Tech+IP Insights into 2024
As we step into 2024, let's take a brief pause (and perhaps a well-deserved coffee break) to reflect on the rollercoaster ride that was 2023 and start to look into what the new year might portend. We’re excited to share a glimpse into what we see the future holds for the world of Patent markets and to hear your thoughts as we re-connect. From the Tech+IP perspective, the coming year promises to be as dynamic and eventful as ever, bringing to fruition trends that are not just game-changers but potentially watershed moments in our industry. Here are the three trailblazing trends we predict will make waves in 2024, each with its own twists and turns as if being dragged by a Dragon in the Year of the Dragon. . Let's dive in and see our predictions for what's in store (in no particular order)!
1. Financialization - Litigation Funders, Insurance, and IP-Backed Asset Focus
In 2024, what we are calling “financialization” of the patent market should be accompanied by a notable shift in the role of PE funds and litigation funders. Moving away from just the traditional model of backing patent trolls, these funders are increasingly aligning with operating companies. This change is in response to OpCos actively asserting their innovation positions through patents and looking for additional revenue streams or at least non-dilutive capital. Litigation funders appear more focused than ever on supporting these entities in enforcing their IP rights, recognizing the strategic value of patents in establishing and maintaining competitive market positions.
Concurrently, we see a growing appetite for financing IP-backed assets, an area that's gaining traction amidst various market conditions. This includes leveraging patents in distress (or pre-distress) situations, where they are used as collateral, sold for liquidity, or positioned to generate future royalty streams from licensed technologies or the interest by licensing groups. The financial market’s interest in patents as viable and valuable assets appears more pronounced, reflecting a broader understanding of their potential as investment vehicles.
This trend is being facilitated in our view by a more sophisticated approach to valuing these assets, with a focus on demonstrated potential to generate revenue, either through strategic licensing agreements or as leverage in litigation. And, the market is understanding that this collateral is somewhat like a garden, needing proactive maintenance and routine re-valuation to ensure continued value. While AI is on everyone’s tongues, “eyes on claims” and charting remain indispensable value anchors. (More on this in trend #3.) The financialization of IP is in our view evolving into a nuanced ecosystem where patents are central to both corporate strategy and investment models. More recently, the rise of insurance-wrapped IP-backed lending is helping bring to more conservative investors into patent opportunities – and as a result creating more competition and holding the potential for lowering the cost of lending. We are still far from financial markets valuing patents and licensing revenues commensurate with the risk associated with high quality assets – and the hope is that more transparency, more deal flow and better advice on which IP assets have underlying market value will help.
2. De-globalization - Shifting Dynamics in Courts and Business Strategies
The year 2024 sees de-globalization significantly influencing the patent market, particularly in the competition among patent courts and local governments. Nations are increasingly promoting their agendas through (or at least impacting) their patent systems, striving to create favorable environments for domestic innovation, markets, and IP protection. This trend is leading to a more competitive landscape where patent courts seemingly vie to attract high-profile cases, each showcasing their efficiency, expertise, and proclivities.
The impact of de-globalization is also evident in the business strategies of companies - the semiconductor industry being a very good example in the way it has shifted to re-insourcing and vertical integration, driven by the need for supply chain security and technological sovereignty. Witness, for example, Apple, Amazon and even Microsoft announcing new in-house chip design efforts and teams. Entities like these are not only focusing on manufacturing, but also on securing patents critical to their vertically integrated processes. This trend underscores a strategic shift where companies are keen to control more stages of their production and innovation cycles, leading to a growth in patent filings and a heightened focus on securing robust IP portfolios to safeguard these new business ventures.
Separately, we eagerly await the US Supreme Court’s ruling on Chevron deference expected in June. If Chevron gets axed, what happens to the PTAB and the “unified” strategy to exploit it? Building on 2023, another year of UPC promises to be a game changer – and an early harbinger might be found in a new case filed by historically conservative Dolby Laboratories.
Finally, 2024 should be the year where patent owners and innovators notch some wins and, with a bit of luck (and hard work), cooler heads prevail in the EU and the stated desire for “efficiency” learns from the lessons of IP history and “efficient infringement” is called out for what it really is. Remember, smoking didn’t cause cancer, either. but the cigarettes did get exported to Europe and the rest of the world.
3. Artificial Intelligence (AI) – Can it Revolutionize Patent Valuation?
In 2024, the potential of Artificial Intelligence (AI) in patent valuation remains a subject of keen interest, but has flourishes of forward movement and notable failure as the machine learns like a prodigy. While AI-driven engines, with their ability to process extensive patent-related data have significantly modernized many aspects of the traditional valuation approach, a core problem is a lack of high quality training data. There is no Zillow for IP like The New York Times and other value added literature was for ChatGPT (legal commentary aside). This limitation underlines the continued (and perhaps heightened) relevance of manual curating and maintaining a disciplined and continued tie to “real world” data. One area in which we do believe AI could make a material contribution in IP this year is the generation of claim charts – a precious and time-consuming predicate to understanding patent value and executing transactions.
At the same time, there's a growing anticipation in the industry for performance metrics to evaluate the effectiveness of AI-based valuation engines and in mechanisms for securely managing and learning from transaction – related information. Data has reliably been an antiseptic to bias for a millennium and we think IP is one of many areas where facts matter.
Finally, we at Tech+IP believe that revolutions are iterative and that 2024 will be more about understanding how, when and why AI should be used by experienced IP professionals and less about the machine itself. Some of the high-profile crashes of 2023 in IP-backed lending get replaced with further data and the opportunity to course correct as prudent.