Stellar Start-Ups: A patented approach to the business of IP

Gideon Keidar's company specializes in the fine art of hi-tech intellectual property and patent monetization.

By DAVID SHAMAH
Gideon Keidar 88 248 (photo credit: Courtesy)
Gideon Keidar 88 248
(photo credit: Courtesy)
The worldwide shakeout in hi-tech has been painful, to say the least. But after all the pain - the fire sale on the furniture and the servers, the tearful exit interviews, the rush to polish up CVs and get more LinkedIn recommendations - there remains an indelible memory of the experience, of the camaraderie employees shared. That, and the patents. And those patents are worth money, with ex-employees sometimes cashing in - and cashing in big. Those who have been able to do so have to thank, in large part, Gideon Keidar of ActiveLinks (activelinks-ip.com), an Israeli company that specializes in the fine art of high-technology intellectual property (IP) and patent monetization. "We've been able to make several deals over the past few months with former employees of organizations that have fallen victim to the recession, and in some cases, the patent holders have been able to earn significant amounts of money," says Keidar. "We're glad to be able to help them achieve this financial windfall." Patent trading is a big business, if a discreet one, he says, and like in any other business, how you sell your wares is nearly as - or maybe even more - important than the goods themselves. Activelinks represents sellers seeking the highest price for their patents and ensures that the offering is positioned properly, to maximize its value to customers. In the patent game, this is called "maximizing price justification," and Keidar, along with his staff, works with patent sellers to ensure the proper valuation. "A patent that without price justification may ordinarily sell for only $20,000 to $100,000, could potentially sell for many hundreds of thousands, or even more, if presented with a strong price justification," he says. While some of the deals Keidar does revolve around patents owned by companies that have closed down - such as ActiveLinks did for defunct Israeli start-up VLSCom last year (tinyurl.com/ohm2pm) - many other patents are sold by individuals, or by companies that have changed direction and put unused patents into cold storage. "In order to ensure that a patent remains registered under their name, companies have to pay maintenance fees, sometimes to multiple jurisdictions. The technology is still good, but they just aren't using it," says Keidar. "Instead of having the maintenance become a drain on company resources, we help them sell the patents, getting as much as possible for them," he says. "We go through dozens of such deals a year, and most of them the public never hears about, since a patent sale could be perceived as a distress signal to investors in a company. But usually it isn't about distress - it's more about 'housecleaning.'" If the company changes direction again and decides it needs the technology it sold the patent for, it can always license the patent - often still coming out ahead, since the licensing fees are usually less than the amount the company earned when it sold the patent. "Patent lease-back is a relatively new development, and many companies aren't aware that this is an option," Keidar says. "But if a company needs funds to develop a new product or service, they may decide to sell patents for technology that are less relevant to their current products, and it makes sense to raise money by selling that technology. We try to educate them on this option as well." Another source of patents comes from companies that have merged or been acquired. "M&As often render many patents obsolete for their owners, because their organizations are now expected to contribute to whatever the new parent company is doing," he says. "If the buyer isn't interested in some of the patents held by the company it is acquiring, the patent owners often try to sell them, since they will just end up on the shelf anyway." ActiveLinks also has clients who have invented a product or process, had it patented and are looking to sell or license, Keidar adds. ActiveLinks has offices throughout the world, including the US, Europe and the Far East, and is regarded as highly trustworthy in the patent trading world, says Keidar. In addition, he says, the company works closely with a gentleman named Rich Belgard, considered one of the world's greatest experts on intellectual-property matters. "We have a lot of connections with the organizations that specialize in patent acquisition, and they trust us," Keidar says. "And they know that we are fully committed to representing our clients, the sellers." ActiveLinks does "due diligence" on all patents it is asked to handle; if a patent isn't registered with the US Patent Trade Office or other international regulators, ActiveLinks won't represent the seller, unless s/he can provide convincing evidence. Perhaps that's why, says Keidar, that in a business rife with litigation, not one of ActiveLinks's clients has ever been challenged on IP ownership issues. Keidar has been running ActiveLinks for over 10 years, long enough for him to sniff out "patent trolls," who specialize in buying patents and then sue unsuspecting victims for alleged infringement. "Serious companies prefer to work things among themselves - they stay far away from the courts, if possible," he says. "We screen hundreds of clients a year, and we don't proceed if anything appears unkosher," he adds. So, just how much can a patent holder make if s/he sells? It depends, says Keidar, adding, "Most of our deals range between $200,000 and $1 million," although very few patents can fetch more than $1m. Keidar is confident that his organization can net sellers the highest price for their work, guiding holders in building a case for price justification, accompanying them throughout the negotiation process and cutting down on the bureaucracy and paperwork. "We have to do our work well, because we work on strictly a contingency basis. If the patent holder doesn't sell, we don't get paid," Keidar says. And in the current economic climate, many companies with money in the bank are seeking to buy patents, hoping to cash in on their usefulness when the economy improves. "Israeli hi-tech people are well-connected, and if they put us in touch with a seller whom we end up representing in a deal, we're happy to pay them a commission," says Keidar. Just because the economy is tough and a company doesn't make it, doesn't mean that their technology can't continue to benefit mankind. And who knows - perhaps the money from the sale of one technology patent can help a company rise again, creating more jobs - and maybe even more patents, which ActiveLinks will be glad to help sell, too! www.israeltech.net