The Patent Transactions Market –  
Established and Emerging Business Models  

 
Thesis in the Master Degree Program 

 
LUCIA KARINA ALVARADO 
 
Department of Technology Management and Economics 
CHALMERS UNIVERSITY OF TECHNOLOGY 
Göteborg, Sweden 2010 

 
Supervisor: Andrew Telles 

CIP Professional Services AB 
413 46 Göteborg  
Sweden 

 

Performed at Nokia, IPR Business Development 

Nokia Danmark A/S 
Sydhavnsgade 17-19 
2450 Copenhagen SV 
 

Supervisor: Anders Arvidsson  
Senior Manager, IPR Acquisitions 

 



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Acknowledgment 
 

It is an honor for me to thank the many people who helped me to make this thesis possible. 

I am grateful with Nokia and its entire IPR team in Copenhagen, Denmark; especially Anders 
Arvidsson, my supervisor, who contributed greatly to my work and guided me on the best paths to 
follow in an area that was new for me and with which I am now fascinated with.  

I would like to thank the ICM School Management, teachers, and administration, for their teachings 
and support along the two years of the Masters. It is a pleasure to thank Andrew Telles, my 
supervisor, who was been there for me all along the thesis to clarify my doubts with sound advice 
and good ideas. 

This thesis would not have been possible without the collaboration of Ron Laurie, CEO of Inflexion 
Point; Donal O’Connell, CEO of Chawton Innovations; Ron Epstein, CEO of IPotential; Andrew 
Ramer, CEO of Marqera; Kent Richardson, Co-owner of ROL; Henri Linde, Memberships VP from 
RPX; Matt Miskimin, IP Transactions Director at Zacco Scandinavia; Fergal Clarke, Director of IP 
Strategy at Rambus; Michael Pierantozzi, Owner of Andiamo Associates; Ulff Petrusson, Head 
Director of CIP; Vincent Pluvinage, leading Strategic Acquisitions & Private Equity at Intellectual 
Ventures; Patrick Sullivan, Co-Founder of ICM Gathering; Kevin Fiur, VP at ICAP Ocean Tomo; and 
the Manager of a Patent Monetization arm of an Operating Company, who asked his identity to be 
kept private. Thanks to all of them, their time, and honesty during the interviews is that this thesis 
was possible. 

Thanks to my friends for sharing their knowledge and making this entire process so pleasant and 
fun. Their advices have helped me overcome many obstacles.  

I am exceptionally thankful to the Innovative University Program and its team: Andreas, Sari and 
Sverker, your enthusiasm and forward thinking has been contagious.  Thank you for believing in 
Nicaragua and its people! To Sari and Sverker I will always be grateful for opening your home and 
hearts to me, your support and guidance has been extremely valuable. 

I am indebted to my family, my mom and dad who taught me since I was little that education was 
key and have devoted their lives to make it possible; my brothers Vilo, Toto, and Eduardo, who with 
their love have kept me going; and my sister Nene, my baby sister and best friend. 

I owe my deepest gratitude to my husband, Roberto, for his support, patience, and everlasting 
affection. I thank him for always being by my side helping me, giving me advice, taking care of me, 
encouraging me to always do better, and most importantly being my source of happiness I turn to 
everyday. 

  

 

 

 
  



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List of abbreviations 
 

IP  Intellectual Property 

NPE  Non-practicing Entity (ies) 

PE  Practicing Entity (ies) 

R&D  Research and Development 

US  United States of America 

USD  United States dollar 

USPTO United States Patent and Trademark Office 

SIPO  State Intellectual Property of the P.R.C (China) 

JPO  Japan Patent Office 

EPO  European Patent Office 

CEO  Chief Executive Officer 

PLEC  Patent Licensing and Enforcement Company (ies) 

IV  Intellectual Ventures 

GDP  Gross Domestic Product 

PR  Public Relations 

M&A  Merger (s) & Acquisition (s) 

 
 
 
  



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Table of Contents 
Acknowledgment ................................................................................................................................ 2 
List of abbreviations ............................................................................................................................ 3 
List of figures ...................................................................................................................................... 6 
Chapter I Introduction and Overview .................................................................................................. 7 

1.1 Introduction ........................................................................................................................... 7 
1.2 Study outline ......................................................................................................................... 8 
1.3 Scope ................................................................................................................................... 8 
1.4 Objectives ............................................................................................................................. 9 
1.5 Importance of topic ............................................................................................................... 9 
1.6 State of the field.................................................................................................................... 9 
1.7 Limitations .......................................................................................................................... 10 
1.8 Research Questions ........................................................................................................... 11 
1.9 Research Methodology ....................................................................................................... 11 

1.9.1 Research approach ..................................................................................................... 11 
1.9.2 Data recollection & Assessment .................................................................................. 11 
1.9.2.1 Assessment Models ................................................................................................. 12 
1.9.2.2 Interviews ................................................................................................................. 12 
1.9.2.3 Variables .................................................................................................................. 13 
1.9.3 Use of data .................................................................................................................. 15 

Chapter 2 Background ...................................................................................................................... 16 
2.1 Patents ............................................................................................................................... 16 
2.2 Patent Strategy ................................................................................................................... 16 
2.3 Patent Monetization ............................................................................................................ 17 
2.4 The patent industry vs. the patent transactions market ...................................................... 17 
2.5 Operating Companies ......................................................................................................... 17 
2.6 Practicing entities vs. non-practicing entities ...................................................................... 18 
2.7 Patent Transactions from a building blocks perspective .................................................... 19 
2.8 Market Geography .............................................................................................................. 19 

Chapter 3 Patent Transactions Market Business Models and Actors ............................................... 21 
3.1 Primary Patent Business Activities ..................................................................................... 21 

3.1.1 Patent Development .................................................................................................... 21 
3.1.2 Patent Sales ................................................................................................................ 21 
3.1.3 Patent Acquisition........................................................................................................ 22 
3.1.4 Patent Licensing .......................................................................................................... 23 

3.2 Primary Patent Business Activities: Business Models and Actors ...................................... 25 
3.2.1 Institutional Patent Aggregators .................................................................................. 25 
3.2.2 Defensive Patent Pools ............................................................................................... 26 
3.2.3 Patent Licensing & Enforcement Companies (PLECs) ............................................... 27 
3.2.4 Single Asserters .......................................................................................................... 27 
3.2.5 IP Development & Licensing Companies .................................................................... 28 

3.3 Secondary Patent Business Activities ................................................................................ 28 
3.3.1 Intermediation and Consultancy .................................................................................. 28 
3.3.2 Financing ..................................................................................................................... 29 

3.4 Secondary Patent Business Activities Business Models and Actors .................................. 29 
3.4.1 Patent Brokers............................................................................................................. 29 
3.4.2 Patent Auctions ........................................................................................................... 30 
3.4.3 Online Marketplaces for Patents ................................................................................. 30 
3.4.4 Licensing Agents ......................................................................................................... 31 
3.4.5 IP Backed Financing ................................................................................................... 31 
3.4.6 Royalty Interests Securitization ................................................................................... 31 
3.4.7 Litigation Financing & Investment ............................................................................... 31 

3.5 Summary of Business Models and Actors .......................................................................... 31 
3.6 Patent Transactions Market Business Model Clusters ....................................................... 33 



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3.7 Chapter Summary .............................................................................................................. 35 
Chapter 4 Macro environmental analysis of the patent transactions market .................................... 36 

4.1 PESTL Analysis .................................................................................................................. 36 
4.1.1 Political Factor ............................................................................................................. 36 
4.1.2 Summary on Political Factors ...................................................................................... 37 
4.1.3 Economic Factors ........................................................................................................ 38 
4.1.4 Summary on Economic Factors .................................................................................. 39 
4.1.5 Social Factors.............................................................................................................. 40 
4.1.6 Summary of Social Factors ......................................................................................... 41 
4.1.7 Technological Factors ................................................................................................. 42 
4.1.8 Summary of Technological Factors ............................................................................. 43 
4.1.9 Legal Factors............................................................................................................... 44 
4.1.10 Summary of Legal Factors .......................................................................................... 45 

4.2 Chapter Summary .............................................................................................................. 46 
Chapter 5 Stakeholders Analysis ................................................................................................. 48 

5.1 Key Stakeholders ............................................................................................................... 48 
5.2 Stakeholder Relationship Classification ............................................................................. 50 
5.3 Chapter Summary .............................................................................................................. 52 

Chapter 6 Empirical Research .......................................................................................................... 52 
6.1 Introduction ......................................................................................................................... 52 
6.2 Results on Empirical Research .......................................................................................... 53 

6.2.1 Results on Company Profile and Activities & Company Integration in the Market ...... 53 
6.2.2 Summary on Company Profile, Activities & Integration in the Market ......................... 64 
6.2.3 Results on Challenges ................................................................................................ 65 
6.2.4 Summary on Challenges ............................................................................................. 68 
6.2.5 Results on Trends ....................................................................................................... 69 
6.2.6 Summary on Trends .................................................................................................... 70 
6.2.7 Results on Success ..................................................................................................... 71 
6.2.8 Summary on Success ................................................................................................. 78 
6.3 Applying Success Factors ............................................................................................... 80 

6.4 Chapter Summary .............................................................................................................. 81 
Chapter 7 Conclusions...................................................................................................................... 83 

7.1 Conclusions and Discussion ............................................................................................... 83 
7.2 Next recommended steps ................................................................................................... 84 

 
  



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List of figures 
Figure 1 Thesis Structure.................................................................................................................... 8 
Figure 2 Variables - Company profile and activities .......................................................................... 14 
Figure 3 Variables - Company integration in the market ................................................................... 14 
Figure 4 Variables - Challenges........................................................................................................ 14 
Figure 5 Variables - Trends .............................................................................................................. 14 
Figure 6 Variables - Success ............................................................................................................ 15 
Figure 7 Top 15 US Patent Holders .................................................................................................. 17 
Figure 8 How patents are used ......................................................................................................... 22 
Figure 9 Number of Patents in Litigation 1985-2007 ........................................................................ 24 
Figure 10 US GDP (ppp) Patent Applications ................................................................................... 38 
Figure 11 USPTO Patent Applications 1995- 2008 .......................................................................... 38 
Figure 12 Trends in patent filings 1995-2007 ................................................................................... 38 
Figure 13 Patent Lawsuits Involving NPEs over time 1998-2009          Patent Freedom ................. 39 
Figure 14 Worldwide innovations 1970-2001 .................................................................................... 42 
Figure 15 Resident patent filings per R&D expenditures 2003 - 2007 .............................................. 42 
Figure 16 Large countries Global Innovation Index .......................................................................... 42 
Figure 17 USPTO Patent applications by type of applicant 2002-2008 ............................................ 43 
Figure 18 Stakeholder Relationship Classification ............................................................................ 50 
Figure 19 Business Model Segments ............................................................................................... 53 
Figure 20 Business Models............................................................................................................... 54 
Figure 21 Business Activities ............................................................................................................ 56 
Figure 22 Year of formation of company........................................................................................... 58 
Figure 23 Year of formation of company according to company type ............................................... 58 
Figure 24 Number of in-house employees ........................................................................................ 58 
Figure 25 Internal competences ....................................................................................................... 58 
Figure 26 Number of employees according to company type ........................................................... 59 
Figure 27 Internal competences according to company type ........................................................... 59 
Figure 28 Outsourced competences ................................................................................................. 60 
Figure 29 Major costs and expenses according to company type .................................................... 61 
Figure 30 Companies' headquarters locations according to company type ..................................... 62 
Figure 31 Companies' headquarters locations ................................................................................. 62 
Figure 32 Companies' regions of operations .................................................................................... 63 
Figure 33 Regions of operations according to companies' types ..................................................... 63 
Figure 34 Types of customers .......................................................................................................... 64 
Figure 35 Challenges ........................................................................................................................ 65 
Figure 36 Trends .............................................................................................................................. 69 
Figure 37 How success can be measured ........................................................................................ 71 
Figure 38 Successful business models ............................................................................................. 72 
Figure 39 Successful actors ............................................................................................................. 73 
Figure 40 Success factors ................................................................................................................ 76 
Figure 41 Success Factors Assessment Matrix ................................................................................ 79 
 



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Chapter I Introduction and Overview 

1.1 Introduction 
A patent is an intellectual property right granted to inventors to exclude others from using the 
invention for a limited time in exchange for public disclosure of the invention when the patent is 
granted.1 Patents are a set of exclusive rights protecting inventions that for centuries have been 
used as competitive differentiators. Patent owners have traditionally used patents to prevent others 
from copying a specific technology that they are commercializing. Other activities with patents have 
involved licensing, selling and acquisitions; however, these transactions have either been a side 
businesses (even if very profitable) or one-off transactions. It was not until recently that a market 
started emerging where actors have as their key business to transact with patents, and the number 
of actors specifically dedicated to this type of business has risen over the last several years. To be 
able to differentiate what it means to have side business and one-off transactions versus engaging 
in patent transactions as core business, we can take a look at the example of IBM, since they have 
been financially very successful with their patent licensing program2. However, despite having a 
significant part of their operations dedicated to this, IBM’s core business is to manufacture and sell 
computer hardware and software along with consulting and hosting services3, not to transact 
patents. On the other hand, actors such as Intellectual Ventures, Acacia, Rambus and IPotential are 
dedicated exclusively to transacting with patents. Business models used by these actors vary such 
as acquiring patents to establish licensing programs, having their own R&D to then build portfolios 
and create licensing programs, acquiring allegedly infringed patents to assert them, financing 
litigation programs on allegedly infringed patents, bringing together buyers and sellers or licensees 
of patents, and others. 

Basic economics establish that a market exists when there are buyers and sellers trading and 
exchanging goods and services.4Therefore, due to the fact that companies have their entire 
business dedicated to transacting with patents and are engaging in profitable business, one can 
postulate that the market for patent transactions exists. Nevertheless, well-functioning markets 
include established and accepted mechanisms for determining price of the transacted goods, 
communication, and facilitation for distribution and transactions. It is in these key mechanisms that 
the patent transactions market shows itself to be in its very early stages. Because no formal 
infrastructure for exchange has emerged, the cost of each transaction differs from one deal to the 
other and, as a result, can be very expensive.  In addition, valuation for the transacted goods – in 
this case, patents – is a major challenge with no commonly accepted methods for reporting, valuing 
or assessing risk, and therefore multimillion dollar transactions are held primarily through private 
channels keeping all the information concealed from the public domain. 

Operating companies have as their core business to commercialize their products, such as IBM that 
manufactures, develops and sells hardware and software. They have complex patent portfolios 
which they primarily use for defensive means (protecting the technology they are commercializing, 
avoiding others from copying, lowering potential in-licensing royalties, preventing potential 
infringement5); yet having strong patent portfolios, which means that they have “goods” that can 
potentially be transacted in a patent transactions market. Thus, operating companies have a need 

                                                            
1 http://www.uspto.gov/patents/index.jsp 
2 http://www.industryweek.com/articles/ibms_patent/licensing_connection_1228.aspx 
3 http://www‐03.ibm.com/ibm/history/ 
4 The Embeddedness of Economic Markets in Economics, Michael Callon 
5 Patents: Their Effectiveness and Role – Carnegie Mellon University & National Bureau of Economic Research, Wesley M. Cohen 



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to better understand this evolving market and the business models used, in order to consider how to 
make the best use of theirs.  

1.2 Study outline 
This thesis is structured in seven chapters. The first chapter provides an introduction to the topic 
and to the specific field of research that the thesis covers including the research methodology and 
questions. The second chapter provides some background information that has been used along 
the document as basis and is important for the reader to have as an introduction and theoretical 
framework. The third chapter is an analysis of the patent transactions market and the identified 
business models and actors. The fourth chapter presents an analysis of the macro-environmental 
factors that affect the patent transactions market and its actors. The fifth chapter provides 
stakeholders analysis for operating companies in the patent transactions market. The sixth chapter 
presents the results of the exploratory empirical research that was performed through interviews. 
And finally seventh chapter provides some conclusions, recommended paths to follow for operating 
companies, some suggested next steps that can be carried on to perform future research in the 
field. 

 

Figure 1 Thesis Structure 

 

1.3 Scope 
The present study is focused on analyzing the Patent Transactions Market as a business 
opportunity for Operating Companies.  

•Scope, Objectives, Importance of topic, State of field, Limitations, Research questions, 
Methodology

Chapter 1 Introduction

•Patents, Patent strategy, Patent monetization, Licensing, Litigation, Patent industry vs. 
patent transactions market, Practicing entities vs. non‐practicing entities, Market geography

Chapter 2  Background

•Business activities, Business Models, Actors, Business model clusters

Chapter 3 Patent transactions market business models and actors

•Political factors, economic factors, social factors, technological factors, legal factors

Chapter 4 Macro‐environmental analysis

•Key stakeholders identification, stakeholders classification, recommended management of 
stakeholders

Chapter 5 Stakeholders Analysis

•Qualitative interview results, Quantitative interview results: Company profile, Business 
activities, Market dynamics, Challenges, Trends, Success analysis

Chapter 6 Empirical research results

•Discussion, Conclusions, Next steps

Chapter 7 Conclusions



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The scope of the thesis covers business models and actors who carry on patent transactions as a 
core part of their business. Patent transactions include patent sales, acquisitions, licensing, and the 
intermediation & support services that facilitate these transactions. 

 

1.4 Objectives 
This thesis aims to provide a description of the patent transactions market, its actors and the 
business models they are using with the focus of having it as a base for operating companies to 
make decisions about how to relate to the market and the actors who engage in patent transactions 
as their core business. 

The first objective of the study is to provide a description of the patent transactions market, its 
structure, and the business activities held in it. 

The second objective of the study is to understand what business models are being used in the 
market and which actors are active in it. 

The third objective of the study is to analyze the macro-environmental factors that affect the patent 
transactions market and its actors. 

The fourth objective of the study is to analyze success factors of business models in this market and 
what it implies for operating companies to put in practice what is considered to be a determinant of 
success. 

 

1.5 Importance of topic 
Patents are strategic tools that can add value to an organization and can be used in many ways, 
much more than a mere exclusion instrument. R&D intensive actors and current and potential patent 
holders are becoming every day more aware that the patents they have (or could have) can be 
monetized through different business models. Recently a market for transacting patents has 
emerged, and these actors have the opportunity to monetize their patents in it; therefore, for them 
it’s important to learn about this market and understand how they can become active players in it. 
For operating companies this means exploiting their patents in other ways than using it for defensive 
means, and analyzing the paths they can take considering the actors in the patent transactions 
market that can be either good allies or threatening rivals.  

This thesis might be of interest for all actors in the patent transactions market to learn about the 
market characteristics, actors, business models, and value drivers. And specifically for operating 
companies it can be a good starting point and analysis to make decisions on how to extract value 
from their existing and potential patents based on the identified current and emerging business 
models in the patent transactions market. 

 

1.6 State of the field 
Despite there being lots of information on the patent industry, the patent transactions market is new 
and there is no widespread understanding on how the market works, who the actors are, how 
companies are structured or how their operations look like. Company names such as Intellectual 



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Ventures, RPX, Rambus, and IPotential are well-known, but there is no clear grasp (especially for 
actors outside of the inner circles) on how the market dynamics work. 

Some academic and industry literature and internet and desk research have been used as 
background; however, very scarce documents are focused on the patent transactions market per 
se. Furthermore, getting access to information on transactions in the market is a hard (if not 
impossible) task, because companies are very secretive and sharing information on their operations 
is not in their interests. 

There seems to be a common understanding in the patent transactions market that transparency is 
required, and a high number of actors contacted along this thesis were interested in participating 
and sharing information to contribute to this cause.  

This thesis aims to serve as a stepping stone for further research in the field both on qualitative and 
quantitative outlooks; the latter, can serve as an opportunity to bring clarity into the field and provide 
the first market overview supported by statistics. 

 

1.7 Limitations 
There were some obstacles presented in the way of performing this research; in one way or the 
other they were mitigated to some extent, but they are worth mentioning as they represent a valid 
proof of the state of the market.  

Secondary sources of information are scarce and when information is found it is sometimes unclear, 
mainly because company public information sources such as websites and brochures are either 
limited or sales oriented.  

Getting first hand data is also hard because when interviewing, some information could not be 
provided, this is primarily due to confidentiality reasons amongst the actors. Areas that were hard to 
cover were the company revenues, financing, payback, and strategic plans. Additionally it was 
challenging to get information on opinions on specific actors because the interviewees in most 
cases were reluctant to mention specific names to avoid controversy.  

Terminology is a limitation because there are lots of new terms that are exclusively applicable to this 
field and is further complicated by the fact that even in the field they do not have a standard, 
accepted meaning or use. A great example of this is the term non-practicing entities (NPEs), the 
exact description is that is a company that does not practice a particular business activity, meaning 
a company that transacts IP but does not for example manufacture the product which is protected 
by the IP which they own; however, when using that term it was sometimes attributed other 
descriptions such as the so called “patent trolls”, R&D intensive companies in general, and others. 
There are no commonly accepted definitions, but this was managed in this research by double 
checking literature and when interviewing subjects, the terms used in the questions were explained 
and if there were doubts then an immediate dialogue could be established, therefore this obstacle 
did not influence the results. 

Additionally, this is a rapidly changing field, and there are constantly developing news and events 
that are important to be on top of to make sure that the research and interviews can be followed in 
the best manner. Despite this being a positive aspect for actors in the market, it also makes it 



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challenging to perform research in it and it might be the case that when this document is released 
some of the data is out-dated and requires further research. 

1.8 Research Questions 
1. Is there a market for patent transactions and what is its structure? 
2. Which business activities and business models are used in this market? 
3. Who are the major players in this market? 
4. How can operating companies become an active player in this market to better monetize 

their patents? 
 

1.9 Research Methodology 
This study is an exploratory research which utilized both qualitative and quantitative methods 
including literature review, internet and desk research, semi-structured interviews, and statistical 
analysis of the data gathered through the interviews. The use of multiple data gathering methods 
allowed the triangulation of the information that led to a higher level of validity of the results. The 
methodology is detailed more specifically below. 

1.9.1  Research approach 
The research started with a deductive approach on existing literature, articles, blogs, news, and 
company profiles. The intention was to start from the more general that could lead to the more 
specific. There is vast information on fields such as patenting and patent monetization; however, 
little information is focused on the patent transactions market and its actors. An inductive approach 
was also utilized when specific observations were found and then further research was performed to 
acquire broader generalizations. Most of the specific observations came from articles and news on 
the latest events. 

1.9.2 Data recollection & Assessment 
Chapters 1 (Introduction) and 2 (Background) are based exclusively on secondary information 
sources such as books, articles, presentations, previous reports, internet, company profiles, and 
blogs. References have been used in all sections so that the reader has a clear view of the sources. 

Chapter 3 (Patent transactions market business models and actors) includes various assessments 
on information found on literature, internet and desk research. The analysis starts by compiling and 
assessing the information following the Building Blocks model by Ulf Petrusson. Furthermore, an 
analysis on the value drivers of these buildings blocks is performed. Then the model by Alexander 
Osterwalder on Business Model Ontology is followed to further assess the information. It’s important 
to mention that a paper by Ron Laurie, Existing and Emerging IP Business Models, served in great 
part as a basis for this assessment; furthermore, the companies’ websites were the primary source 
of information on the actors’ details. 

Chapter 4 (Macro-environmental analysis) follows the PESTL model and is an assessment based 
on the information found, and empirical knowledge that the researcher gained along the process of 
the thesis. 

Chapter 5 (Stakeholders Analysis) presents an assessment following Grant Savage’s model on 
Stakeholder Analysis. 
 
Chapter 6 (Empirical exploratory research results) presents the results of the interviews. The 
qualiltative and quantitative data gathered was used as a basis for assessment on Chapter 5 and is 
also the basis for the conclusions and recommended next steps to follow with the research. 



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Chapter 7 (Conclusions) provides a sum-up of the thesis and also has the section of next steps 
recommended to take in order to take full advantage of this study. 
 

1.9.2.1 Assessment Models  
The assessment models utilized were Building blocks from Ulff Petrusson, Business Ontology by 
Alexander Osterwalder, macro environmental analysis of PESTL, and Stakeholders Analysis by 
Grant Savage. 
 
The building blocks model served the purpose of deconstructing what it really means to have patent 
transactions, it provided information that could be used as building blocks for the next chapters; it 
helped to really understand what it means to have patent transactions, who engages in those 
transactions and what drives them to do so.  
 
The business ontology model helped to better organize the identified building blocks found with the 
previous model, clustering them into what they had in common and really showing which were the 
business models active in the market. 
 
The PESTL analysis was a good model to view from a macro perspective the entire market while 
going into the various factors that might affect a business, which are politics, economic, social, 
technological, and legal aspects. 
 
The stakeholders analysis was chosen based on the fact that Savage’s model proposes on how to 
interact with your stakeholders based on levels of potential collaboration or threat, which seems to 
be very applicable in a market that is emerging. 
 
All the models link to each other in the way that it starts with the deconstruction and identification of 
building blocks which are used for the clustering of business models and segments, which help as a 
basis to analyze the market in both macro (PESTL) and micro (stakeholders) levels. 

1.9.2.2 Interviews 
The interviews were held between April 9th and May 27th of 2010. A total of 14 interviews were 
completed. The selection of the interviewees was based on influence circles i.e. people part of an 
organization in the patent transactions market with which a connection could be established. The 
process started by setting up the list of all actors to contact (Appendix 1 – Interview contact list). The 
following step was contacting them via email and/or phone to ask for an appointment for an 
interview.(View Appendix 2 for information on company and interviewees profiles). A general 
interview guide was created in order to clarify the general topics that needed to be covered 
(Appendix 3 – General interview guide). Afterwards, research was performed on each actor to add 
on questions that were specific to their activities and experience; the result was a personalized 
interview guide for each actor (Appendix 4 – Personalized interview guides). Despite each actor 
having a personalized interview guide, the results could be compared because the sections of the 
interview guide remained the same but applied to each case, for example questions to brokers were 
focused on brokerage transaction deals; while IP development & licensing companies interviews 
were focused on IP development and licensing plans. Additionally, targeted open questions were 
posted in order to acquire qualitative data. For example to ICAP Ocean Tomo, who held the first live 
auction, questions in that area were asked to learn more about it. 

The interviews were unstructured with open questions to allow a partial part of the questioning to be 
led by the responses of the interviewee. Although open questions produce data that is difficult to 
organize and code, it was preferable to be able to have a good qualitative base and preliminary 



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exploratory research for the creation of a statistical database and market survey closed 
questionnaire. The interviews were held through Skype, phone conversation, and in a few cases in 
person. The duration of the interviews was in average 1.2 hours, being the shortest one 1 hour and 
the longest one 2 hours. 

After the interview was held a transcript report was put together that were then treated from a 
variable perspective (Appendix 5 – Interview variable identification) and codified in the statistical 
program SPSS to identify frequencies and have a structured quantitative results (Appendix 6 – 
Variable Codification & Appendix 7 Variable Tabulation). 

The variables were identified after having 75% of the interviews completed. The process was to 
review all the interview reports and select all the possible answers that the interviewees had given. 
For example, in a question where we asked the number of direct employees the company had, we 
had answers such as 5, 12, 17, 45, and others; so the process was to group them to be able to 
present them in ranges that could be set as variables: Less than 10 to 20, 21 to 50, 51 to 100, and 
so forth. Other variables were created based on the previous research that had been done. For 
example, the actors were classified according to company types: Market markers & middlemen, 
enforcers & litigation financiers, patent aggregators, IP development & licensing, and other model. 
This was not a question that was asked directly to interviews, but the variable was identified based 
on previous research and response from actors of various questions, such as type of activities they 
carry on, so if they acquire patents to enforce them exclusively they would be in the category of 
enforcers and litigators.  

The initial codification led to 136 variables. The large amount of variables is due to two factors: 1. It 
was expected because of their nature and source that are unstructured interviews with open 
questions. 2. Some variables of multiple answers had to be separated into individual ones because 
of the fact that answers don’t necessarily fall into one category or grouping. For example in business 
models, there are a total of 18, and actors in some cases carry on with 2 or more of them, so they 
couldn’t be classified in one specifically; therefore, variables were set with yes/no to be able to 
clarify which business model the actor did/didn’t work with. 

1.9.2.3 Variables 
The variables fall under five different categories:  

Company profile and activities 

No. Variable/Variable Family Objective 
1a Year of formation of company Understand when the market started and what 

kind of growth/decrease it’s had over the years. 
1b Annual revenue of company Categorize the firms and visualize differences 

there might be according to operations and 
models vs. revenue. 

1c Number of employees Understand the differences in number of direct 
employees according to company type and 
models 

1d Internal competences Understand what type of competences 
companies use internally 

1e External competences Identify what type of competences companies 
outsource and why 

1f Legal fees Understand under which structure they pay for 
legal services and how they choose a lawyer/firm 



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1g Financing model Identify how companies are financing their 
operations and what other stakeholders come 
into the picture 

1h Major costs and expenses Categorize according to company type and 
models what are the major costs and expenses 
related to it 

1i Company headquarters Identify prominence of geographic regions for 
central offices 

1j Company operations 
(geographic) 

Clarify in which geographical regions the 
company carries on operations, showing where 
there are market needs and potential according 
to operations that these companies have 

1k Customers Identify what type and category of customers are 
transacting in the market 

1l Majority of customers Categorize according to company type and 
model the predominance of clientele they handle 

Figure 2 Variables - Company profile and activities 

Company integration in the market 

No. Variable/Variable Family Objective 
2a Company type Categorize companies according to the 

established types that were distinguished from 
research done 

2b Business model Identify which models are carrying on operations in 
the business models that were previously 
identified with research 

2c Business activities Understand what type of activities are being 
performed by actors when transacting IP 

Figure 3 Variables - Company integration in the market 

Challenges 

No. Variable/Variable Family Objective 
4a Challenges Understand what the interviewees list as 

challenges that the market is facing 
Figure 4 Variables - Challenges 

Trends 

No. Variable/Variable Family Objective 
5a Market trends Understand what trends the interviewees list as 

being trends in the market to utilize it as a base for 
further analysis 

5b Emerging geographical areas Identify which geographical areas the interviewees 
catalog as prominent emerging areas for IP 
transactions 

Figure 5 Variables - Trends 

Success 

No. Variable/Variable Family Objective 
3a Successful models Identify which models the interviewees catalog as 

successful to then use that as base for deeper 
analysis on the model 

3b Successful actors Identify which actors the interviewees catalog as 



15 | P a g e  
 

successful to then use that as base for analysis on 
the actors 

3c Success factors Understand what the interviewees identify as a 
need to be successful  

3d Measurement of success Understand what is the base that the interviewees 
use when mentioning a successful actor  or model 

Figure 6 Variables - Success 

1.9.3 Use of data 
Literature, internet and desk research were used as a basis for the analysis in Chapters 3 and 4, 
and also served as background knowledge for the deployment of the interview sessions on Chapter 
6. The data from the interviews was analyzed with qualitative and quantitative models, providing a 
good basis for conclusions and recommendations. 

  



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Chapter 2 Background 
This chapter aims to provide the reader with background information and terms that will be used 
along this entire thesis. It serves as a theoretical framework delimiting the terms and scope of the 
study. Furthermore, it provides some analysis of the information clarifying how the terms are used 
and how they are applicable to this specific research. 

 

2.1 Patents 
Patents are an established legal tool used to secure a control position that ostensibly has the 
objective of enabling technology diffusion while also providing the right of the patent owner to 
exclude others from commercially exploiting the patented invention.6 Patents are a set of exclusive 
rights granted for inventions, which can be products, technical solutions to problems, or processes 
of new ways of doing things. Patents provide the patent owner protection over the invention, which 
means that only the owner (or those actors who the owner shares its exclusive rights with) can use, 
distribute, sell or make anyway commercially available what the patent claims cover.7The patent 
claims are the specific clauses in a patent application or a granted patent that define the scope of 
what is protected by this set of exclusive legal rights.  These exclusive legal rights apply only the 
specific invention described in the patent claims. 

 

2.2 Patent Strategy 
Patent strategy is how patent owners decide how their patents should be used. They decide who 
can or cannot use the patented invention. They may grant permission through licensing to other 
actors to use the invention covered by the patent; and can also enforce their rights over actors that 
are using the invention without their permission. Also they can decide to buy or trade their patents. 
For the time that the patent is valid, the patent owner will have control over the patented invention 
and has the ability to decide what the best path for them to follow is. 

Since patents are a set of rights, complex strategies can be built around them and value can be 
extracted in many ways. Patents can be used “offensively” through protecting the temporary 
monopoly that the patent owner has by excluding others from having access to their invention. 
Patents make the transfer and commercialization of inventions easier, therefore, there are market 
strategies where technologies are diffused and traded. Another way that a patent holder can use 
their invention is to agree with another party, who also has patents to cross-license, and in that 
sense they can have a win-win situation by providing each other access to inventions which they 
can use in their business activities. Patents are also used as a basis for future developments 
through collaborations or even open infrastructures for sharing and diffusing technologies. Some 
patent holders decide to use their patents to block other actors and gain competitive advantage in 
the field they are in. Additionally some actors are exclusively dedicated to enforcing their patents, 
meaning that they check who is using their patent without permission (license) and then create a 
business out of it. 

There are many other ways that patents can be used and it depends on the business model of the 
patent owner and the creativity that they have on how to extract value from them. Some actors may 
decide to utilize various strategies for one same patent granting rights in certain fields of use or 
                                                            
6 Lecture Patents and Patentable inventions – Caroline Pamp 15/09/08 
7 WIPO 



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territories, others might have their patents in a collaboration agreement but also enforce it against 
other actors… in reality the combinations of strategies are innumerable and that is why actors 
owning patents must be smart on how the manage their portfolios. 

 

2.3 Patent Monetization 
To monetize means to cash something into money or other source of profit8; therefore, patent 
monetization means how patents can be transformed into money or any other type of benefit that 
brings value to the patent owner. Patent monetization is intertwined with patent strategy, because 
depending on the strategy that the patent owner chooses for their patents is that their monetization 
will become a reality. 

Extracting value from patents has been traditionally defined as how much money the patent owner 
can get from it. And even if this idea still remains, the direct relation between patent and money is 
not as simple as “I have a patent, I sell it or license it and I have a monetary exchange”. Patents 
have many different layers and consequently various business models have emerged. 

Patent value can be extracted from the sales or licensing fees; one can use it to block other actors 
and have “sales” of the “product” that the patent is covering; one can block actors and build a profit 
center from suing actors who infringe; and, one can extract value from providing access with 
collaborations, standardization, open innovation, and other, and that can lead to new patents, new 
sales, new licensing fees, new patent potential sales, and so forth. 

 

2.4 The patent industry vs. the patent transactions market 
When studying a specific market it is important to understand to which industry it pertains. It is in 
many cases puzzling to identify what’s being analyzed as the terms industry and market tend to be 
mixed. The patent transactions market is the place where buyers and sellers are exchanging 
patents; while the patent industry is the collection of companies that are competing with one another 
in all patent related activities, not only transactions of the patents themselves, but also usage of 
them. Specifically, the patent industry is the group of companies that build their business from 
researching, writing, granting, licensing, and litigating 
patents.9  

2.5 Operating Companies 
Operating companies are the major patent holders. They are 
R&D intensive and are focused on developing new 
technologies to patent to gain competitive advantage in the 
market by preventing copying, blocking other actors, and 
establishing monetizing models from their portfolios. It can 
be assumed that since operating companies are the major 
patent holders, they are also a very important source of 
patents that go into the market for sale and licensing. 

                                                            
8 Merriam Webster Dictionary 
9 http://www.ethipat.org/lexicon:global‐patent‐industry 

Figure 7 Top 15 US Patent Holders 



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Operating companies are the top patent holders10 (Figure 7) both due to the facts that they engage 
in technology development and also because their core business is to “practice” through 
manufacturing or service offering the patents they hold. For example LG’s vision is “To deliver 
innovative digital products and services that make our customers’ lives better and easier—happier, 
even—through increased functionality and fun”.11 Their core business is to deliver products, 
therefore it can be deduced that the patents they hold are a building block to achieve this vision.  

Operating Companies other than being the primary “customer” for licensors, can and have engaged 
in licensing programs. Many product companies have opened departments especially for this, such 
as IBM Intellectual Property and Licensing12, AT&T Intellectual Property13, Ericsson Licensing 
Program14, Phillips Intellectual Property & Standards15, Xerox Technology Patent Grouping16, and 
many others. After all, operating companies are the major patent holders (As seen on Figure 7), so 
it’s a matter of establishing multidimensional patent monetization strategies in an intellectual value 
chain to extract value out of their intangibles in more than one way17 even if practicing the patent 
(manufacturing products covered by the patent and blocking other actors) is their core business.  

It would be expected that operating companies’ approach to licensing would be by negotiation; 
however, it can be seen that operating companies are highly involved in patent litigation. It is 
assumed that operating companies’ motives are different than PLECs and single asserters who 
litigate to have a revenue stream, but that their reasons behind it are to maintain a control position 
and exclusivity in the technology area covered by the patents.  

Important note: Operating companies’ activities will not be deeply analyzed in this thesis as it is out 
of scope, however, they are being presented here because they represent the highest demand for 
the patent transactions market and are the main customer of the actors in the market. Furthermore, 
focus is being put in this thesis in analyzing how entities that don’t practice their patents perform so 
that operating companies can better monetize their own patents as well. 

2.6 Practicing entities vs. non-practicing entities 
Along this entire thesis the terms practicing entities and non-practicing entities will be used therefore 
it’s important to clarify the differences between them. Practicing entities are operating companies 
who are R&D intensive and generate physical products; along the way they generate patents, but 
their main purpose and core business is to utilize their IP for their own use either to produce their 
own products or block other actors from participating in a specific technology area. On the other 
hand non-practicing entities (NPEs), are companies who are engaged in patent transactions but 
don’t manufacture, and their core business is to transact patents. 

The term NPEs in many cases is confused with “patent trolls”, which is a derogatory term to 
describe companies and individuals that acquire patents and monetize them through their 
enforcement, seeking for payment from alleged infringers. These entities are often viewed as actors 
that slow down innovation because some argue that they litigate low quality patents that shouldn’t 

                                                            
10 IPO Releases List of Top 300 Patent Holders for 2009 
11 http://www.lg.com/uk/about‐lg/corporate‐information/overview/index.jsp 
12 http://www.ibm.com/ibm/licensing/ 
13 http://www.att.com/gen/sites/ipsales?pid=17704 
14 http://www.ericsson.com/yourbusiness/equipment_manufacturer/licencing_programs 
15 https://www.ip.philips.com/ 
16 http://www.xeroxtechnology.com/xt.nsf/p02?readform&unid=451539A915CA424685257728004C0CE3 
17 Intellectual Property & Entrepreneurship – Creating Wealth in an Intellectual Value Chain, CIP, Ulff Petrusson 



19 | P a g e  
 

have been granted in the first place against operating companies, making them lose time and 
money. For the purpose of this thesis, the term NPEs will be utilized as companies who engage in 
patent transactions but don’t manufacture. 

2.7 Patent Transactions from a building blocks perspective 
 
To better understand which transactions are being referred to it’s important to deconstruct what it’s 
meant by it; patent transactions are patent acquisitions (buying patents), patent sales (selling 
patents), and patent licensing (in-licensing and out-licensing). These and all the supporting and 
intermediation activities that take place are the building blocks of the patent transactions market. 
Furthermore, patent development (R&D that can lead to patentable inventions) is an activity that 
defines the market’s structure, because despite it not being a primary action classified as a patent 
transaction, it is the source of where patents come from and there are actors transacting patents 
that they develop and actors acquiring patents from developers and then transacting them. All the 
building blocks will be further described in the sections below. 

Licensing is the most complex activity of all. It has been identified along the research performed that 
when licensing there are two approaches: negotiation approach and litigation approach. This means 
that when an actor wants to license out a technology there is the option to license by negotiation or 
directly by litigation. Moreover, there might be cases where the process starts with negotiation and 
turns into litigation because no agreement could be established. Negotiations can end up in 
licensing deals and settlements; while litigation might end up in licensing deals and settlements, or if 
no negotiation or settlement is agreed upon, they go to court and the profit or loss will be the 
damages awarded by the court.  

Licensing programs in most cases (does not apply to defensive models that will be further analyzed) 
are with allegedly infringed patents. The patents transacted are not necessarily those that provide a 
technological competitive advantage, but are those that are being already used by actors in the 
market (or supposedly used). In licensing programs in the patent transactions market the notion of “I 
invented the wheel, do you want to license it?” is not leading; but it’s basically focused on “You are 
using the wheel, now pay for it”.  

It can be summarized that the activities carried on in the patent transactions market are the building 
blocks that construct up the market, which are patent development, patent acquisition, patent sales, 
patent licensing, and all the services that collaborate and intermediate these transactions to take 
place. 

 

2.8 Market Geography 
Most of the activities are in the US; approximately 70% of the actors are there, predominantly in 
Silicon Valley which is known as the world’s best high tech conglomeration18. Of the world’s total 
receipts of international licensing 45% pertains to activities in the US with approximately 50 billion 
USD.19 Litigation is also a way of analyzing a market’s geography, because litigation is a licensing 
approach used by actors, and despite not having an exact number of world’s litigations, there is a lot 
of information available about activity in the US, showing once more that the market is centered 
there. 
                                                            
18 Ashby H. B. Monk ‐ The Emerging Market for Intellectual Property: Drivers, Restrainers, and Implications, Oxford University 
19 Technology and Industry Outlook 2006, OECD Science 



20 | P a g e  
 

There are emerging areas showing some interesting activities. Asia in general is a growing 
economy, and countries such as Japan and China are becoming relevant actors to this market. Of 
the world’s patenting activities China and Japan combined have 35%. The Japanese Patent Office 
(JPO) has the goal to become the world’s most advanced IP nation20, and despite them having a 
slight decrease in patenting, they keep their development plans strong. On the other hand, China 
had a 23% growth rate21 and their patent office SIPO has been restructuring their national IP 
Strategy to become a strong IP player in the world market.22 

This thesis has been developed focused on the US because it’s the region with most activity in the 
field of interest. Some comments will be made on the emerging areas such as Asia and Europe; 
however the objective is to deeper analyze the market where it’s currently stronger. 

 
  

                                                            
20 http://www.jpo.go.jp/ 
21 2009 IP indicators, WIPO 
22 http://www.sipo.gov.cn/sipo_English/index.html 



21 | P a g e  
 

Chapter 3 Patent Transactions Market Business Models and Actors 
This chapter provides an overview of the patent transactions market analyzing the market structure, 
actors, and business models. In the first section the market activities are deconstructed following Ulf 
Petrusson’s model on Building Blocks Approach; it presents the market activities, the drivers that 
actors have to engage in those activities, followed by describing the types of actors that engage in 
such activities. The first business activities that will be analyzed are patent development, patent 
acquisitions, patent sales, and patent licensing that are the primary (direct) patent activities between 
patent owner/licensor and buyer/licensee. Then the supporting business activities and actors will be 
shown, which are the secondary patent activities involving intermediation services, consultancy, and 
financing. The business models used by these actors will be analyzed focusing on providing 
information on where they acquire the patents (own patent generation, acquisition, or in-licensing) 
and explaining how these patents are used (sales, out-licensing). Afterwards a summary of the 
identified business models utilized in the market will be presented. Then business model 
segmentation will be presented following Alexander Osterwalder’s model on Business Ontology. 
And to finish up the chapter a conclusion and discussion on how it’s recommended for operating 
companies to interact with these actors to better perform in this market will be presented. 

 

3.1 Primary Patent Business Activities 
The primary business activities in the patent transactions market refer to those that are a direct 
transaction between the patent creators, owners, buyers, sellers, licensors, and licensees. 

3.1.1 Patent Development 
Technology development is the base for patent generation. Actors engaged in R&D activities are the 
base for patent development. Patents are the “goods” transacted in the patent transactions market, 
and the source of them is of utmost importance. 

Actors that develop technologies and patent are the ones providing the “goods” to be transacted in 
the patent transactions market. Operating companies, IP development and licensing companies, 
institutional patent aggregators (to a certain extent), universities, R&D centers, and individual 
inventors are the actors in the invention process. These actors provide with the patents that will then 
be bought and sold and licensed in and out in this market. 

3.1.2 Patent Sales 
Actors selling patents are patent owners that for one reason or another they have decided to sell all 
or part of their portfolio. Actors that own patent portfolios are those who either develop their own 
portfolios and/or acquire patents. As a principle, all actors that own patents can sell them; however, 
one thing is to have certain transactions than to have it as a business model. The actors that supply 
patents to the market are those patent owners that wish to divest them. Such patent owners can be 
individual inventors, operating companies, universities, and other actors that own patent portfolios; 
however, the only identified type of actor that can be seen as completely dedicated to selling 
patents are corporate spin-offs from operating companies such as the one that was interviewed for 
this thesis that asked to remain anonymous. This company was exclusively opened to monetize a 
family of patents of an operating company through its sale. 

The activity of selling patents is part of the supply side of the market, as these actors are providing 
the marketplace with the “goods” to be exchanged or transferred. Patent sales can be driven by 
having patents in an area where there is no longer interest in; having the opportunity of potentially 



22 | P a g e

having a better proceeds through the sales of it; the shift of business or technology area on where 
the patent is; the need of cutting off costs and expenses; liquidity requirements; close-down or 
bankruptcy of a firm; strategic decision to sell rather than enter a licensing program due to the time 
and resources it requires. 

According to the nature of the identified drivers, it can be deduced that actors selling patents don’t 
have as core business selling patents, but rather sell patents that they don’t use, don’t want, or just 
prefer to sell.  

A patent sale can be either done directly by the patent holder to the buyer or through an 
intermediary, such as a patent broker, patent auction, or to be put up on an online marketplace for 
patents. (These will be described in Section 3.3 Secondary Patent Business Activities). 

3.1.3 Patent Acquisition  
Patent acquisitions represent the demand side on the patent transactions market, completing the 
basic market forces of supply (patent sales) and demand (patent acquisition).  

It is important to look how actors use 
patents because that will be directly linked 
to what drives them to acquire as well. 
According to a survey by Carnegie Mellon 
University & National Bureau of Economic 
Research23 patents are used for prevention 
of copying, patent blocking, prevention of 
suits, use in negotiations, enhancing 
reputation, licensing revenue, and 
measuring performance (Figure 8). 

These factors can be divided into internal 
and external uses. Internal use (own use) if 
for defensive means: prevent copying, 
patent blocking, prevent suits, use in negotiations, enhance reputation, and measure performance. 
While on the other hand the external use is linked to having licensing as a profit center and 
acquiring patents to obtain licensing revenue. 

Patent acquisition is highly related to patents usage and it has been identified that what may drive 
actors to acquire patents is linked to how they will use them. Some of the drivers for patent 
acquisition are: obtaining licensing revenues through licensing programs or patent assertion and 
litigation, improving position in cross licensing deals, filling in gaps in technology to have a better 
position in the market, blockage other actors and prevention them from patenting a related 
invention, decreasing royalty payments, prevention of copying, and for defensive means to prevent 
or decrease risk of patent infringement suits.24 

Actors acquiring patents are those who want to create, enrich, or compliment their portfolio, either 
for their own use (defensive, competitive advantage tool, negotiation power) or for the creation of a 
profit center through licensing programs that can be either through negotiations or patent assertion 
and litigation approach. Therefore actors who are on the demand side of the patent transactions 

                                                            
23 Patents: Their Effectiveness and Role – Carnegie Mellon University & National Bureau of Economic Research, Wesley M. Cohen 
24 Intellectual Property & Entrepreneurship – Creating Wealth in an Intellectual Value Chain, Ulff Petrusson CIP 

96%
82%

59% 48% 48%
28%

6%

How are patents used

Figure 8 How patents are used 



23 | P a g e  
 

market are operating companies, institutional patent aggregators, defensive patent pools, patent 
licensing & enforcement companies (PLECs), single asserters, universities, IP development & 
licensing companies, and other occasional actors. (These actors will be further described in Primary 
Patent Business Activities: Business Models and Actors) 

The reasons for why each one of these actors acquires patents are different. In the case of 
operating companies, as it was seen before, they are driven to acquire patents for what they most 
use them, defensive means. On the other hand, defensive patent pools, have built up a business 
out providing the “defense shield” that operating companies are looking for; they license out the 
technologies they include in the pool to all of its members. Institutional patent aggregators are 
dedicated to collect patents and it’s still unclear how they plan to monetize it; they have shown 
recent activity in patent sales but it doesn’t seem like it might be their business model but it’s more 
of an opportunistic transaction; they have the option of monetizing their portfolios through licensing 
with negotiation and/or litigation approach and the market is anxiously waiting to view which path IV 
will take. Patent licensing & enforcement companies and single asserters acquire patents to build up 
an enforcement business out of it; their core line is to litigate against operating companies. 

Patent acquisitions can be done directly with the buyer and the patent owner or through an 
intermediary that can be a patent broker, a patent auction or an online marketplace for patents. 
(Described in Section 3.3 Secondary Patent Business Activities) 

3.1.4 Patent Licensing  
Licensing is the activity to grant permission (out-license) or receive permission (in-license) to use a 
specific patent or set of patents. The actor owning the patent or holding the rights to license may 
license-out the patent to licensees. Licensees receive authorization to use that patent according to 
the licensing agreement, which describes the scope and field of use, exclusivity, royalties, territory, 
term, amongst other specifications.  

In the patent transactions market licensing represents the most complex activity of the patent 
transactions market because licensing deals can start with negotiation approach or litigation 
approach. For the purpose of this study, negotiation approach means those licensing agreements 
that are settled without any litigation; litigation approach is when it involves suing activities. A deal 
might start with negotiation approach and if there is no agreement, it might turn into litigation. In 
other cases, there is litigation from the beginning where the patent holder sues the potential 
licensee for alleged infringement. To better describe it, let’s look at the scenarios where a case can 
be negotiation or litigation approach: 

Negotiation approach: “Patent holder” offers license to “Company”; “Company” accepts the license 
offer. That acceptance can either be linked to desire to have access to the technology covered by 
the patent; or because the “Patent holder” can prove infringement and then “Company” decides it’s 
better to negotiate a license than carry on with litigation. Also “Company” might decide to settle 
despite not being an infringer not to go through the hassle of litigation, that might be more 
expensive and time consuming. This means that they concluded a licensing agreement without any 
litigation, but that doesn’t mean that the fear of litigation is not involved. 

Litigation approach: “Patent holder” sues “Company” for alleged infringement directly. Or also the 
case where “Patent holder” offers license to “Company”, “Company” doesn’t take the offer and then 
“Patent holder” sues “Company” for patent infringement. The litigation approach might be either that 
the relationship starts with litigation or it ends up in litigation because no agreement could be met. 



24 | P a g e

To be able to have a clear understanding on how licensing is evolving one would have to have 
access to information on licensing programs performance, settlements, and damages. 
Unfortunately, the only publicly available information is on litigation and damages, and scarce data 
is found on licensing programs and settlements.  It is unknown the total amount of licensing deals 
that take place and how many are by negotiation and litigation approach. Even scarcer is 
information on revenues. 

Despite data being limited, some information on 
litigations can be found and it demonstrates that 
litigations are vast in the patent transactions 
market and have increased in the past decade 
25(Figure 9). Of the total number of patent litigation 
cases in the US 85% is presumably between 
operating companies, and the remaining 15% 
between non-practicing entities and operating 
companies26. It was in 2003 that the non-practicing 
entity vs. operating company started to grow 
stronger and 75% of litigations involving NPEs 
rose.27 Of the total amount of litigations 
approximately 88% end up in settlement28. 

As a principle all actors that develop patents and/or acquire them could potentially engage in 
licensing activities therefore the identified actors that engage in patent licensing are PLECs, single 
asserters, institutional patent aggregators, defensive patent pools, operating companies, IP 
development & licensing companies, and licensing agents (intermediaries).(These actors will be 
further described in Primary Patent Business Activities: Business Models and Actors and Licensing 
Agents). 

Some are in the business of infringed patents and turn more into litigation, while others are into 
technology transfer and might start their process with negotiation approach (which might turn to 
litigation if no agreement is achieved). The primary customers/licensees are operating companies. 
And while operating companies are the primary customer they are also active in the patent licensing 
arena and litigations have been an increasing trend.  

Actors who have as core business to acquire patents to license are: 

• PLECs and single asserters who are focused in litigation 
• IP development and licensing companies develop their own IP and license it out to 

operating companies 
• Patent aggregators, who could potentially establish strong licensing programs, but at the 

moment there is one actor in the market that uses this model and has yet not disclosed the 
path they will follow with their portfolio 

• Defensive patent pools are into patent licensing in a different format such as membership 
fee to have access to their portfolios 

                                                            
25 http://www.patentlyo.com/patent/2008/03/patent‐litigati.html 
26 http://www.rpxcorp.com/svc_problem.html 
27 https://www.patentfreedom.com/research.html 
28 Preliminary Analysis of IPLC Data: Patent Infringement Cases – Cornerstone Research, Mary A. Woodford 

Figure 9 Number of Patents in Litigation 1985‐2007 



25 | P a g e  
 

• There have also emerged licensing agents who are actors linking patent owners with 
licensees as intermediaries. 

3.2 Primary Patent Business Activities: Business Models and Actors 
This section presents the business models and actors within the primary patent business activities, 
meaning those actors that have as core business having direct patent transactions. 

 

3.2.1 Institutional Patent Aggregators 
Activities carried on: development (not as strong as acquisition), acquisition, out-licensing, 
in-licensing (to a certain extent, only to have as a basis for future out-licensing) 

Institutional Patent aggregators as their name well establishes it are dedicated to aggregate 
patents. Their business model is twofold. On the one hand they raise capital, from large technology 
companies, pension funds, venture capital firms, and wealthy individuals, offering them high return 
over their investment. With that capital they acquire patents in bundles and then create patent 
monetization programs for the patents they’ve aggregated. The patent monetization strategies that 
patent aggregators can use are licensing (either negotiation or litigation approach), patent sales (for 
better proceeds) like a recent patent portfolio divesture from Intellectual Ventures to Thales Alenia 
Space29, or spin-off new companies on specific patents, like TerraPower a spin-off company from 
Intellectual Ventures focused on improving electricity using nuclear reactors.30 

Intellectual Ventures31 (IV) is “the” patent aggregator. IV has raised around 5 billion USD in capital 
and has acquired over 30,000 patents32. Although these numbers cannot be confirmed exactly, it is 
a fact that IV has a strong position when it comes to capital and patents. When IV started raising 
capital in 2002, their sales pitch was focused on offering companies the opportunity to acquire 
patents to protect themselves against lawsuits. Nowadays the defense pitch is no longer their core, 
but rather they offer investors the opportunity to channel their capital through IV’s own inventions or 
in funds of acquired patents that will be monetized and high return over their investment is foreseen. 
According to Bloomberg BusinessWeek, some of their investors are Microsoft, Intel, Apple, Sony, 
and eBay33; however, this information is not a fact and has not been confirmed by Intellectual 
Ventures as they have stated that they don’t disclose details about their investors34 because they 
could somehow be in disadvantage if their participation is known.35 

Licensing is a definite option; however, Intellectual Ventures, the single patent aggregator identified, 
has yet not mounted a well rounded licensing program and it is unclear how they will carry on their 
operations with their portfolio. It is unclear how IV plans to monetize that “30,000” patent portfolio, 
and although Nathan Myhrvold, IV’s co-founder and CEO, states to be opposed to patent litigation36, 
many are hesitant about it, because it’s claimed that IV could turn into a dangerous asserter and 

                                                            
29 http://www.intellectualventures.com/NewsAndInformation/PressReleases/10‐06‐
22/Intellectual_Ventures_Signs_with_Thales_Alenia_Space.aspx 
30http://www.intellectualventures.com/OurInventions/TerraPower.aspx 
31 http://www.intellectualventures.com/home.aspx 
32 http://business.timesonline.co.uk/tol/business/entrepreneur/article7127608.ece 
33 http://www.businessweek.com/magazine/content/06_27/b3991401.htm 
34 http://www.intellectualventures.com/Home/FAQ.aspx 
35 http://online.wsj.com/article/NA_WSJ_PUB:SB122142717791833671.html 
36 http://www.businessweek.com/magazine/content/06_27/b3991401.htm 



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litigator backed up by their strength in patent holding.37 It has also been argued that that IV is 
building a monopolistic scenario and that it’s a scary proposition for companies because it will turn 
into an offensive situation38. Additionally, there always exists the risk of IV either selling or coming 
into collaboration with an actor that is not opposed to suing.39  

Due to the fact that IV is acquiring patents in bundles, many of the other actors in the patent 
transactions market have IV as a primary stakeholder. It has been reported that 75% of the publicly 
auctioned patents lots were acquired by Intellectual Ventures40. Furthermore, that some brokers, 
such as IPotential have had their top successful transactions with Intellectual Ventures. 
“Successful… IPotential, due to the fact that they sold 80% to 1 buyer: IV which whom they had a 
very strong relationship before as people came from Intel” – Interviewee from Interview Sessions 
(Chapter 6 Empirical Research). 

Such large firms like Intellectual Ventures are involved with almost all actors in the market, because 
they develop patents, acquire patents, sell patents, have licensing programs (which is still to be 
seen if it will be negotiation or litigation approach), and raises capital from corporations. At the 
moment there is only one of these actors in the market, but it has been said that there might be 
enough space for 2 or 3 of them. “There will come other IVs, as there is enough space in the market 
for 2 or 3 of those players”. – Interviewee from Interview Sessions (Chapter 6 Empirical Research). 

Additionally to acquiring and licensing, institutional Patent aggregators develop technologies and 
patent to a certain extent. It might not be their core business as acquisition is, but they do have R&D 
teams dedicated to it. Intellectual Ventures claims to have internal development and a worldwide 
network of inventors who “conceive ideas, conduct extensive research, evaluate product feasibility, 
and determine an invention’s market viability”41. 

3.2.2 Defensive Patent Pools 
Activities carried on: acquisition, out-licensing (for defensive means), in-licensing (to a 
certain extent when patents can’t be bought the rights are in-licensed for the members). 

Defensive Patent Pools are a variation of the abovementioned Patent Aggregators, as they 
aggregate patents and have it in a pool so that members can use it for defensive means. Defensive 
patent pools identify and acquire key patents that could be used offensively against operating 
companies, which is the base of its members. They are not in the business of offensively litigating 
the rights of the patents in the pool, but only serve as a protective shield to lower litigation risk for its 
members. Basically what defensive patent pools do is bring together operating companies that have 
one interest in common, reduce costs in litigation, and by the aggregation of the members so is the 
collection of capital.  

What they basically do is patent licensing but in a different format than the traditional one, because 
it’s only for their members and for defensive means. They collect patents that can be used for 
protective means and then provide licenses to their members to the entire portfolio. The license in 
this case is presented as a membership or participation fee. 

                                                            
37 http://money.cnn.com/magazines/fortune/fortune_archive/2006/07/10/8380798/index.htm 
38 The trolls' game – The Deal, Danny Fortson 
39 http://www.pehub.com/74614/qa‐with‐nathan‐myhrvolds‐intellectual‐
ventures/?utm_source=feedburner&utm_medium=feed&utm_campaign=Feed%3A+pehub%2Fblog+%28PE+HUB+Blog%29 
40 Inside the world of public auctions – IAM Magazine, Tom Ewing 
41 http://www.intellectualventures.com/Inventors.aspx 



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There are two variations of defensive patent pools. The first one is based on the defensive patent 
pool firm bringing together various operating companies and advising them on which patents to 
acquire for the benefit of the group, the patents are owned by the defensive patent pool and are 
licensed out to all of its members. The acquisition is governed by the members, not by the defensive 
patent pool firm. Allied Security Trust42 (AST) is an example of this. The second type is when the 
defensive patent pool actor decides which patents to acquire and it’s then offered to the members 
(or in some cases bought because of the need that members or potential members might have). 
Rational Patent Exchange43 (RPX) is a firm that has this format. In both cases the patents are 
owned by the Defensive Patent Pool aggregator (RPX or AST), and licenses are offered out to its 
members for defensive means. 

3.2.3 Patent Licensing & Enforcement Companies (PLECs) 
Activities carried on: acquisition, out-licensing (primarily based on enforcement) 

Patent licensing & enforcement companies (PLECs) are entities that own patent portfolios and 
enforce them through licensing programs with litigation approach. They have as core business to 
acquire patents and enforce them through litigation against operating companies.  

The way they operate is that they acquire patents which they believe are being infringed by 
operating companies, and establish licensing programs targeting those alleged infringers. They 
contact the allegedly infringing operating companies either through letters or meetings trying to 
engage on a non-exclusive basis licensing agreement; those who refuse to take license under the 
terms they’re offering are sued for patent infringement. PLECs do not develop technologies; they 
acquire technologies from third parties and then enforce them. These actors are usually called 
“patent trolls”, which is a pejorative term used for non-practicing entities that enforce their patents in 
an aggressive and opportunistic matter.  

Actors in this category are Acacia44, Lemelson Foundation45, Papst Licensing46 and Fergason 
Patent Properties47. 

3.2.4 Single Asserters 
Activities carried on: development (they might start asserting on patents they developed, but 
then moved to acquisitions), acquisition, out-licensing (primarily based on enforcement) 

Single asserters are just as Patent Licensing & Enforcement companies (PLECs) with the difference 
that they are individuals and not companies (even if they litigate under company name, they are a 1 
to 10 people team). The major difference is that PLECs have heavy organizations and handle high 
numbers of patents; while single asserters, are in most cases attorneys themselves, and so they 
handle the cases from A to Z; they don’t acquire patents in bulks, but only on a few of them that they 
consider might be profitable. 

Actors in this category are Erich Spangenberg48 under the LLC Plutus IP, Ronald Katz under the 
LLC Ronald A. Katz Technology Licensing49, and Leon Stambler50. 

                                                            
42 http://www.alliedsecuritytrust.com/ 
43 http://www.rpxcorp.com/index.html 
44 http://www.acaciaresearch.com/ 
45 http://www.lemelson.org/ 
46 http://www.papstlicensing.com/ 
47 http://fergasonpatents.com/ 



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3.2.5 IP Development & Licensing Companies 
Activities carried on: development, acquisition (not as core, but may occur in certain cases), 
out-licensing 

IP development and licensing companies are entities that develop technologies internally 
therefore generate patents and are in the line of business of licensing out these patents. They do 
not manufacture products, but license out their technologies and patents to operating companies. 
These actors are R&D intensive because their core business is to establish monetization plans on 
internally developed patents. Their core business is to develop technologies, patent them, and then 
establish licensing plans with their portfolios. They develop technologies that have market potential 
within operating companies since they are their primary customers. In some cases IP 
development & licensing companies might also establish acquisition programs to enrich 
their portfolios and establish better licensing plans. 

Actors in this category are Rambus51, ARM52, MOSAID53, InterDigital54, AmberWave55, Qualcomm56, 
and Tessera57 

3.3 Secondary Patent Business Activities 
This section presents the business models and actors within the secondary patent business 
activities, meaning those actors that have as core business to intermediate transactions or provide 
services to support these transactions. 

 

3.3.1 Intermediation and Consultancy 
There are actors in the market who are intermediating and supporting the acquisitions and sales of 
patents. There are actors serving as middlemen bringing together patent owners and holders with 
potential buyers and/or licensees. In the patent transactions market the middlemen are patent 
brokers, patent auction, online marketplaces for the patent divesture and acquisition; while licensing 
agents intermediate licensing deals. 

Various actors in intermediation offer consultancy as one of their services. Some examples are 
IPotential58, ThinkFire59Marqera60, and IP Value61who offer other than their brokerage and licensing 
agency services, also IP consultancy. There is also consultancy in the legal arena, having actors 
specialized in guiding patent owners and potential buyers and licensees in legal aspects. An 
example of this is Richardon Oliver Law Group62 and Zacco with their IP Transactions unit63. 
                                                                                                                                                                                                        
48 http://www.good.is/post/the‐patent‐troll/ 
49 http://en.wikipedia.org/wiki/Ronald_A._Katz 
50 http://www.iptoday.com/articles/2009‐1‐bednarek.asp 
51 http://www.rambus.com/us/ 
52 http://www.arm.com/ 
53 http://www.mosaid.com/corporate/home/index.php 
54 http://www.interdigital.com/ 
55 http://www.amberwave.com/ 
56 http://www.qualcomm.com/ 
57 http://www.tessera.com/ 
58 http://ipotential.com/consulting/index.htm 
59 http://www.thinkfire.com/services/ip‐portfolio‐analysis‐and‐strategy‐development/ 
60 http://marqera.com/default.asp?PageID=43 
61 http://www.ipvalue.com/ 
62 http://richardsonoliver.com/ 



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Various areas are covered by consultancy groups and service units, such as IP strategy, valuation, 
monetization paths, legal requirements, marketing, and others. 

3.3.2 Financing 
How actors are financing their operations vary. Data from the Interview Sessions reveal that some 
of the financing sources that actors have in the market are:  share capital; private equity such as 
venture capital, corporations, and investment funds, which might be either a strategic investor or 
financial investor only; and their own capital. 

Other than how actors in the market are financing their operations, entities dedicated to financing in 
the patent transactions market have emerged. These are actors that have as core business to 
finance activities related to patent transactions and more and more the financial markets are looking 
at IP as an area to invest in.64The identified models in this line of business are IP backed financing, 
royalty stream securitization, and litigation finance & investment. 

The financing sources for actors in the patent transactions market may be share capital, own 
capital, and private equity through strategic and financial investors. There is also a model in which 
actors invest in assertion programs hand by hand with the patent owner. Additionally, a set of 
models dedicated to financing utilizing IP as collateral or royalty securitization have emerged, where 
patent holders can obtain financing based on the estimated present and potential value of their IP. 

IP has traditionally been illiquid because of its intangible nature; however, more and more financial 
options are opening for patent holders who are able to transact their IP. 

3.4 Secondary Patent Business Activities Business Models and Actors 

3.4.1 Patent Brokers 
Patent brokers are actors who serve as middlemen in selling and buying patents. They do not own 
patents, but are agents bringing together buyers and sellers. These actors can be compared with 
real estate brokers, who help home owners to sell their properties, and home seekers to find a 
house to purchase. Patent brokers search for patents in the market that might be for sale and then 
offer it to potential buyers. They study the patents and then prepare a list of actors who could be 
interested in acquiring the patents based on many reasons, such as providing a competitive 
advantage, lowering licensing costs, avoiding potential litigation, filling in gaps in technologies, 
avoiding potential infringement, or in some cases simply based on common technology area where 
the patent is e.g. they have a patent on semiconductors for brakes, they offer it to actors in the 
automotive industry. Brokers send information on the patents to their potential buyers and focus on 
why it’s important for them to acquire it. Their income is the broker’s commission that is around 25% 
of the entire sales price and it comes out of the patent owner’s proceeds.65 
 
Patent brokerage has been rapidly increasing and it is no longer a one-shot-deal activity, it is an 
occupation that is recognized by the US Census Bureau.66 Some of the identified patent brokers 
are: IPotential67, Inflexion Point68, ThinkFire69, Bramson & Pressman70, ILeverage71, Lava Group72, 
                                                                                                                                                                                                        
63 http://www.zacco.com/practiceareas/ 
64 The expanding market for IP finance – IAM Strategy 250, 2010 
65 http://patentmatchmaker.com/AboutPatentMonetization.html 
66 http://www.census.gov/hhes/www/ioindex/cens_050_095.html 
67 http://ipotential.com/ 
68 http://www.ip‐strategy.com/ 
69 http://www.thinkfire.com/ 
70 http://www.b‐p.com/ 
71 http://www.ileveragegroup.com/ 



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Pluritas73, Red Chalk74, Semiconductor Insights75, Marqera76, IP Value77, amongst others. The great 
majority of them offer IP consultancy as a service and some of them also are moving towards not 
only offering patents for sale, but also licensing. 

3.4.2 Patent Auctions 
Patent Auctions provide the option to place patents for sale and bid on them for their acquisition. 
Patents are collected by the auction firm to be put in the auction, and potential buyers are invited to 
participate and bid. There are live patent auctions where previous to the event, an information kit is 
sent to the potential buyers containing non-confidential information on title clearance, market 
potential value, technology and patent description, and other details on the lot. The patent owner 
and the patent auction firm agree on a minimum sales price (reserve price), and in most cases set a 
minimum amount on the increase of bidding. During the event, the potential buyers will bid (if 
interested) to buy the patents, and if the reserve price is met, then the patents are sold to the 
highest bidder. This auction format historically been used for various goods such as art, antiques, 
cars, real estate, etc… and was first used for patents in 2005 in Chicago by the firm Ocean Tomo.78 
Another format that is being introduced to the market is online patent auctioning service, a type of 
“ebay for patents” where patent owners can upload patents to the online infrastructure and potential 
buyers will do online searches and bid on the patents they’re interested in. The patent auction’s firm 
income is a commission of ranges from 10%79 to 25%80 from the total sales price of the patents.  

Ocean Tomo was the firm that started live auctions in 2005, and it was acquired by ICAP an 
interdealer broker and post trade in 2006 and it is now called ICAP Ocean Tomo81. IP Auctions 
GmbH is another firm involved in live auctions.82 Firms providing online patent auctions are 
IpAuctions.com83, LynxStreet.com84, and Sciencecentral.com85. 

3.4.3 Online Marketplaces for Patents 
Online marketplace for patents is a platform where patent owners can upload their patents into a 
website and potential buyers will visit the site and buy the patents that they are interested in. It is 
similar to the online brokerage, but in this case the listings are not up for auction but have set prices. 
This format is an equivalent to what amazon.com is for books and other goods. Firms involved in 
this model are yet2.com86, Tynax87, Open-ip.org88, and soon ICAP Ocean Tomo will also be 
launching their own online marketplace.89 

                                                                                                                                                                                                        
72 http://www.lavagroup.net/home.html 
73 http://www.pluritas.com/ 
74 http://www.redchalkgroup.com/ 
75 http://www.semiconductor.com/index.asp 
76 http://marqera.com/ 
77 http://www.ipvalue.com/ 
78 The New IP Marketplace: Patent Auctions Michelle Tyde and Andrea Bates – Greenberg Traurig 
79 http://www.iam‐magazine.com/blog/Detail.aspx?g=2052b9b1‐18c7‐4827‐8edf‐e4bd4c2c5478 
80 http://ipassetmaximizerblog.com/?p=71 
81 http://icapoceantomo.com/ 
82 http://www.ip‐auction.eu/index.htm 
83 http://www.ipauctions.com/ 
84 http://www.lynxstreet.com/site/index.html 
85 http://www.sciencecentral.com/site/4536830 
86 http://www.yet2.com/app/about/home 
87 http://www.tynax.com/ 
88 http://www.open‐ip.org/ 
89 http://icapoceantomo.com/coming‐soon 



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3.4.4 Licensing Agents 
Licensing Agents offer services to connect patent owners with licensees, they are like a “broker” but 
rather than for buying and selling, for licensing. The way they work is that they search for patent 
holders who might have the need to better monetize their patents through licensing and look for 
potential licensees. They can establish licensing programs both on the negotiation and the litigation 
approach. Examples of this type of actor are IPotential90 and ThinkFire91. 

3.4.5 IP Backed Financing 
IP backed Financing actors are either direct financial institutions providing loans with IP as collateral 
or are actors linking IP owners looking for financing with financial actors. Despite IP being an 
intangible asset, it is increasingly becoming “Intellectual Capital” that can be transacted and used as 
security for financing. Paradox Capital92 is a great example of this model that provides loans to 
individuals and companies utilizing IP as collateral93. There are actors that don’t provide the 
financing themselves, but bring together patent owners with financing actors, such as Marqera with 
their Transactions Capital service94 that helps patent owners find financing and commercialization 
opportunities. 

3.4.6 Royalty Interests Securitization 
Royalty Interests Securitization is a model on which patent owners with established licensing royalty 
streams can have access to financing secured by their royalty interests; basically they are selling 
future royalty incomes from their licensing agreements. A recognized actor in this model is AlseT 
IP95. 

3.4.7 Litigation Financing & Investment 
Litigation Financing & Investment are actors that strategically finance and/or invest in litigation, with 
the goal of having an income over the outcome of the suit. These actors work together with the 
patent owner in the assertion programs and then share the awards and settlements with them. 
Actors utilizing this model are Rembrandt96 and Altitude Capital Partners97. 

3.5 Summary of Business Models and Actors 
A set of