The patent acquisition market in the United States has become an established business. Though the value of U.S. patents can still differ widely, the market for buying and selling U.S. patent assets is a relatively known process. Historically, U.S. patents were always more valuable than any other patents from foreign jurisdictions. In fact, if a purchaser of patents was buying U.S. as well as foreign patent assets, the foreign patent assets — including Chinese patent assets — were given little to no value and sometimes were just “throw-ins” on a deal involving U.S. patent assets. This is no longer the case. Given the difficulty in protecting a company’s IP in the U.S., and China’s development of its intellectual property system, Chinese patents are in some instances valued at higher or equal value to U.S. assets involving the same technology. This situation represents a disruptive sea change from the historical valuation of Chinese assets. Now foreign assets, including Chinese patent assets, are viewed favorably and valued in any patent acquisition.

Every patent acquisition involves a valuation in order for the parties to agree on a sales price. Many factors can determine value. For instance, the purpose for which the patent assets are being acquired can influence the valuation. If a company is buying assets for defensive purposes the valuation is tied to the perceived benefit of owning the assets for that objective. If the patent assets are being purchased with licensing or litigation in mind, the valuation is tied to expected licensing revenues, costs of litigation, potential outcomes, and determination of the inherent risks of litigation.

Buying Chinese patents are no different in this regard as companies will determine the value based upon either defensive or offensive needs. However, China’s patent laws allow for injunctions and to date, injunctions for successful cases have been par for the course. Meanwhile U.S. patent laws are such that getting injunctive relief is very difficult. For example, it took 4-5 years for Apple to obtain an injunction against Samsung — and Apple is a company with unlimited resources at its disposal. In addition, companies that do not have products in the marketplace face substantial difficulties in getting injunctions in the United States. Thus, companies are looking to foreign jurisdictions like China to protect their inventions.

Going forward it will be interesting to see how the patent acquisition market views Chinese assets and if the preference for foreign assets in patent purchases remains a value-added activity. If Chinese assets are increasingly sought after in patent asset purchases, there will be additional disputes filed in China. Thus, how China handles and adapts its IP system to the increased value of the patents granted by the country will be a key point of interest in 2017.

More from this series: China Emerges as New Hot Spot for Patent Litigation Patent Litigation in China: What Remedies are Available?

For more information on this topic, please visit our Patent Protection service page, which is part of our Patent Practice.

Klemchuk LLP is an Intellectual Property (IP), Technology, Internet, and Business law firm located in Dallas, TX.  The firm offers comprehensive legal services including litigation and enforcement of all forms of IP as well as registration and licensing of patents, trademarks, trade dress, and copyrights.  The firm also provides a wide range of technology, Internet, e-commerce, and business services including business planning, formation, and financing, mergers and acquisitions, business litigation, data privacy, and domain name dispute resolution.  Additional information about the patents firm and its patents attorneys may be found at www.klemchuk.com.

Klemchuk LLP hosts Culture Counts, a blog devoted to the discussion of law firm culture and corporate core values with frequent topics about positive work environment, conscious capitalism, entrepreneurial management, positive workplace culture, workplace productivity, and corporate core values.

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