PORTFOLIO DEVELOPMENT LESSONS FROM UBER IN 2017

Despite having a seemingly disastrous year, ride sharing pioneer, UBER, the took great strides to improve its patent position in 2017.  Licensing deals most likely more than triple UBER’s total number patent holdings.  Using a combination of ordinary licensing deals and less common patent purchase program, Uber improved its IP holdings to value distribution, obtained tools to impede competitors, and removed potential litigation fodder from the market, increasing the company’s overall value.  Biotechnology companies can take lessons from UBER’s accomplishments for improving their own patent portfolio.

1.     Enhance your portfolio through licensing

In January 2017, UBER purchased 66 patents and 10 patent applications from AT&T.  Of the assets acquired, only 5 patents relate directly to ridesharing.  The rest relate to various technologies such as messaging, call handling, routing network traffic, VoIP, and billing.  Nonetheless, UBER this purchase increased the size of its patent portfolio by more than 45%, making UBER a dramatically bigger player in the patent game, and the AT&T purchase was named LES USA-Canada’s High-Tech Sector’s Deal of Distinction for 2017. 

What’s the deal?  Most of the acquired patents are not directly related to UBER’s primary business. 

Highly valued tech start-ups (“unicorns,” like UBER) generally have few patent assets.  This creates a “patent-gap” in which the distribution of IP holdings for these companies does not correlate with their value distribution.  As these companies’ approach events that force them to strengthen their IP position such as exit events or entry into new markets, some of these companies have opted to improve their patent position by purchasing IP assets.  Such purchases have been referred to as “backfilling,” and many patent practitioners expect backfilling to occur more often.

Various factors likely lead UBER to improve its patent portfolio. (i) Speculation has swirled the idea that UBER will go public in the near future.  The AT&T patents improves the disparity between UBER’s IP holdings and their value distribution, filling the patent-gap and making UBER more attractive to potential investors. (ii) Competition has become an issue for UBER, not just from U.S. competitors like Lyft and Curb, but from foreign competitors such as Didi Chuxing, Grab, and Ola and various start-ups like Gett, Juno, and See Jane Go that are garnering attention from investors.  Even if the AT&T patents don’t present significant infringement threat to UBER competitors, they could slow these competitors’ movement into the marketplace. And, (iii) Snapping up third-party patents that could potentially be used to sue you by patent trolls is a great defense against patent litigation.  UBER is becoming a target of patent litigation.  UBER was named as a defendant in 6 patent cases in 2017, 3 patent cases in 2016, and 1 patent case from its 2009 inception to 2015.  By removing third-party patents from the market, UBER eliminates the possibility that these patents can be asserted against it, reducing the likelihood of further litigation.

Facebook made a similar deal with Microsoft in April 2012, spending $550 million purchasing or obtaining rights to 925 patents Microsoft acquired in the auction of AOL assets, bolstering its patent portfolio ahead of Facebooks May 2012 IPO.  At the same time, patent litigation naming Facebook as a defendant peaked in 2012, suggesting that the purchase was meant to ward off patent litigation.  

The Lesson(s):  You are unlikely to find a cache of 66 biotechnology patents that are related directly related to your technology.  Nonetheless, many biotechnology patents are available for license through Universities or other holding organizations.  Adding licensed assets to your portfolio provides a number of advantages: (i) Attract investors.  Even if these patents are only tangentially related to your technology, even one or two licensed assets that provide issued patents for an early stage portfolio or that round out your portfolio by providing, for example, broad method or class composition claims, will make your company more attractive to investors. (ii) Reduce freedom-to-operate issues.  The best defense to a freedom-to-operate issue is a license to the patent at issue.  As your company matures it’s important to keep an eye out for patents that could present freedom-to-operate issues.  If the patents identified are available for license, you should consider snapping it up to both bolster your patent portfolio and eliminate a freedom-to-operate issue.  (iii)  Avoid litigation.  When money is on the line, the line between competitor and collaborator, friend and foe is often very thin, and academic inventors almost always have many collaborators.  Obtaining a license to collaborator’s work before they can spin-off their own company can avoid years of litigation and maintain the bonds of friendship.   

2.     The crowd could be the answer?

UBER appears to have taken a page from Facebook’s playbook to build its portfolio by licensing.  UBER also took a page from Google’s playbook by launching UP3, UBER patent purchase project, in April 2017.  UP3 is a patent purchase project in which patent holders were given an open application window to propose a price for their patent holdings.  UBER then reviewed the application and patents involved in the offer, and gave (will give) the patent holder a yes or no answer. 

I haven’t seen any report describing whether UBER was successful with this program.  However, when Google launched a similar program in 2015, it resulted in the purchase of 28% of the patents offered for between $3000 and $250,000, and almost half of the participants offered less than $100,000 for their patent assets.  Given the increasing cost of patent filing and prosecution, patent purchase programs seem to be a pretty good means for building a patent portfolio cost effectively and keeping potentially damaging patents out of the hands of competitors and patent trolls.  $100,000 is a small price to pay to avoid the expense of years of litigation. 

The Lesson:  Maybe a patent purchase program isn’t the answer to all your patent woes, but a well worded request could produce patents and applications that file holes in your portfolio or otherwise bolster your patent position.  Taking it a step further, a request for disclosures, rather than patents, designed to help resolve R&D problems puts to use the expertise of potentially thousands of scientists and inventors to work, while potentially saving thousands in contractor/expert costs.  

However, the important lesson in this case is to think outside the box.  It’s important to keep an open mind and an open eye for IP assets that could supplement and enhance the portfolio you’re developing in-house.  Whether these assets are identified in a patent search, as cited references during patent prosecution, or from a patent purchase program, they all increase the value your portfolio and reduce the likelihood of being sued for patent infringement, while providing a means for warding off competitors.  Keeping an eye on the marketplace is never a bad thing.