Intellectual Property Focused Merchant Banking

When one thinks of a merchant bank, Morgan Stanley and Goldman Sachs come to mind, or maybe the original merchant banks that were established by Italian traders in the Middle Ages. Or one thinks of junk bonds, mergers and acquisitions, derivatives and other exotic financial instruments. IP Holdings LLC does none of that stuff.

The “IP” in their name stands for “intellectual property” which includes mostly patents, but also trademarks, copyrights and trade secrets. IP Holdings is an IP-centric merchant bank that owns outright or has interests in a portfolio of patents and companies, and they’ve acquired these interests in a most noble fashion. To understand how, one must realize that after anti-trust litigation, patent infringement litigation is the second most expensive.

Estimates of the median cost of a patent infringement lawsuit run from $3 million to $5 million. That’s not a problem if the patent owner is a large, profitable corporation that can afford the cost of going to court to enforce its patent(s). But what if the patent owner is an individual or small business or university? IP Holdings created a unique business model that addresses the needs of the patent owners whose patent has been infringed, but cannot afford the cost of patent litigation.

The patent owner transfers his or her (if the patent owner is an individual) or its (if the patent owner is a small business or university) patent(s) to an LLC (Limited Liability Company), and the LLC becomes the plaintiff in any ensuing patent infringement litigation that is filed against the infringer(s) of the patent. This substantially reduces the patent owner’s liability, since the infringer cannot file a countersuit against the original patent owner, jeopardizing the original patent owner’s assets. The original patent owner receives an ownership interest in the LLC in exchange for the patent or patents that are transferred to the LLC. IP Holdings also receives an interest in the LLC in exchange for financing the litigation. And there may be other parties that participate in the litigation and also have an interest in the LLC.

If the patent enforcement campaign is successful – they win the patent infringement lawsuit at trial or reach an out-of-court settlement with the infringer(s) – the original patent owner, IP Holdings and its affiliates that assisted with the litigation share in the proceeds. For the original patent owner, this is a very attractive arrangement. The original patent owner does not need to come up with any cash on the front end, the original patent owner’s liabilities are substantially reduced, and IP Holdings and its affiliates are only paid if and when they produce results for the original patent owner!

IP Holdings also operates an idea incubator that finances the development of (we love this term and wish we’d thought of it) “disruptive technologies” and “break-through innovations.” And “break-through” is not just hype! One of IP Holdings portfolio companies, Ryogen LLC, has been awarded numerous patents for genes it discovered.

The IP Holdings portfolio includes the following companies and the patents they own:

• Acticon Technologies LLC – “Smart cards” such as the PCMCIA cards used in laptop PCs

• Advanced Card Technologies LLC – Technology behind gift, phone and customer loyalty cards

• Advanced Video Technologies LLC – Full Duplex Single Chip Video Code patent used in camcorders

• Digital Technology Licensing LLC – Adaptive Multi Rate Codec patent that permits backward compatibility in cell phones and Bluetooth devices

• Leighton Technologies LLC – Patents related to the manufacturer of “smart” cards

• Ryogen LLC – Patents for genes with potential applications in biomedical research, diagnostics and drug development

In 2010, IP Holdings acquired IPOfferings LLC, a patent broker and consulting firm in Boca Raton. The founder and president of IPOfferings, Richard Ehrlickman, became a vice president at General Patent Corporation, responsible for new client development for the GPC Group of Companies that includes IP Holdings and now IPOfferings. Rich Ehrlickman remains president of IPOfferings in charge of all patent brokerage activities.

In addition to interests in these LLCs, IP Holdings also has its own patent portfolio. And talk about walking the walk: Our favorite is US Patent No. 7,296,015 titled “Apparatus and Method for Identifying and/or for Analyzing Potential Patent Infringement!”

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