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I got a press release this morning from JaNSOME IP Management, a New York-based IP advisory and monetisation firm. It announces the creation of the JaNSOME Patent Opportunities Fund, “a new investment vehicle that invests in global opportunities in the patent market”. What these new opportunities usually mean in these circumstances, of course, is either litigation finance or litigation licensing programmes. But according to the press release, this fund will have a much wider focus:
Unlike other patent monetization funds, the JaNSOME Fund will invest in various areas of patent monetization, providing participation opportunities in several different IP revenue generating investments. These areas include, but are not limited to, patent price arbitrage, patent litigation finance, use of the public markets, and purchasing equity positions in companies where JaNSOME finds undervalued IP. The Fund will also share in the profits generated by JaNSOME’s consulting and brokerage services.
One of the people managing the fund will be Anthony Hayes, a former partner at law firm Nelson Mullins Riley & Scarborough. He told me that the idea is very definitely not to morph into yet another NPE. “Litigation often has a very binary result. Our type of diversification allows investors to participate all areas which is attractive for entities looking to invest in this non-correlated asset, but who can't get over the high barriers to entry.”
Of course, this all sounds great in theory, but in practice it’s not that easy just to launch a fund, get investors and start generating cash. Hayes, though, is confident. “The fund represents a response to the changing patent monetisation market place,” he told me, adding that his experience gives him a strong understanding of the range of opportunities now available to investors: “As someone involved in the space for a few years, I've managed patent infringement litigation, I've brokered patent sales directly for clients, I've worked with ICAP on both the buy and sell side of IP transactions, and I keep up on a lot of the case law and different monetisation approaches, such as Vringo.”
Flexibility is key Hayes states; and with this in mind there are no pre-set fixed investment percentages for any one area. “It is impossible to predict the type of deal flow that the fund will see. So, for example, if we can't find a good deal for a patent centric IPO, we won't do one of those deals,” he says. Geographically, though, the focus will be on the US, at least initially. “We have a very good relationship with a large, well known IP litigator who is interested in investigating the German market and sees it as a growth space. So if the right opportunity presents itself, we will invest overseas,” Hayes says.
The total fund size will be $30 million and investment opportunities are open to both accredited high net worth individuals and institutions willing to put in a minimum $500,000. In terms of returns, Hayes is bullish: “Prior to the fund, the gross ROI for my past three deals has ranged from 200% to almost 400%. But I'm not promoting those types of returns here, as they are not possible to project with any integrity.” Instead, the ROI goal is around 30%. “By sharing brokerage and consulting fees with investors, I believe this ROI is realistic,” Hayes claims. “For example, to broker a patent deal, the fund may only expend $10,000 to $20,000 in hard costs, such as general charts, a damages compilation and pitch book presentation. But commissions on brokerage deals are normally more than six figures; so one brokerage deal would substantially increase the ROI for investors.” He says that JaNSOME has verbally agreed its first brokerage contract and that he is hopeful the papers will be signed within the next fortnight. “As I have personally made a substantial financial investment in the fund, I have a significant amount of skin in the game,” Hayes says, “so I am focused on thoroughly vetting deals, mitigating as much risk as possible and making only sound investments.”
Although you hear a lot of people talking about IP and patent funds, actually tying down the number that are currently active is quite tricky. Hayes says it all depends on how the term “fund” is defined: “Juridica has a large litigation fund and a portion is dedicated to IP finance. You also have companies like IV that use a fund structure to finance their acquisitions. So if you count both as funds, I would estimate that there are perhaps 15 which derive at least a portion of their total income from the patent market.” But, he says, an educated guess is all that it can be: “You have to make allowances for a market that is very decentralised and has very asymmetric information flow.”
Patents, IP business, IP finance