Results Offer Exclusive Insights On Deals In High Tech

Valuable benchmarks for royalty rates and deal terms are sought by many in the High Technology sector. They can find them in the 2017 High Tech Deal Term And Royalty Rate Survey Report which provides in-depth data summaries and analyses of transactions in the High Tech sector. LES is pleased to present this report exclusively for members free of charge.
The final survey report provides exclusive industry-specific data and detailed analysis of fixed royalties, tiered royalties, deal terms and valuation methods from the United States. A robust data set drawing from this and the previous surveys offers the opportunity to individually review deals for therapeutics, diagnostics, and delivery innovations. The information is especially valuable for those seeking a better understanding of the market and to enhance their own deal strategies and negotiations. It's presented in the form of tables and charts for a graphic picture of the statistics and can be downloaded as a PDF from the LES website.

Survey Participation
The 2017 survey, which builds on highly successful surveys completed in 2011 and 2014, was conducted nationally by the LES High Technology Sector. "Our membership's participation was outstanding, and the survey team's analysis was rigorous and insightful," said Ian DiBernardo, Chair of the LES High Tech Sector. "The team drew practical conclusions from the 2017 data, for example, regarding the effect of exclusivity on rates. The team also looked beyond the 2017 data, utilizing the 2011 and 2014 surveys to identify trends."

A total of 155 completed surveys were incorporated into the final High Tech Survey Report. The 2017 survey covered the major fields within the High Tech Sector (HTS), including aerospace, software, clean technology, communications, medical devices, semiconductors, consumer products and electronics, and computers. We also attempted to drill-down into the software category more substantially than in the past to try and measure any statistics relating to the effects on the licensing industry from the June 2014 Supreme Court decision in the Alice vs. CLS Bank case.

The following are some of the highlights gleaned from the 155 distinct deals reported. Some were expected, and there were also a number of surprises.

• Slightly more than two thirds of the deals had an academic or governmental licensor.
  
• Of the respondents, 88 percent were licensors. Of those licensors 35 percent entered into the deal for purely monetary gain, 28 percent for strategic purposes, 10 percent as part of an assertion strategy, and 11 percent for Standards Essential Patent (SEP) licensing. Not surprising, most deals were done with a goal of monetary gain combined with creating/maintaining a strategic relationship. Surprisingly, 35 percent of responding licensors entered into the deal to support a new product, compared to 22 percent in the 2014 survey.
  
• The split between exclusive and non-exclusive deals was almost 50/50, with 48 percent reporting exclusive grants and 45 percent non-exclusive.

Methodology & Data Collection
Bob Held notes that, "Extreme care was taken in maintaining the confidentiality of survey respondents. No one on the survey team, or at LES, had access to the identity of the survey respondents. All data provided by Vault was clear of confidential data and cannot, in any way, be tied back to any individual respondents," he says.

Dynamics of the Licensing Market
Jack Lu does a deep dive into a 10-year journey across the three surveys in Chapter 5 of the report. He notes a few trends:

• Royalty pricing is different across different technology fields, IP types and technology development stages.
• Events such as AIA/IPR and the Alice Ruling have significantly and structurally transformed the licensing market.
• As a result of the Alice Ruling, the technologies in healthcare fields started to obtain royalty premiums.
• It seems that the market-specific factors such as AIA/IPR and the Alice Ruling have transformed the licensing market mainly through the intervention on or interference with deal-specific variables.

LES would like to thank the Survey Committee who contributed hundreds of volunteers hours. They are: Joseph Daniele, Bob Held, Jack Lu, Lewis Stark and Manta Zhang.
For more on this or other LES Royalty Rates and Deal Terms surveys and reports, visit http://www.lesusacanada.org/royaltyrates.

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