Why Yahoo Is Auctioning Off Over 3,000 Patents [e271]

Full Podcast Transcript

NASIR: Welcome to our podcast where we cover business in the news and add our legal twist.
My name is Nasir Pasha.

MATT: And I’m Matt Staub.

NASIR: And welcome back after – I don’t know – it’s been like weeks and months since we had our last episode, right?

MATT: Yeah, it’s been a while. Even so much, we were actually one of the rare instances we’re in the same city and still kind of figuring out a way to record.

NASIR: That’s true. That’s true. Well, I mean, we do get busy sometimes. The podcast isn’t all we do. We actually do lawyer once in a while, right?

MATT: I don’t.

NASIR: Okay. I’m sure you get the question, too. I don’t know what’s more embarrassing – when people ask how long it takes us to actually do this podcast and how much time we spent or maybe more embarrassing is how little time we do to prepare for these podcasts. I’m not sure which is more embarrassing.

MATT: Well, you don’t want to prepare too much.

NASIR: We know you don’t.

MATT: Don’t work and don’t prepare. Just sit around for the week until podcast recording. But I think it’s been good we waited a couple of weeks. I think we have a good topic to discuss today.

NASIR: Yeah, Yahoo!

MATT: Yeah, Yahoo. I think this is pretty fresh news – at least as we’re recording this.

NASIR: By the time our podcast comes out, it’s always old.

MATT: So, Yahoo is looking to – amongst other things – sell a bunch of patents that it owns. I guess more than 3,000 even though, when I did a search, it only pulled up 2,661. Maybe I’m missing some.

NASIR: That’s because only 2,661 was transferred to Excalibur. I think they’re selling some under Yahoo, I think. I’m not sure.

MATT: Okay. So, over 3,000 is looking to sell. It’s transferred, like you just said, 2,661 to this entity that it set up – Excalibur IP LLC. I guess it’s holding on to another or it’s intending to retain more than 2,000 other patents. All of these patents either have been issued or are under approval review. Obviously, we’re just going to talk about the ones that are up for auction.
So, they transferred all of these patents – or a bunch of these patents – to this entity, Excalibur, and are looking to essentially find the highest bidder.

NASIR: Obviously, we all know they’re been in trouble for years. if you’ve been to Yahoo.com recently then I’d be asking, “Why are you going to Yahoo.com?” but, either way, everyone kind of knows they’ve been going down for a while. They even hired a Google exec a few years ago as a CEO that didn’t seem to do much.

MATT: It seems like she might be on the outs here.

NASIR: Yeah, but right now, their patents that they put into this LLC, they literally transferred it to a separate LLC that they’re going to be auctioning off. I mean, they’re saying that – at least Yahoo is saying that – it’s valued over a billion dollars.

MATT: Yeah.

NASIR: And so, that’s not insignificant. They included – of course – a lot of their search stuff. I mean, I basically went through every single one here.

MATT: I bet.

NASIR: No, I didn’t, but I did skim through a lot of them. A lot of them are like something to do with search or targeted advertising or user generation of keywords for content authored by them is one of them. It’s pretty fascinating because you’ll look, I mean, they still have, of course, all patents. They retain the names of the actual inventors but patents are treated as personal property in the sense that you could sell, transfer, and assign just as you would a car or a can of soda – which is definitely a commodity as well. But, of course, when you assign a can of soda to somebody, the paper work is pretty simple. In fact, you don’t need any paper work at all. But patents are a little bit of a different story when it comes to the actual formality of transferring it.

MATT: Yeah. Just a real quick touch on some of these patents, like you said, you skimmed through all of them but I’ll just… I mean, it ranges from things that make sense like identifying IP addresses for spammers. Like, okay, that’s something I can decipher. But some of them are just so vague. Like, one just says web service.

NASIR: Nice.

MATT: Human responses and rewards for requests at web scale. It’s a wide variety. I’m sure this makes more sense to people that draft and file the patents. But, yeah, I mean, there’s an actual formal process that you have to go through to do the assignment. Like you said, it is classified as personal property. I’ll link the USPTO so that people can see. You can see how the page we have pulled up that you and I are both looking at now is that it’s the assignor, Yahoo, to the assignee, Excalibur. You can see the actual assignment that’s already been done. I wonder, how many hours of legal work so you think it took to do these assignments?

NASIR: Yeah, exactly. That alone probably cost a billion dollars. I mean, they’re probably breaking even, you know.

MATT: They have correspondent John Rauch. I guess he’s probably doing all right with that.

NASIR: Unless he charged like a dollar per, then he probably would have made like $3,000 or so.

MATT: So, the interesting thing with this – or one of the things – is they’re selling these, right? When we said they valued it more than a billion dollars.
Other than holding on to them, one alternative would be to license these, right? You think that’s too burdensome or it’s just not worth it?

NASIR: I think it’s not worth as much, right? I mean, you’re not going to get as much money from them and I think this goes towards what Yahoo is planning on doing. It seems that they’re setting themselves up with an asset sale. They want to start unloading these things. I’m not familiar with what the business reasons are and why they’re starting out with these patents but I would assume, I mean, the value of their company is probably right here in their IP and the 2,000 that they’re retaining, I know they’re retaining some because they haven’t gone through the publication process and they’re still pending with the USPTO but there’s probably some in there that are maybe higher valued or more strategic in nature that they want to sell. But, at the same time, I mean, we know that some of these patents are going to be bought by the competitors of Yahoo. I mean, some of them – like Google and Microsoft – are definitely going to be interested in some of these and I’m sure a lot of other tech-related companies. I know I’m probably going to bid on a few of them.

MATT: Is it individual purchases? Is it all one sale?

NASIR: Oh, you’re right, it is for the patent portfolio.

MATT: Yeah, that’s why they transferred all the entity, I think.

NASIR: Oh. So, it looks like I can’t bid on one patent. I can probably afford but I can’t afford 3,000. Darn it.

MATT: Yeah, that’s too bad. Well, maybe you’ll have enough to get it.
So, this is just one of the many things they’re doing here and I think the thing that’s out there is they’re weighing the option of selling their internet operations which includes their email – which people still use Yahoo email, I guess.

NASIR: They do, yeah.

MATT: The digital sports was actually there was some new argument that was struck last year but they actually livestreamed an NFL game last year.

NASIR: That’s right.

MATT: And it was the only way to watch it – Yahoo livestream.

NASIR: Yeah, I remember that.

MATT: And I think there was another deal that they struck later on. But, anyway, they’re weighing this option of selling their internet operations and Verizon’s offered I guess $3 billion already which is less than the $4.4 billion it paid to acquire the great purchase of AOL last year which is even more archaic email. I don’t know anyone who even uses AOL anymore. At least Yahoo is still relevant.

NASIR: I know someone very well that uses AOL and all I know is that, every time they send emails to certain addresses, I never get it. Like, I have to tell them to send it to my Pasha Law email. That’s definitely true. I see he pulls his laptop up and you still hear that “you’ve got mail” sound. Anyway…

MATT: It’s pretty much all they have I guess anymore.

NASIR: Yeah, exactly. It’s probably the best part of it.

MATT: So, it’s selling off a bunch of these patents. It’s wanting to sell – like we were saying – its internet operations. I don’t know exactly all that includes but what’s really left at that point, I mean, I would think internet operations includes the search engine but maybe it doesn’t. I mean, first of all, their search engine is not good. You said, “Who uses Yahoo?” My wife, actually, her homepage used to default to Yahoo. Everyone else uses Google or anything else. It would just pop up. I’m like, “All right, I’ll search in there.” You can’t find it. The search is awful. Nothing pops up that’s useful. I don’t know what Yahoo is even going to be once it starts selling everything off here.

NASIR: Yeah, it’s true. I mean, it’s really kind of a first step. I mean, I know they’ve talked about how they have holdings with Alibaba and Yahoo Japan which are lucrative and so forth. But, here’s the thing, what these patents, why would someone want to buy these patents is what’s even more interesting because some of these patents are probably going to be old and even archaic in itself. But what’s interesting is that most companies of this size, they buy these patents and control these patents mostly for the offense of it in order to sue your competitors for possibly violating those patents. And that’s the more interesting thing and that’s why you’ll see in these patent auctions that have happened in the past, they’re notoriously unpredictable and the prices will be often bid up dramatically if there’s a certain patent in there where they know that they can use it to prosecute against a competitor, for example.

MATT: Yeah.

NASIR: And so, most of these are all strategic kind of holds that Microsoft or Google may be interested in – and myself.

MATT: What do they say? Your patents or your IPs are only as strong as your ability to defend it or enforce it.

NASIR: That’s absolutely true. We go through this all the time. Do you trademark your logo? Do you trademark your company name? And then, a client will go through that and we’ll explain to them all the risks and reward and so forth. And then, they’ll complain about a competitor that maybe violated the trademark but, actually, it’s not automatic. There’s no private police force to say that that person has to stop using that trademark. You have to actually do something and possibly sue them for trademark infringement or you have to possibly, if they file a trademark, file an opposition to that trademark in order to actually retain your rights under that trademark or patent or what-have-you. So, any of the IP. Yeah, that’s a very good point.

MATT: And you mentioned the part about being able to sue. What was it? The Nortel portfolio which included Apple, Microsoft, Sony, BlackBerry, et cetera. Basically, that was purchased, that was $4.5 billion and that was essentially used to just sue a bunch of people – Google included. So, yeah, I mean if you’re a patent troll, this is basically your best case scenario to acquire all these patents in this auction and then start suing away.

NASIR: Yeah, it’s interesting. In a way, it’s kind of interesting because we use the term “patent troll” and that is, of course, a derogatory term but, if you talk to patent attorneys, especially litigation and patent attorneys, that’s the business. I mean, it’s nothing personal; it’s just what happens. Everyone’s expecting that it’s not unusual which is, of course, strange to those that aren’t a part of that world in the sense that, you know, you’re basically suing each other patents that you may or may not actually use for anything useful yet you’re suing people for that. It seems strange to us but, apparently, this is the cost of doing business for them. This is how they look at it.

MATT: It seems like the prospective buyer should be Mark Cuban. If anyone hates people that sue over patents, it’s him. He can stop a bunch of these right now just by making this mass purchase. He’s got the one billion.

NASIR: Yeah, just one billion dollars. Well, yeah, I would say Mark Cuban. Also, Elon Musk too because I think we covered that a long time ago when Tesla basically said all of their patents belong to everybody in so many words. You know, they basically said they’re not going to enforce their patents to a certain extent. I believe they have retained some rights and so forth. That’s a pretty interesting thing. Yahoo could do that. Instead of putting on a public auction – which I think you have to register – I think I might have missed the registration date already, darn it! I think I would have gotten it, too.

MATT: Do you think there’s any chance some sort of private equity firm could buy all of these and then try to start selling them off individually? I guess maybe the sum of all the parts is greater than the whole but it seems like it’d be a lot of work to go about that process.

NASIR: Yeah. I mean, you would think that, in general, if you put in two parts, that might be worth more than the whole, in theory, because I can’t imagine, of these 3,000 patents, you know, very many of them being super valuable in one in itself, it seems like these are always going to be patents with very specific, intricate kind of unique capabilities rather than, you know, it’s not going to be a patent for the telephone, for example. It’s going to be like the one particular component in a phone that somehow is unique and patentable.

MATT: One of these patents is just for the internet as a whole so you want to hold on to that one.

NASIR: Yeah, the web service one seems pretty interesting.

MATT: We haven’t done a movie or TV show scene in a while but, from Dumb and Dumber where they have all those IOUs in that briefcase after they find that money. Like, one of them is for the Lamborghini that they buy. It’s like, “This one is for however many grand.” He’s like, “You’re going to want to hold on to that one.”

NASIR: Yeah.

MATT: Yeah, some of these are definitely going to be more valuable than others.

NASIR: Definitely. I’m just looking at more of these. I mean, you can actually, they have the patent numbers. You can actually look at them in detail if you want.

MATT: I’ll link it. We can link it in the notes if people are interested in kind of looking through these, but they span back. Some of them are over ten years old.

NASIR: This one’s for an internet service and it’s dated 1975. No, I’m just joking.

MATT: Do you know that eBay also has a trademark and patent?

NASIR: Oh, like a section?

MATT: Yeah.

NASIR: That’s pretty neat. I may actually go on there. Sorry, I got the chills. I may actually go on there and give it a shot.

MATT: They were all overpriced – or at least the ones I saw.

NASIR: Beauty is in the eye of the beholder. Let’s see.

MATT: Like, you can buy this vodka brand trademark website patent domain name, $450,000 – doesn’t seem worth it.

NASIR: Oh, nice, yeah. I see that. Yeah, oftentimes, they’re selling the website with the trademark or something like that. Or they’re selling this kitchen gadget invention for $10,000. Let’s just see what this shake says. “Shaking, vibrating, cleanable surface to shake unwanted air bubbles from batter mix. Speed and duration selection based on type of batter mix.” Okay. $10,000 right there.

MATT: Here we go. USA Pizza Business for sale – logo, trademark, with domain name. USAPizza1.com is the domain name you could have. It’s only a crisp $21 million.

NASIR: Wow.

MATT: USAPizza1.com.

NASIR: It’s not even like, yeah, USAPIzza.com – maybe – but USAPizza1? That seems strange.

MATT: Ah, it’s pretty enjoyable as well.

NASIR: There’s Pizza Boss for $100,000. That’s actually worth it.

MATT: Yeah, that’s not bad. I think there’s a Pizza Boss here in San Diego.

NASIR: Well, I’m going to buy this just to sue them. I’m going to buy the trademark. $101,000.01. That’s how that works, right?

MATT: Well, if the patent thing doesn’t work out, you have your fallback plan.

NASIR: Yeah, exactly.
All right. Well, I think that’s our episode, right?

MATT: Yeah, I think so. Hopefully, people are happy to have us back. Maybe we’ll have another break.

NASIR: Yeah, I’m sure we’ll have more, too.

MATT: Yeah.

NASIR: Thanks for joining us though.

MATT: Yeah, keep it sound and keep it smart.