Yahoo Lines Up Bids for About 3,000 Patents
June 07 2016 - 8:40PM
Dow Jones News
Yahoo Inc. has kicked off an auction for a portfolio of about
3,000 patents expected to fetch more than $1 billion, according to
people familiar with the matter.
In recent weeks, the internet company sent letters to a range of
potential buyers for the patents, which date back to Yahoo's
founding in 1996 and include its original search technology, one of
the people said.
Yahoo has set a mid-June deadline for preliminary bids, this
person said, and hired Black Stone IP, a boutique investment bank
that specializes in patent sales, to run the auction.
A Yahoo spokeswoman confirmed the company is exploring the sale
of about 3,000 patents and pending applications. "This represents a
unique opportunity for companies operating in the internet industry
to acquire some of the most pioneering and foundational patents
related to web search and advertising," she said in a
statement.
Yahoo is launching the patent sale in the midst of a
high-profile auction for its core web business. Verizon
Communications Inc., seen as the leading contender, bid about $3
billion for the internet properties before the Monday deadline for
second-round bids, a person familiar with the matter told The Wall
Street Journal.
That figure may be lower than initial estimates on the value of
Yahoo's core business—which analysts said could fetch from $4
billion to $8 billion -- in part because Verizon isn't bidding on
the bulk of Yahoo's most valuable patents.
In April, Yahoo assigned 2,659 patents to a separate subsidiary
called Excalibur IP LLC, according to a filing with the U.S. Patent
and Trademark Office. That action, seen as a step toward a patent
sale, occurred on the same day as the deadline for first-round bids
in the auction for Yahoo's core business.
The trove of Excalibur patents cover key areas such as search,
e-commerce and online advertising, including a patent related to
ad-matching technology that was at the center of a legal dispute
between Yahoo and Alphabet's Google. That technology, which matched
online ads to Web-search results, was developed by Overture, an
online ad company that sued Google in 2002 for patent infringement
before being acquired by Yahoo a year later. Yahoo and Google
settled in 2004, with Google giving Yahoo stock worth more than
$300 million in exchange for a perpetual license to Yahoo's
ad-matching technology.
A Yahoo spokeswoman said the company is offering a smaller group
of patents—500 U.S. patents and over 600 U.S. pending
applications—as part of the auction of its core web business. Those
patents are seen as necessary to the underlying technology of
Yahoo's web properties, people familiar with the matter said.
The company has invited strategic buyers, private-equity firms,
and investment firms focused on intellectual property to submit
bids, the person said. It is unclear how many parties are
interested.
Alphabet Inc. and Microsoft Corp. are among the obvious
potential buyers for Yahoo's patents, said Maulin Shah, managing
attorney at Envision IP, a Raleigh, N.C., law firm that specializes
in patents. Alphabet and Microsoft didn't immediately respond to
requests for comments.
In April, Mr. Shah appraised about 2,000 of Yahoo's enforceable
patents and estimated them to be worth $965 million to $1.34
billion, based on a variety of factors including the company's
historical patent licensing revenue.
Yahoo said in February it was exploring divesting nonstrategic
assets, including patents and real estate, which the company
estimated could generate between $1 billion and $3 billion in cash
this year. The company has already collected about $600 million
from patent sales and licensing fees in the past three years.
Patent sales are notoriously unpredictable and prices can often
be bid up depending on whether a company's patents can be asserted
against other companies in lawsuits or if patents are considered
strategic.
In 2011, Nortel Networks Corp. sold a trove of wireless patents
for $4.5 billion to a group of bidders including Apple Inc.,
Microsoft Corp, BlackBerry, EMC Corp. and Sony Corp. The deal
marked one of the highest-profile bidding wars for patents that
pitted the so-called "rockstar consortium" against Google Inc.,
which was the stalking horse bidder, originally submitting a bid
for around $900 million for the same set of patents.
When Eastman Kodak Co. puts its portfolio of patents covering
digital photography and web-based photo applications up for sale,
it expected a similarly frothy auction. The imaging company used
the patents to sue a bevy of technology companies and licensing
from the patents brought in $1.9 billion in revenue for Kodak from
2008 to 2010. While the auction attracted a number of high-profile
technology companies such as Apple and Google, the portfolio
eventually sold for just $525 million to patent buyer Intellectual
Ventures LLC.
Write to Douglas MacMillan at douglas.macmillan@wsj.com and Dana
Mattioli at dana.mattioli@wsj.com
(END) Dow Jones Newswires
June 07, 2016 21:25 ET (01:25 GMT)
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