Forming a Monetization Strategy–Acquisition Considerations (Part 1 of 6)

Creating an effective monetization strategy requires a multi-dimensional game plan, a game plan involving (1) acquisition considerations; (2) campaign costs; (3) revenue potential, taking into account the (i) market landscape and (ii) importance of the read; (4) assessments regarding the (i) strength of the read; (ii) claim construction positions; (iii) validity, including (a) forum considerations and (b) validity assessments; (5) filing strategies; and (6) compelling story telling.

These variants necessitate each patent asset’s monetization strategy to be uniquely tailored—no two monetization strategies are the same.

To be a successful IP investor, you’ll need to formulate and execute effective monetization strategies for each of your patent assets.

To aid in the process of forming a monetization strategy and, more particularly a business model behind a particular campaign, I’ve organized the content as a list of questions and checklists to consider.  Have each of these points thoroughly addressed, before launching a monetization campaign.

In this post, I’ll be discussing (1) acquisition considerations.

Acquisition Considerations:

Are you acquiring a patent asset with:

1.  Complete interest, with no backend arrangement to the seller?

Providing no backend interest to the seller leaves more equity for you, which is better.  But this usually requires an upfront capital investment–see below regarding assessing costs attributable to the acquisition.

2.  No money down, and only backend interest to the seller?

If you are providing a backend arrangement to the seller, work the numbers to determine your take-home equity interest (be sure to factor in the law firm’s cut).  If your take-home equity interest is less than 5%, then consider another structure or passing on the opportunity

3.  A hybrid of the two above?

Negotiate for the best terms when acquiring an asset–you may need to strike a balance between an upfront capital investment and a worthwhile equity interest.

With respect to costs attributable to the acquisition:

1.  If you put down money, what percentage of your investment capital did it consume?

Don’t put all your eggs in one basket.  At a minimum, have enough investment capital to acquire 5 to 10 portfolios.

2.  How quickly do you need to realize your investment capital?

If you can hold out, you can take more risk and hold out for higher settlements.  If you need to recoup your investment quickly, you’ll need to consider offering steeper discounts to licensees, to obtain quicker settlements.

3.  How much would you like to earn as a return, and what over what time frame?

This should frame your goals for the particular campaign, as well as for your entire portfolio pool.  Determine how much gross revenue you’ll like to generate from your campaigns, calculate your personal revenue based on the gross revenue, and ensure this aligns with your personal goals.

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