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A number of news sources have reported today that the French government is considering alternatives to the €1.6 billion debt deal agreed last week between Alcatel-Lucent and lending banks Goldman Sachs and Credit Suisse. At least some of the telecoms company’s 29,000 patents have been put up as collateral to secure the financial lifeline. If this morning’s reports are anything to go by, this has alarmed the French government, which seems to believe that France has a lot to lose economically if ownership of the patents were to pass to someone outside of the country.
According to Les Echos, French ministers are developing potential alternative lines of financing for Alcatel-Lucent, including the creation of a ‘patent consortium’. At this stage it is not entirely clear what this proposal entails, but it sounds as if the government may be thinking of some sort of monetisation vehicle. Such an option would allow Alcatel-Lucent to raise cash from outside investors while retaining part-ownership of its patents – and could lead to lucrative licensing revenue streams in the longer term.
Alcatel-Lucent has recently explored a number of possibilities with regards to monetising its patents, without seeing any significant success. In September, it announced that it would be re-evaluating its partnership with RPX. Back in February the defensive aggregator agreed to market Alcatel-Lucent’s patent portfolio to its members with some commentators estimating revenues of €1 billion, but the telecoms company decided to rethink the deal after it had failed to deliver on its expectations. The company has also considered selling off non-core patent assets.
But perhaps previous attempts at monetisation have stalled because of the patents in question. If that is the case, then the French government will also likely have a hard time maximising their value if its consortium plan were ever to come to fruition. Les Echos says the Alcatel-Lucent portfolio is worth €5 billion, while others have claimed that the company’s IP liquidation value is between $3.9 billion and $5.9 billion; last year one estimate valued the patents alone at $9 billion. However, valuation is nowhere near an exact science, so what is to say that the majority of those 29,000 patents actually hold any significant worth for other companies? Are there a large number of prospective licensees out there? Even if the patents do have widespread applications in the market, the level of encumbrances in terms of existing licensees might make them far less attractive to investors seeking to assert them than the French government might hope.
Nonetheless, today’s reports do show us that French politicians feel patents to be important, on some level, to safeguarding their country’s economic progress. France has also been a leading voice in the creation of a unitary patent right for the European Union (and, of course, a Frenchman heads the European Patent Office). Furthermore, the French state teamed up with public investment fund Caisse des Dépôts to create France Brevets, an entity that works with universities, research institutions and SMEs to commercialise their patents. All this points to a country which is well aware of the crucial role that patents and other IP assets can play, at both national and international levels.
But maybe the most important lesson of all for French politicians to learn is that if patent value is to be exercised to maximum effect it is best left to those who know how to really do it. The role of government, surely, is to create a conducive environment for IP creation and exploitation, and then to get out of the way. Second-guessing the market or mandating certain actions from on high are not likely to help either Alcatel-Lucent or France in the medium to long term. As painful as it may be for the French state to admit, non-French entities may be best-placed to manage and create value from Alcatel-Lucent’s patent portfolio, most of which is highly likely to cover rights that are not valid in France.
IP management, Licensing, IP politics, Patents, IP business, IP finance, IP valuation