How valuable are Palm's patents? | webOS Nation
 
 

How valuable are Palm's patents? 22

by Robert Werlinger Mon, 19 Apr 2010 2:32 pm EDT

 

 

Through all of the recent talk and rumor surrounding what might come next for Palm, one constant theme has been the value of the company’s intellectual property, holdings that are by themselves worth between $8 to $9 per share according to MDB Capital Group.

There has been talk that perhaps the market has been undervaluing Palm’s massive patent holdings, but if the company’s IP portfolio is as potent as some of these analysts think is, a recent article posted on ars technica poses an interesting question: why hasn’t Palm done everything in its power to leverage that IP though lawsuits and licensing agreements to keep cash flowing into its coffers? The answer could, of course, be a simple matter of business practice, in which case Palm has been carelessly leaving money sitting on the table for quite a while now.  The answer could also be that the company's massive war chest of patents has less relevance than we'd like to think. 

Thanks to govotsos for the tip!

22 Comments

Nice to have an Ace up your sleeves

Probably the patent portfolio is more valuable as a deterrent to keep from being sued by other companies. Odds are that while Palm's patents may be being violated by others Palm is likely also treading on their patents. Suing under that scenario would likely end up in a cross licensing settlement with little cash gained except by lawyers.

Exactly. See: Apple and Nokia.

How about;
1. the value of the patents is overstated by some analysts (gasp!)
2. the desire to play nice with other patent holders
3. the cost, mindshare and time required for patent suits can be very expensive for a company trying to right the ship

Analysts and everyone in the media always wants one reason for everything. We live in a world of black and white with no room for grey. When in reality the world is shades of grey.

...they can follow Apple and sue anything that has a voice to get funds that should have been coming in through patents being licensed abroad, BUT Palm does not have the financial strength (currently) to bicker about those aspects in court. Right now they're focused on R&D and "soon-to-be" announced hardware...whether it be a smartphone or tablet powered by webOS. $500 million can run dry pretty quick especially if current webOS devices aren't in consumers hands. More marketing, word of mouth, and Palm Awareness (through viral, etc.) will help expand on the cash @ hand. Hopefully w/ the launch on both AT&T and Tmobile will make curious onlookers (those on Sprint n Verizon) take another look @ webOS & realize "WOW THIS HAS BEEN OUT FOR OVER A YEAR & NOBODY HAS TOLD ME ABOUT IT?!?"

"...although time is money, patience is always a virtue."

Dammit, don't further legitimize that article!

Palm is a small, cash-strapped company. Patent licensing is likely happening, and that's not terribly lucrative. Patent litigation is expensive and takes time. Would people rather Palm spent their limited resources on litigation or developers/marketing?

I also don't like the indication that Palm's patents may be effectively worthless. I'm not a patent lawyer, and I haven't looked deeply into their portfolio, but anecdotal evidence points in the other direction. That is to say, if Palm's patent were worthless, they'd be on the receiving end of patent litigation (hello, Apple). Their patents have to be worthwhile enough for some behind-the-scenes cross-licensing and/or to act as a deterrent for potential litigation against them.

There are different kinds of patents, and not all patents are written or intended for the same purposes. Besides the content of patents, patents are written in different ways to suit different purposes. There are such things as "offensive" and "defensive" patents, and two patent statements for the same thing could be written in completely different ways to suit completely different purposes, such as offensive patent litigation or defensive positions in a marketplace.

Clearly Apple has some offensive patents, which are written in such a way as to make it easy to go after other companies which may encroach, and with which they are going after HTC. I would also think it highly likely that much of Palm's portfolio could be in defensive patents, which are strong patents that cover your own interests, in case anyone else decides they want to try to say their patents apply to your works.

Just because the patents aren't useful in an offensive strategy doesn't mean they aren't very valuable as a defensive patent portfolio. And "offensive" and "defensive" are just the simple cases, the strategy of building a strong patent portfolio is much more involved and in-depth than just saying "we have lots of patents on important things". The value doesn't just come from many patents on important things, or from your ability to sue other people with your patents, it comes in writing your patents for intended purposes and making sure that your portfolio fills the needs you require.

That raises an interesting question, a couple possibilities:
1. Palm sees little patent licensing royalties because they're mostly in cross-licensing agreements (this is still useful to a buyer since buying Palm would mean they have more patents to bring to the table for future cross-licensing agreements, i.e. HTC would own a bunch more patents which they can use to bargain with Apple).
2. As others have mentioned, patent litigation can be expensive and harm brand image. If Palm were to start lawsuits against all offenders it would cost a lot of money and they would be seen as patent trolls, this would destroy brand loyalty.

Going around suing people makes you look bad and weak. palm would rather have a good reputation and sell devices to get their stock up to $20 a share than become the next SCO and sit around at $8 a share.

If WebOS and the Pre flat out die, and Palm starts to drop down to rock bottom with no chance of coming back, they will start suing anyone and everyone.

I think it is a matter of bad business practice and management.

Additionally, patents often end up in a state of MAD. It is not a question of only what others have stolen from you, but what you have stolen from others. You trust your patents to prevent them suing you.

If Palm stops producing phones, it will start producing lawsuits.

Also, Palm has changed leadership, Rubenstein may prove more litigiously-minded than Eddy-baby.

There was a recent Engadget (or Gizmodo?) article that described the situation up to this point as as a d

I don't know much about patents, or patent law, but dammit, Palm has had the best stylus technology I've ever used.

There's some kind of stigma with the stylus now that I don't understand. It allowed precision very much unlike the sausage-stylus we use now on iPhones. A stylus is a much better way to interact, yet has suffered from being "out of style", and "no longer hip or cool", which is simply ridiculous.

i'd pose the question. If they have such value why isn't palm profit more off of them? Poor management? Don't know but if they have all this value they should be using it better. And if they are using them the best they can and not reaping profits maybe they are not that valuable. Either way it's an issue for someone.

Patent litigation is a very long, expensive process. You can't really leverage patents for immediate cashflow to run your business because other companies wil counter-sue. So it's mainly for companies that are already dead or have no operational expenses, or companies like Apple trying to block weaker competitors out of the market.

It could also be that Palm isn't run by a bunch of mindless jerks who want to abuse the patent system (unlike 99% of the companies today). They might be holding their patent portfolio in reserve to use defensively -- so they can, for example, create a user interface with pinch/zoom technology and Apple won't sue them like they try to sue other companies because Palm holds the patent that Apple needs to make a smartphone.

When companies use their patents against other companies for the sole purpose of making money they only gain in the short term and industry as a whole loses in the long term. So kudos for Palm for not being jackassess... so far.

If Palms IP was worth anything remotely close to $8 or $9 it would be reflected in their current stock price. The truth of the matter is that their IP isn't worth anything close to that valuation.

Also, didn't Palm spin off a big portion of it's patent portfolio a few years ago with PalmSource for like $300m?

I wouldn't be surprised if most of the valuable patenets from the years were lost in that spinoff to generate cash. And a $9 a share valuation of their current portfolio is over 5 times that PalmSource spinoff at $1.5b. Let alone the few hundred million they still have in cash and the value of WebOS among other things.

All of this would be reflected in the current stock price of the company. This isn't rocket science and there are very smart people that would sniff out this gross undervalued stock if it indeed warrented it. And I'm not argueing the EMH here even though it sounds like it...but all of this Palm buyout talk and patent portfolio talk has been in the news and rumors in SV and wallstreet for a few weeks now...if there was this drastic of an undervaluation in a company in the headlines, it wouldn't still be around right now, it would be opportunity lost, probably between 3/31 and 4/12 depending on your valuation.

additionally talking in the abstract is problematic.

someone needs to list what the patents are and who they are valuable. I did a patent search but i don't know enough about why they'd be useful and don't care that much anyways.

Unlike trademarks there is no need to sue every patent infringement immediately (unlike, say, trademarks).

I think Palm are making a sensible decision by not allowing themselves to be distracted - but even if Palm wanted to be evil their best policy would be to wait. Every iPhone sold that infringes a Palm patent (and there will be multiple infringements) would be more damages for Palm. Let Android take off too!

Of course the first response from Apple etc. would be to countersue so it really only makes sense for Palm to get nasty after they stop making phones..

I love this notion of "Palm owns very valuable and relevant smartphone patents, just ignore the fact that nobody seems to even know what they are!"

Patent lawsuits are not as expensive as people think. Yes it is expensive for individuals and small companies, but even Palm can burden the cost of several of them easily.

The cost of a patent case costs in millions, not hundreds of millions.

At this moment, it only means the value of the Palm's patent portfolio is not that valuable. I suspect some of them are already "outdated" due to the advances in portable technology. Some of them probably wouldn't stand in court. Afraid of being counter-sued is also a concern.

Business is business. It has nothing to do with being nice or taking a high road.

Some of the comments in the ars technica article made some good points for why Palm isn't pursuing a lot of patent suits. The one that makes the most sense to me is that they are trying to be bought. Starting a lot of suits now would saddle the new owner with a big headache and some big costs. That would definitely make Palm less attractive to a prospective buyer. If this is part of their reasoning for not going sue crazy, it looks pretty smart to me.

If you want to see Palm's patents, look here http://www.google.com/patents?rview=1&scoring=2&q=%22Palm%2C+Inc.%22&btn...

It looks like they do have a good bit of value.

The only way to truly assess the value of Palm's patents would be to put them up for sale. Of course, that is not going to happen unless they get themselves into insolvency, which probably won't happen soon. They will almost certainly get bought out before that happens.

You could get a feel for how much they are worth if an entity tried to forcibly buy Palm in a hostile takeover, buying large quantities of shares on the open market. No one wants to do that because it would likely raise the price to a level that would make profits in the near term very unlikely. And since they are openly courting a buy-out on friendly terms, this is likely to never happen at this point.

I actually doubt that they are actively licensing many of their patents right now. Their cash flow seems to reflect sales of phones, accessories, and apps, and little else. If they are liscensing their ip, they are probably very narrow in scope or limited in some way, IMO.

The obvious reason why they haven't gone and sued every company that has tread on their ip is probably just because it is very expensive to litigate. If you go up against an apponent with a lot of cash, the legal bills can easily go into the the tens of millions or more. Certainly if you were to go up against Apple, Microsoft, Nokia, or Google, you had better have a huge warchest.

Palm is in a better position to wait and see if someone is foolish enough to sue them. Then they can countersue for damages and legal fees, and at least have a better chance to minimize their legal expenses.