return on investment will be funded. Recent facts have shown that legal financing is indeed likely to result in an increase of litigation cases :
In a 2010 study of securities class action litigation in Australia, NERA Economic
Consulting identified the emergence of litigation funding as the most significant
development behind the increase in securities class action litigation.
Another problem with litigation funding is that it may take a large chunk out of plaintiff’s settlement. The amount of interest may often be high and build up over the years of litigation.
After paying attorney contingency fees and the amount owed to the legal financing company,
the plaintiff may recovery very little of the original claim. There is also no guarantee that the parties will settle for a greater amount when litigation is prolonged.

http://dealbook.nytimes.com/2013/04/08/new-firm-plans-to-invest-in-lawsuits/?_r=0
http://online.wsj.com/news/articles/SB10001424127887324031404578483492868041194
http://www.lexology.com/library/detail.aspx?g=fa1f2541-00ad-4a81-a956-aaeaf653372c
http://abovethelaw.com/2013/05/third-party-litigation-financing-the-latest-chimerical-lifeline-for-the-legal-profession/#more-244523
http://www.huffingtonpost.com/bradley-t-borden

In my comment I would like to talk about a new, powerful and above all controversial kind of super-aggregator that is currently raising lots of debate about the role of intermediaries and their effect on innovations in the patent market. These new intermediaries are investment firms that do not engage in the manufacturing of products nor conduct research, but help scrutinize and navigate the published landscape […] by assembling portfolios of relevant inventions and providing access through licensing (1). I will focus on today’s most known super-aggregator which is Intellectual Ventures.

We can wonder if a firm like IV [Intellectual Ventures] contributes to any social value to the society. IV is a private company that was founded about ten years ago and whose goal is to link all kind of patent owners with firms which may use their innovations.
One positive impact of Intellectual Ventures is that its huge size and influence helps to decrease search and transaction costs for people who want to buy or sell patents. It can as well be a way to reduce patent valuation uncertainty for innovators and therefore benefit both side of the market.(2) For these reasons, this firm has become an attractive tool for small patent owners who don’t have enough expertise to monetize their IP on their own. It makes patents more liquid and enables small businesses to be known and sell their ideas.

The negative aspect of Intellectual Ventures is that it can be seen as a big “patent troll” because as seen before, it acquires, creates, and seeks to license patents without directly making any products or services itself (2) (Definition of a patent troll) In fact, some of the revenue of the firm comes from licensing its patent portfolio to other companies, but a big part of it also comes from lawsuits for infringement of patents.

I found this example interesting because Intellectual Ventures is currently the most hated company in the US (3). Indeed, its tactic is very controversial; the company often threatens patent owners with lawsuits when a patent shows enough weaknesses, so that it has the opportunity to buy it for almost nothing. Its targets are often small businesses which can’t afford all the costs that come with a lawsuit. Having the prospect of having their ideas robed is surely not a way to incentivize small businesses to innovate.

References:
(1) R. Hegarty (2012), Intellectual Ventures: Why the Patent System Needs Aggregators
(2) A.Hagiu and D.Yoffie (2011) Intermediaries for the IP market
(3) J. Marin (2013), Intellectual Ventures : l’épouvantail de la Silicon Valley, Le Monde

http://en.wikipedia.org/wiki/Intellectual_Ventures

http://www.generation-nt.com/patent-troll-intellectual-ventures-royalties-brevets-plainte-actualite-1807642.html

Indeed, a market for patents and technology should be very different from the market of goods and commodities. These markets are in their nascent stage and can been seen only in few countries places like US and Europe. Companies still prefer to deal with firms or patent-holders on individual basis which is obviously not an efficient way for trade of technology. As it has been rightly put by various researchers mentioned in the above article, there is a need for intermediaries who can act both as facilitators and catalyst in the market of technology. I came across some really interesting articles on how an efficient market for patents can be created through intermediaries. Some of the feasible mechanisms that I could figure out have been mentioned in the following text-
1. Patent Expos and Fairs: They can provide excellent opportunities to the patent-holders to present their innovations to the representatives of various organisations. They can also enables firms looking for technology to get easy access to the latest developments happening around the world. The biggest welfare that these kind of arrangements can bring about is the opportunity for the independent patent-holders who do not enough resources to broadcast their findings. Thus these fairs can give them the desired platform and help them derive both recognition and monetary value from their innovations.
2. E-Market for Patents: Internet can be an easy medium for the people wanting to sell or license their patents to market their innovation where in they can publish the information and interested buyers can be approach the patent-holders. I believe just like e-commerce websites like Amazon and E-bay we can have a similar platform for the technology products. The channel can save a lot of transaction cost for both buyers and sellers of patents and thus increase both producer and consumer surplus.
3. Patent Dealers/Brokers: Patent brokers can act as facilitators in the trade of patents. Further, brokerage firms can be setup to stimulate the market. The brokers can be industry experts specializing in fields like software, semiconductors, nano-technology etc. Let me explain how brokers can help in trade of technology. The major issue that affects the patent market is that most people (decision makers in the organisations) find it hard to understand the technical content of the patent and consequently it becomes difficult for them to put a fair value to the patent. The brokers who may be industry experts can help firms in this regard. They can also favourably affect the market price of the patents to bring them to the fair value. There are already over 500 patent brokers in the US, helping the prospective patent buyers and sellers come together.
There can be many more such intermediaries that can help in developing an efficient patent market. I believe these intermediaries are must for the market of technology and without them it would be extremely difficult for firms to find the right technology as well as for patent-holders to derive right value for their innovation.
Reference: http://www.wipo.int/export/sites/www/freepublications/en/intproperty/834/wipo_pub_834_ch9.pdf

I have decided to write about the Transaction Facilitators, more concretely about IP Auctions.
This type of companies were created because their leaders observed a flaw in the IP market, which was the lack of a common marketplace for buyers and sellers to meet. They have been successfull because they provide the companies the opportunity to reach their potential buyers/sellers with zero effort, therefore reducing the waste of money and time previously spent on this activity, making the market much more efficient.
These companies hold online live auctions, with different formats and structures, and offer their sellers the opportunity to sell a pre-determined number of patents while they charge listing fees. It is said that the aim of some IP Auction Companies is to become “the e-Bay of patents”.
We can think of them as useful to society in terms of efficiency, because if we link every improvement to which they contribute we conclude that their business makes the IP market more efficient, therefore improves the companies’ efficiency as well, which results in positive consequences to society.
We can also think of these companies as providers of “value insurance” for the patents, in the sense that they make much easier a potential sell of a patent. Having the (almost) certainty that if they file a patent they will be able to sell it, companies are more willing to invest in R&D as they have greater chances of making profit out of it. Again, if the companies are more predisposed to use their money in favor of innovation, society will most surely benefit from it.
This being said, I believe the IP Auctions play an important role in current days, as they offer a solution to an obvious problem in the market, therefore contributing to the creation of value for society.
Some examples of these companies are PatentAuction.com and IPAuctions.com.

My analysis focuses on IP brokers. Examples of IP brokers are “Inflection Point Strategy”, “iPotential”, “Ocean Tomo”, “Patent Freedom”, and “Thinkfire”. IP brokers are public or private companies bridging supply and demand of intellectual capital. The role played by brokers in the patent market is very similar to the one they play in most other markets: they establish the value for patents and remove information asymmetries, reducing patent owners’ search costs; they help patent owners to sell or license their technologies in exchange for a fee in case of a successful transfer.
They add their expertise and skills in patent market, contributing to its improvement. Without IP brokers, a market for knowledge would be more difficult to develop and some ideas could remain unexploited. Brokers can also provide legal assistance and control for free-riding behaviour.
Therefore it can be argued that IP brokers can have a positive social contribution because they help reducing uncertainties about the value of patents (filling structural holes) and reducing transaction costs. As for the first point, IP brokers produce positive outcomes for the patent system because they establish a more consistent system for determining market value, which is difficult for intellectual property. In this way the patent market can become more fluid and the number of successful transactions can increase. Furthermore, brokers reduce the lack of transparency which characterizes this market. As for transaction costs, due to the limited resources of independent investors and of companies in dealing with other companies, transaction costs may be high. Brokers can intervene helping to reduce these costs.
There is however a disadvantage in the activity of IP brokers because they can exploit a monopolistic position, as they temporarily own information that is crucial for a transaction. This can produce distortions on the market because brokers can convey limited information or hide relevant information, becoming an obstacle to market efficiency.
However, it has been argued that this IP brokerage is doomed to disappear as industry matures. As knowledge of the market diffuses, the bridging function of brokers looses its appeal and companies can skip the intermediaries and directly manage their IP transactions.
Therefore I conclude that, also considering the probability of bad behaviour of brokers, their (maybe temporary) activity has beneficial social effects, leading to a better functioning of the patent market.

Thank you Paul for putting this important topic on the table.

At Fraunhofer MOEZ we did a very similar work and built a taxonomy for all services which are provided by IP practitioners. You can see the current version of this IPST here: http://ipib.ci.moez.fraunhofer.de/ipst

When you click on the headlines of the several service descriptions you will find a lost of companies which are already practice the according service.

It would be great to further discuss with you and your team the IPST.