Insights2017 analyzing m_a_transactions
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This document provides an overview and analysis of the patent portfolios of several major technology companies in relation to mergers and acquisitions (M&A). It summarizes the businesses, subsidiaries, recent M&A activity, and key statistics of the patent portfolios for Alibaba, Softbank, Foxconn, and the companies within their networks. It then analyzes the patent portfolios through visualizations to identify areas of technological overlap between the companies that could impact future M&A decisions.
Insights2017 analyzing m_a_transactions
- 1. Ken D. Kumayama — IP & Technology Group — Skadden, Arps, Slate, Meagher & Flom LLP ANALYZING M&A TRANSACTIONS THROUGH PATENT OWNERSHIP
- 2. Ken D. Kumayama IP & Technology Group — Skadden, Arps, Slate, Meagher & Flom LLP INTRODUCTION: YOUR PRESENTER 2
- 3. Analyzing M&A Transactions Through Patent Ownership AGENDA • M&A Overview • Introduction to Companies • Alibaba • Softbank • Foxconn • Patent Portfolio Analysis: Viewing Through the Lens of M&A Transactions • Patent and Technology Due Diligence in M&A Transactions 3
- 4. What does “Mergers and Acquisitions” mean exactly? M&A OVERVIEW • Patent purchase • Defensive purposes, in response to threat, bankruptcy, monetization, portfolio pruning • Collaboration/Joint Development • Joint Venture • Asset Purchase/Spin-Out • Sale of Company (Merger/Stock Sale) • Sale of Conglomerate 4
- 5. Relationship Between M&A and Patents M&A OVERVIEW Transaction Type Patent Footprint? 5 • Patent purchase • Collaboration/Joint Development • Joint Venture • Asset Purchase/Spin-Out • Sale of Company (Merger/Stock Sale) • Sale of Conglomerate • Change of record owner • Joint ownership and/or joint inventorship • Varies • Change of record owner • Varies (possibly none) • Typically none
- 6. Other corporate events or transactions and their Patent Footprints M&A OVERVIEW Corporate Events/Transactions Patent Footprint? 6 • Non-Exclusive License • Exclusive License • Financing Transaction • Government Contract/Funding • Name Change, Conversion of Entity Type, Change of Place of Incorporation, Other Corporate Reorganization • Possible recordation with Patent Office • Possible recordation with Patent Office • Lien may be recorded with Patent Office • Government rights may be identified • Change of record owner
- 7. INTRODUCTION TO THREE ASIAN COMPANIES 7 • Chinese Internet company • Founded in 1999 • Market cap: $274B • Total active patent assets: ~9,000 • Several acquisitions of Chinese companies, mainly in Internet space • Japanese mobile phone and Internet company • Founded in 1981 • Market cap: $79B • Total active patent assets: ~12,300 • Largest shareholder of Yahoo Japan; acquired Sprint in US and ARM in UK; agreed to acquire Fortress in US • Taiwanese manufacturing company • Founded in 1979 • Market cap: $52B • Total active patent assets: ~135,000 • Acquired majority of Sharp in Japan; current lead bidder for Toshiba’s flash memory business
- 8. Overview of Businesses and Subsidiaries ALIBABA • Taobao Marketplace China’s largest mobile commerce destination • Tmall.com Dedicated to providing a premium shopping experience for increasingly sophisticated Chinese consumers in search of top-quality branded merchandise. • Juhuasuan A sales and marketing platform for flash sales where Tmall.com and Taobao Marketplace merchants can acquire new customers and raise brand awareness through special discounts and promotional events. • AliExpress A global retail marketplace targeted at consumers worldwide, many of them located in Russia, the United States, Spain, Brazil, France and the United Kingdom. • 1688.com A leading online wholesale marketplace that connects buyers and sellers in China who trade in general merchandise, apparel, electronics, raw materials, industrial components, and agricultural and chemical products, among others. • Alibaba.com A leading English-language wholesale marketplace for global trade. • Alimama A marketing technology platform that offers sellers on Alibaba Group's marketplaces online marketing services for both personal computers and mobile devices. • Alibaba Cloud Develops highly scalable platforms for cloud computing and data management. • Ant Financial Services Group Financial services provider focused on serving small and micro enterprises and consumers. • Cainiao Network Operates a logistics data platform which provides real-time access to data for both merchants and consumers, as well data that allows logistics service providers to improve the efficiency and effectiveness of their services. 8
- 9. Recent M&A Activity ALIBABA • Acquires remaining 67.56% stake in Damai.cn from Beijing Hongma Media Culture Dev. (2017) • Acquires Beijing Zhuoyi Xunchang Technology from SoftBank for $200M (2017) (pending) • Acquires 21.5% stake in Lazada South East Asia Pte. Ltd. (2016) • Acquires Youku Tudou Inc. for $4.4B (2016) • Acquires Intel Patents (2016) • Acquires 365fanyi (2015) • Sells, along with others, zulily, Inc. to QVC Inc. (2015) • Sells 11 Main, Inc. to OpenSky Corp. (2015) • Acquires VULNHUNT (2015) • Acquires AutoNavi for $1B (2014) • Acquires Shanghai Shuidushi Information Technology Co., Ltd. (2014) • Acquires remaining 34% stake in UCWeb for 3.78 CNY (2014) • Acquires IBM Patents (2014) 9
- 10. Overview of Businesses and Subsidiaries SOFTBANK 10
- 11. • Domestic Telecommunications (Japan) • Provides mobile communications services in Japan • Sells mobile devices and terminals in Japan • Provides broadband services to retail customers in Japan • Provides telecom services to corporate customers in Japan, such as data communications and fixed-line telephone services • Sprint (U.S.) • Provides mobile communications services in the U.S. • Sells and leases mobile devices and sells accessories in the U.S. • Provides fixed-line telecommunications services in the U.S. • Yahoo Japan (Japan) • Internet advertising • e-commerce business • Membership services • Distribution (Japan) • Distributes mobile devices overseas • Sells PC software, peripherals, and mobile device accessories in Japan • ARM (Global) • Designs microprocessors, physical intellectual property and related technology and software, sells development tools 11 Overview of Businesses and Subsidiaries SOFTBANK
- 12. Recent M&A Activity SOFTBANK • Announced acquisition of Fortress Investment Group LLC for $3.3B (February 2017) • Acquires ARM Holdings plc for £23.5B (2016) • Sells, along with others, Beijing Zhuoyi Xunchang Technology to Alibaba for $200M (2016) • Sells 72.2% stake in Supercell Oy to Tencent for $4.1B (2016) • Acquires 40% stake in Advanced Smart Mobility (2016) • Sells remaining 40% stake in UULA Co., Ltd. (2016) • Sells Creativebank Inc. to Will Group, Inc. for approximately JPY 790M (2015) • Sells equity stake in SoftBank Satellite Planning Corp. to Boeing (2015) • Acquires additional 23.86% stake in Scigineer, Inc. (2015) • Acquires additional stake in Aldebaran Robotics SAS for 95% ownership (2015) • Sells majority stake in Green Power Investment Corporation (2015) • Acquires remaining shares of Brightstar Corp. for $300M (2014) • Sells WILLCOM, Inc. to eAccess Ltd. (2014) • Acquires 80% stake in Sprint for $23B (2013) • Forms Yahoo Japan as JV with Yahoo! (1996) 12
- 13. Overview of Businesses and Subsidiaries FOXCONN 13 • Products and solutions include system assembly of 3C products, mechanical design, processing, and sales • Offers thermal modules for O/T, NB, server, and other 3C products • Mg and alloy products include portable computer enclosures, mobile phone enclosures, and 3C product enclosures • Manufactures and sells electronic components and equipment internationally • Five segments: • Consumer Electronics • Energy Solutions • Business Solutions • Electronic Components and Devices • Display Devices
- 14. FOXCONN AND SHARP M&A ACTIVITY Foxconn Sharp 14 • Lead bidder for Toshiba’s flash memory business (2017) • Acquires Fabrigene Ltd. for $25M (2017) • Acquires SMART Technologies (2016) • Acquires Sharp for $3.8B (2016) • Acquires a portion of Nokia’s feature phone business from MSFT for HKD 2.6B (2016) • Acquires Optical Module Business from Avago (2016) • Acquires Fuyu EV Service Co., Ltd. for CNY 100M (2015) • Acquires eCMMS Precision Singapore PTE. Ltd. for $43M (2015) • Sells, with STMicro, remaining stake in 3SUN S.r.l. to Enel Green Power S.p.A. (2014) • Sells 50% ownership in JV to Enel Green Power S.p.A. for €30M (2014) • Sells, with others, Renesas SP Drivers Inc. to Synaptics Inc. (2014) • Sells remaining 51% stake in SI Solutions Co., Ltd. to IBM (2013) • Sells 50% stake in Sharp Display Products Corporation to Foxconn for JPY 66B (2012) • Acquires remaining 51% stake in Tsutaya Galapagos Co., Ltd (2011) • Acquires Recurrent Energy Inc. (2010)
- 16. ALIBABA • 9,132 active patent assets (4,943 families) • 1,947 grants; 7,184 applications • 8 US design patents • Jurisdictions • 4,622 active assets in China • 1,054 active assets in US • Notable Patent Acquisitions • Acquired UCWeb in 2014 (513 active assets) • Acquired AutoNavi in 2014 (205 active assets) • 51 patent assets from IBM (2014) • 9 patent assets from Intel (2016) 16
- 17. OVERVIEW OF ALIBABA’S PATENTS 17 4622 1053 966 2492 Jurisdiction China United States Hong Kong 0 500 1000 1500 2000 1997 1998 1999 2000 2001 2002 2003 2004 2005 2006 2007 2008 2009 2010 2011 2012 2013 2014 2015 2016 Priority Year (Families) 0 500 1000 1500 2000 1997 1998 1999 2000 2001 2002 2003 2004 2005 2006 2007 2008 2009 2010 2011 2012 2013 2014 2015 2016 Chinese Patents by Priority Year 0 50 100 150 200 250 1997 1998 1999 2000 2001 2002 2003 2004 2005 2006 2007 2008 2009 2010 2011 2012 2013 2014 2015 2016 US Patents by Priority Year
- 18. © VALUENEX 2017 Data source: Innography US, CN, TW, EP, WO, KR, JP, IN, AU, CA, RU Patent Assets (1997-2016) Number of Documents: 6,314 ALIBABA PORTFOLIO 18
- 19. SOFTBANK GROUP 19 1,066 active 2,020 active 4,350 active 4,567 active 276 active
- 20. OVERVIEW OF SB GROUP’S PATENTS 20 6516 3074 750 373 1572 Jurisdiction United States Japan United Kingdom China Other 0 500 1000 Priority Year (Families) 0 500 1000 1500 2017 2018 2019 2020 2021 2022 2023 2024 2025 2026 2027 2028 2029 2030 2031 2032 2033 2034 2035 2036 Expiration Year 2626 17791025 887 2391 Main CPCs (families) G06F H04W H04L G06Q Other
- 21. OVERVIEW OF YAHOO JAPAN’S PATENTS 21 1811 208 1 Jurisdiction Japan United States China 0 100 200 300 2000 2001 2002 2003 2004 2005 2006 2007 2008 2009 2010 2011 2012 2013 2014 2015 2016 Priority Year (Families) 0 200 400 2017 2018 2019 2020 2021 2022 2023 2024 2025 2026 2027 2028 2029 2030 2031 2032 2033 2034 2035 2036 Expiration Year 844 627 392 Main CPCs (families) G06F G06Q Other
- 22. OVERVIEW OF SPRINT’S PATENTS 2222 4391 176 Jurisdiction United States Other 0 200 400 600 1997 1998 1999 2000 2001 2002 2003 2004 2005 2006 2007 2008 2009 2010 2011 2012 2013 2014 2015 2016 Priority Year (Families) 0 200 400 600 2017 2018 2019 2020 2021 2022 2023 2024 2025 2026 2027 2028 2029 2030 2031 2032 2033 2034 2035 2036 Expiration Year 1523 849 405 322 708 Main CPCs (families) H04W H04L H04M G06F Other
- 23. OVERVIEW OF ARM’S PATENTS 23 1835 750 350 312 312 224 141 426 Jurisdiction United States United Kingdom China Japan Taiwan South Korea EPO Other 0 50 100 150 200 1996 1997 1998 1999 2000 2001 2002 2003 2004 2005 2006 2007 2008 2009 2010 2011 2012 2013 2014 2015 Priority Year (Families) 0 100 200 300 2017 2018 2019 2020 2021 2022 2023 2024 2025 2026 2027 2028 2029 2030 2031 2032 2033 2034 2035 2036 Expiration Year 1280 160 118 503 Main CPCs (families) G06F G11C G06T Other
- 24. 24 © VALUENEX 2017 Yahoo Japan Sprint Nextel ARM Aldebaran ? Data source: Innography US, JP, GB, CN, TW, KR, EP, WO, IN, CA, AU, FR, RU, DE Patent Assets (1991-2016) Number of Documents: 11,550 SOFTBANK PORTFOLIO
- 25. MIPS PATENTS IN ARM AND IMAGINATION PORTFOLIOS 25 Key: MIPS Imagination ARM (other than MIPS) © VALUENEX 2017
- 26. FOXCONN PORTFOLIO OVERVIEW 26 • 53,122 active assets (42,399 families) • Jurisdictions: • TW: 24,486 • US: 14,684 • CN: 12,734 • 81,944 active assets (59,919 families) • Jurisdictions: • JPN: 50,000 • US: 12,306 • CN: 7,680
- 27. OVERVIEW OF FOXCONN’S PATENTS 27 24486 14684 12734 867 1218 Jurisdiction Taiwan United States China Japan Other 0 2000 4000 6000 8000 1997 1998 1999 2000 2001 2002 2003 2004 2005 2006 2007 2008 2009 2010 2011 2012 2013 2014 2015 2016 Priority Year (Families) 0 2000 4000 6000 2017 2018 2019 2020 2021 2022 2023 2024 2025 2026 2027 2028 2029 2030 2031 2032 2033 2034 2035 2036 Expiration Year 6644 5750 3077 2294 24634 Main CPCs (families) G06F H01 R H05K
- 28. OVERVIEW OF SHARP’S PATENTS 28 5074613874 8205 9371 Jurisdiction Japan United States China Other 0 2000 4000 6000 1997 1998 1999 2000 2001 2002 2003 2004 2005 2006 2007 2008 2009 2010 2011 2012 2013 2014 2015 2016 Priority Year (Families) 0 2000 4000 6000 2017 2018 2019 2020 2021 2022 2023 2024 2025 2026 2027 2028 2029 2030 2031 2032 2033 2034 2035 2036 Expiration Year 5851 5406 4907 4846 4234 34800 Main CPCs (families) H04N H01L G03G G06F G02F Other
- 29. Sharp Foxconn Data source: Innography JP, US, CN, EP, TW, IN, KR, RU, CA, WO, AU, GB, BR, DE, MX Patent Assets (2005-2016) Number of Documents: 55,701 © VALUENEX 2017 FOXCONN AND SHARP PORTFOLIOS 29
- 30. Patent analytics to augment and offer new methods of performing IP due diligence DUE DILIGENCE IN M&A TRANSACTIONS 30 Ownership of IP Patent Infringement Sufficiency of IP • Confirming that the IP being sold is actually owned by Seller • Reviewing chain of title • Joint ownership issues • Terminal disclaimers • Liens and other encumbrances • Analyzing claims against competitors, customers and suppliers • Analyzing past infringement claims • Identifying NPE activity/risk • Facilitate FTO/non- infringement analysis • Confirming that Buyer will have all of the IP rights necessary for business • In Asset Sales, this is a combination of: • Transfer of Transferred IP • License under Retained IP • Seller will typically receive a license-back
- 31. Exploring the relationship between patent assets and M&A 31 + = ? HOW WILL FOXCONN’S PATENT PORTFOLIO BE AFFECTED IF IT ACQUIRES TOSHIBA’S FLASH MEMORY BUSINESS?
- 32. Overview of Carve-Outs/Asset Purchases DUE DILIGENCE IN M&A CARVE-OUT TRANSACTIONS • Asset Purchases (or “carve-out transactions”) are among the most complicated types of M&A transactions • Commingled Assets — personnel, data, IP, IT, customers, suppliers, etc. • Assets are often divided based on whether they are “primarily” or “exclusively” related to the business being divested • Determining whether a patent is “primarily” or “exclusively” related to a product, technology or business can be very challenging 32 Personnel Real Property Intellectual Property
- 33. Shared IP: Primarily vs. Exclusively DUE DILIGENCE IN M&A CARVE-OUT TRANSACTIONS 33 Exclusively Primarily Transferred Business Retained Business Transferred Business Retained Business Shared IP: In each scenario, consider – will Buyer or Seller need a license to operate its business going forward? Does your answer change if “business” includes new products and services in the future?
- 34. Identifying “In-Scope” Patent Assets DUE DILIGENCE IN M&A CARVE-OUT TRANSACTIONS Current Methods Possible Methods in the Future? 34 • Source of Patents • Original Owner/Assignee • Inventorship • Analysis of Metadata • IPC/CPC • Citation analysis • Keyword Searches • Semantic search • Boolean keyword searches
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