Korean patent fund Intellectual Discovery (ID) is seeking a buyer for its subsidiary ID Ventures, according to the company’s website. IAM understands the fund is weighing multiple offers already, and just one week remains before the bidding deadline closes on November 9th. What the potential sale means for the future of ID is unclear, but it comes as the fund continues to sell patents to third parties.
A notice on ID’s website dated October 23rd states that the company will sell 100% of issued shares of ID Ventures through a public competitive bidding process. The publicly run patent fund chose KPMG to handle the transaction, and is expected to announce a short list of potential acquirers in the middle of this month, with a view to closing a deal in early 2018.
According to a source with knowledge of the process, a few companies have already submitted letters of intent to participate in the bid. ID executives expect the subsidiary to fetch up to $10 million, I am told. The fund had an operating profit of around $360,000 last year, down from $1.2 million in 2015.
ID Ventures is one of the two major subsidiaries operating under ID, the other being IP-backed lender Idea Bridge Asset Management. The idea behind the fund was to leverage the patent expertise within the organisation in order to make investments in start-ups with promising technology. For example, one fund launched by ID Ventures last year uses a patent evaluation method called SMART 3.1 to inform investment decisions.
The core ID business aggregates patents but has not yet litigated, at least in its own name. It has done numerous deals with NPEs – last month it sold 15 US patents to Compact Lens Technologies, an entity linked to IP Valuation Partners. Last year, ID executed a privateering style deal with Document Security Systems, which is now litigating in the US against Cree, Everlight and Seoul Semiconductor. The recent patent asset sales potentially create opportunities for ID to recoup some share of licensing revenue down the road without paying litigation costs directly at a time when ID is purportedly receiving less budget support from the government.
Selling its VC arm potentially signals that ID plans to focus more on its core patent aggregation operations. If so, it sets the fund apart from other NPEs that have sought to diversify into other areas – often with some start-up angle. IP Bridge, for example, has invested a lot in its innovation business, which is seeking to connect Japanese and Southeast Asian companies. It could also just mean that ID is looking to bolster its bottom line in an uncertain budget situation. If that is the case, expect the company to remain on the sell side of the patent market for now.