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Steam in patent mega-deals yet as ARM and AST wade in on MIPS sell-off

This week we learned that microprocessor architecture developer MIPS Technologies has agreed to sell most of its patent portfolio to a consortium which includes its main competitor, ARM Holdings.

Bridge Crossing LLC, which is described in a MIPS press release as “an acquisition vehicle of Allied Security Trust” (AST), will acquire 498 of MIPS’ patents for $350 million. If the deal with Bridge Crossing goes through, MIPS’ remaining 82 patents, along with its operating business, will be acquired by Imagination Technologies for $60 million.

According to a press release from ARM the motivation behind buying its competitor’s patents is to “support continued innovation in system-on-chip design, whilst removing any potential litigation risk presented by the MIPS patent portfolio with respect to the consortium members”. The fact that defensive aggregator AST is in on the deal further indicates that the patents have been acquired primarily, at least, for those purposes. The press release further states that Bridge Crossing will offer licences to the MIPS patents to companies outside of the consortium.

For some time there has been speculation that struggling MIPS would seek buyers for part or all of its business, spreading fears that its patents may fall into the hands of an NPE or operating company that would assert them against licensees of ARM’s architecture.

Back in July, IAM reported on the licence renewal deal struck between MIPS and Broadcom, seen by some analysts as a pre-emptive move by the latter should MIPS’ patents be used offensively at some point in the future. It was further suggested that ARM licensees might rush to obtain similar ‘troll-proof’ licences from MIPS to mitigate the possibility of lawsuits down the line. With the Bridge Crossing deal, it seems that ARM is doing the job for them. The British company will contribute almost half of the money ($167.5 million) needed to complete the purchase.

It is not clear at this stage which other companies are involved in the deal. The formation of Bridge Crossing reflects common AST practice, which is to create a limited liability corporation (LLC) backed by those AST members with a specific interest in buying the technology on the table, while other members don’t have to get involved if they don’t want to. Although some AST members are listed on its website, most (including ARM) are not.

AST’s ‘catch, license and release’ model means that the MIPS patents will have to be sold on within a year. By that time, licensing encumbrances may make them a far less attractive proposition for someone seeking to deploy them offensively – though that could depend on how many companies from outside of AST sign up for licences between now and then. Either way, ARM and the other Bridge investors should get at least some of their money back. And by doing the deal through AST they ensure that it will be the defensive aggregator rather than themselves who will be responsible for identifying potential licensees and buyers, as well as for doing most of the subsequent negotiating – something that will save a lot of time and expense.

Last week, IAM suggested that operating companies concerned about litigation are better off exploring the possibilities offered by patent pools and defensive aggregators, rather than joining in with calls for profound legislative reform which could weaken the patent system. With the MIPS deal, it appears that ARM, AST members and any others involved in the buying consortium think the same. The fact that they have chosen to work through AST on such a large transaction is a very significant vote of confidence in the model that it offers.

Should it be approved by MIPS shareholders – who stand to make a healthy return on their investment – the sell-off will show that the age of big ticket patent deals is not yet over. It is also worth noting that this sale of microprocessor architecture patents indicates that there is scope for such deals beyond the wireless telecoms technology that typified the Nortel-Rockstar and Google-Motorola transactions or the internet-related patents of the sort that passed hands from AOL to Microsoft to Facebook.


Jack Ellis
IAM Magazine
08 November 2012

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IP management, Licensing, IP litigation, Patents, IP business

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