The IP ADR Blog had a brief but interesting post last week about settling a patent infringement case by selling the company. The post goes on to raise some issues which come up when trying to value your company for that sale.
So – when is this actually going to happen, and what does it all mean, strategically?
Firstly – I can’t imagine this ever happening to the defendant. Why would a patentee settle a patent dispute by buying the defendant? Perhaps if the patent’s validity is shaky and the defendant has some asset of interest – other IP? A good market position? This all seems unlikely, but I’m interested to hear of contrary examples…
If you’re the patentee and the defendant offers to buy you out as part of a settlement – well, then what? Well, interestingly this suggests that the defendant is reasonably confident that the patent will be a useful asset for its own use (and presumably against its other competitors). So, if anything, this should signal that the defendant has at least some belief in the strength of your position – or they wouldn’t bother. (Though, I can think of some exceptions to this rule.)
What next? Well that depends on the strength of your position and the alternatives you have in place. Would it be better for the shareholders for you to simply press on for a verdict? Can you fund this? (Which jurisdiction are you in, and how much will it hurt the defendant?) If you believe you’re likely to win the patent dispute, then something as drastic as sale of the company will usually only come up when there is some other near-cataclysmic event at play – eg. lack of funds (or shareholder support) for the ongoing litigation. The defendant will be aware of this – as this is presumably why they made the offer in the first place.
How do you position for this? Make your best alternative (BATNA) as good as you possibly can (best done before while developing the litigation strategy – ie before you commence the court proceedings), and sit back and wait for the offer. Then ask – which is better for the shareholders. Then ask them.