It might seem as if nobody ever conducted a thorough analysis of how many patents are abandoned when companies go bankrupt. Patent authorities don’t track the cause of a patent’s expiration, and many companies opt to abandon their patents before they expire for many reasons as strategic goals and utilized technologies shift within a company.
It’s our understanding that selling patents when a company is under bankruptcy protection (e.g. under chapter 7 of the United States Code) is a difficult task for SME’s that is often poorly conducted by the appointed trustee*) Here are some of the following causes of this predicament:
1) The assets of a company are often considered to be what’s in its inventory (e.g. buildings and equipment)
2) There is little time and money to conduct a thorough due diligence review of the IP
3) The trustee has a limited understanding of the competitive edge of the IP and is unable to identify potential buyers
The first point addresses the problem that IP, and especially patents, is often forgotten in the process of bankruptcy liquidation unless there are active licensees that are paying royalties. Most of the former employees, including the academic and technical staff members, are probably already employed somewhere else, so who will be left to handle the potential of existing and pending patents?
The second point addresses the problem that trustees are often given a fixed sum or paid at a lower rate than they would normally obtain elsewhere, thus limiting their interest in activities that will add opportunity costs to the case. The trustee is more likely to be focused on the execution and rapid realization of the assets in order to distribute the balance to the property’s owed creditors.
Finally, as the third point states, it is often difficult to identify potential buyers, and even more difficult to present the property as a fair business exchange unless you have a deep understanding of both the business and the technology. In some situations, a patent broker or patent auction house is approached to manage a sale, but engaging with this type of trader is only viable for the most clear-cut business cases.
If this situation is to change, either the creditors should seek out a third-party to conduct a proper sale of the IP, or the trustee should be offered a premium or incentive to find a buyer. The latter is improbable due to the risk of not being successful compared to the certainty of getting paid by doing more work. So, how about the creditors? Would creditors be prone to using (spending?) money to try and sell off the patents? Well, that would depend on the creditor’s risk profile. A bank would normally not take on that type of risk, but private investors might, which again depends on the risk level and a whole range of other variables.
But if the risk is low enough, it would be most obvious to try to take action, and that could mean using DirectInvite to contact the top five or top ten companies working with technologies in the same area. At a cost of $89 USD per contact, the risk is certainly worth taking for most creditors, even if it turns out to be reaching for the stars. Selling and outlicensing patents is always a game, so in order to win it, it is necessary to play on every chance, and using DirectInvite means playing it smart!
*) Some exceptions for this assumption exist if: the patents are already part of a license agreement; the company is part of a collaboration or the company is owned by an industrial investor.