The Value of Speech Patents (part 2) August 17th, 2011
I’ll continue on with a few thoughts from yesterday’s blog because I got asked the question: “Why would speech patents be worth so much more than general telecom and other patents?”
There are 2 key reasons:
- Speech is HUGE in mobile.
- Look at Google/Android. I read in the Mercury News this week that Google believes 80% of its revenues will come from mobile phone search in the future. Let’s combine that with the old stat that 25% of Android search is voice search (this was a year or so ago, and it’s probably been growing). This would mean a minimum of 15% of Google’s overall revenues will come from mobile phone voice search…and this number will probably grow!
- Apple. I guess its common knowledge that their new iOS5 will include “Assistant” that allows a complete voice controlled user experience. This is big. This is the company that defines user experiences, moving from a follower in speech technology to a leader (even if it is Nuance tech!).
- Available speech patents are DECREASING. Remember when the Bass brothers started buying up silver to drive up the price? Scarcity increases price. Nuance has been “buying” speech patents at a faster rate than they are issued! Combine this with patent acquisitions by companies like Vlingo, (who spent in the 7 figures to buy up a large number of Intellectual Ventures speech patents in order to countersue Nuance,) and the available portfolio of speech patents is quite small. Finding patents with early priority dates are even scarcer.
As an interesting case in point, Sensory has a few key patents on client/server speech recognition approaches. We have a very early initial filing date from 1996 (if you want to know the patent number, drop me an email.) We went through 10 years of revisions and responses to the patent office and finally got 3 patents issued on our initial concepts of using client devices connected to more powerful servers with speech recognition (yeah that should sound familiar today, but it was a very unique idea in 1996!). These are VERY fundamental patents with a VERY early priority date. Back in the downturn of 2008 we talked to a patent auction house that gave a very thorough evaluation of the patents, and they concluded it would be the highest valued auction they had ever seen. They wanted a “reserve” price in the single million dollar digits, but we wanted it in the double million digits, so we never went forward. It just shows the importance of speech patents, and with the recent lawsuits in the mobile and speech community, speech patents have become even more valuable today!
Following M&A Monday–It’s About the Patents August 16th, 2011
Two BIG acquisitions happened over the last week. One is big for the smartphone space, and the other is big for the speech industry. I think they both had something to do with technology patents.
Google acquired Motorola. As everyone knows, Google has been wrapped up in a lot of legal feuds over Android. Android is certainly doing well, its competitors want to knock it down, and patent infringement seems to be the preferred means of fighting. Long established companies like Microsoft, RIM and Apple have had a lot of time to build a patent portfolio…on top of that they recently outbid Google on the Nortel patent acquisition. SO… Google has to beef up its patent portfolio quickly to fight back and eventually do what big companies do – agree to cross license and stop paying the law firms! Or maybe Google just wants a boatload of patents so they can be comfortable indemnifying all the Android users.
So at the end of July, Google bought a boatload (well over 1000) of patents from IBM (Nuance bought a bunch of patents from IBM as well focused on speech tech!)
Now Google buys MOTO. Here’s something really interesting. The price paid for Nortel was about $4.5B for 6000 patents (plus patents applied for etc). That’s about $750K/patent. Google underbid and didn’t get in on the deal. Google bought MOTO Mobility for $12.5B for a little over 17,000 patents… Just under $750K/patent! VERY INTERESTING…seems like $750K/patents is the going rate for large patent portfolios!!!!!
Specialized portfolios in speech technology are worth even more!
Nuance acquires Loquendo. I’m sure this wasn’t just for patents…it was taking out one of their only competitors for both SR and TTS, and Nuance got a GREAT price for a company with a lot of excellent technology. I have no idea how many patents Loquendo has…I think 7 in the US and probably a lot more in Europe. Let’s estimate that they had 35 patents total. At $75M, that would be around $2M per patent, which isn’t far off of the per-patent price Nuance paid for SVOX, who had 60-80 patents. The revenue multipliers seem pretty consistent too…SVOX was doing around $25M in sales and was bought for around 6x sales…likewise Loquendo was doing about $12.5M in sales and was bought for ABOUT SIX TIMES SALES. What does Nuance trade at? ABOUT SIX TIMES SALES. So what does that mean? Well you could argue that if Nuance pays less or equal to its revenue multiplier (6xsales) for an acquisition, then the patents essentially come free because the acquired revenues should immediately boost Nuance’s valuation by close to the purchase price.
I wonder if that’s how Nuance thinks about it. Then they wouldn’t be paying $2M for a patent or even $750K…they’d essentially get them for free and in the process build the biggest database of speech patents in the world.
Maybe Nuance’s strategy isn’t really about taking out competitors and buying customers through M&A, but maybe they want to own the majority of patents in the speech tech space. Nuance certainly hasn’t made money in using patents for lawsuits. Dave Grannan, Vlingo’s CEO was recently quoted as saying, ”We are happy to report that with this latest ruling, Nuance’s record remains perfect in patent infringement trials, they haven’t won any.” You go, Dave!
So why would Nuance want so many speech patents if they can’t make money in court? Well I’ve blogged earlier about their use of patent infringement in acquisitions. Maybe they are looking to be bought by a Google, Apple, or Microsoft…that patent portfolio could certainly do a lot in user experience fights. But if cross licensing agreements get worked out between the companies big enough to acquire Nuance, then where does that leave Nuance?
Well…without a lot of competition for sure!
A Tale of Two Awards August 5th, 2011
I recently learned about 2 awards that Sensory has won over the past year. The contrast is in how we learned about them, and the different nature of these awards. It’s really amusing, so I thought I’d share my take.
Both awards were for our TrulyHandsfree™ Voice Control. One was for the significance of Sensory’s truly hands-free trigger in implementing speech recognition without using buttons, and the other was for Sensory’s chip-based implementation of a truly hands-free interface.
The first award came from Speech Technology Magazine. Sensory won their Star Performer award for 2011, and I didn’t even know we had been nominated. In fact, nobody ever told me that we had won; I found out really by chance (thanks, Bernie!) They only gave out four of these awards this year, and I’m honored and thrilled that Sensory won one of them. It’s really a testament to our team behind TrulyHandsfree… IT’S THE MOST AMAZING TECHNOLOGY. I sent kudos to Speech Tech for having the insight to understand the significance of this technology! Speech Technology Magazine has gotten so independent and non-self-serving in their awards process, that they didn’t even take the opportunity to call us and let us know! Now we know, so thanks again, Speech Tech!
In contrast…The second award came from a market research firm I’ll call the Cold Irishman. Why don’t I use their real name? Well I can’t or they might sue me. I received a call from their “Manager of IP and Copyrights” to congratulate me, and to let me know about their thoroughly independent and fair process that looked at the entire speech market and decided that Sensory stood out… blah blah blah…
I knew there was something funny going on by the guy’s title. Yeah you guessed it. To be able to tell people we won their award costs a certain price; you pay more the more you want to use it, and you can even pay more to go to an awards banquet. He offered me programs for as little as $10K, which went up in price to WAY more than that. One of the more expensive programs was that they’d make a video for us receiving the award with lots of praise from their esteemed analysts. So, I decided to go onto YouTube and see for myself how many hits last year’s award winners were getting…my memory said low double digits, but that didn’t seem possible (Sensory’s little home-made video’s often get thousands of hits.) Just for fun I looked just now at this year’s award winners – one of them had only 10 (yes TEN) hits. Most of them must have been employees… Pretty hefty price to stroke your own own ego and get almost nothing in return! I’ve always wondered who pays to be in Whoever’s Whatever? It’s probably the same CEO’s that pay to go to award dinners!
So…Many Thanks to Leonard Klie and Speech Technology Magazine…and Cold Irishman…thanks, but no thanks! Sensory deserves recognition for innovation in speech technologies based on our hard work, not on how much we pay to market it.