As we step into 2024 it is worth pausing to reflect on an eventful 2023 and consider what the new year may bring. We are pleased to share our outlook on the patent markets landscape and look forward to reconnecting with our readers. From the Tech+IP perspective, the coming year promises to be as dynamic and eventful as ever, bringing to fruition trends that represent genuine inflection points for our industry. Below are the three trailblazing trends we predict will shape 2024, presented in no particular order.
1. Financialization: Litigation Funders, Insurance, and IP-Backed Asset Focus
In 2024, the financialization of the patent market is expected to be accompanied by a notable shift in the role of private equity (PE) funds and litigation funders. Rather than simply backing patent trolls in the traditional sense, these funders are increasingly aligning with operating companies—a shift driven by the growing number of operating companies actively asserting their intellectual property (IP) positions and seeking additional revenue streams or non-dilutive capital.
IP-backed asset focus
Simultaneously, there is a growing appetite for financing IP-backed assets, a sector that is gaining traction amidst various market conditions. This trend includes leveraging patents in distress or pre-distress situations, where they are used as collateral, sold for liquidity, or structured to generate future royalty streams from licensed technologies or licensing groups. The financial market’s recognition of patents as viable and valuable assets has intensified, reflecting a broader understanding of their potential as investment vehicles.
Valuation and re-valuation
We believe this trend is being facilitated by increasingly sophisticated valuation methodologies, focusing on an asset’s demonstrated revenue-generating potential, either through strategic licensing agreements or litigation leverage. The broader market recognizes that IP collateral is dynamic, requiring proactive curation and routine re-valuation to ensure continued value.
While AI dominates current conversations, traditional “eyes on claims” and charting remain indispensable value anchors (more on this in Trend #3.) The financialization of IP is maturing into a nuanced ecosystem where patents are central to corporate strategy and investment models. Notably, the rise of insurance-wrapped IP-backed lending is attracting more conservative investors into patent opportunities, creating more competition and potentially for lowering the cost of lending. Despite this progress, financial markets are still far from valuing patents and licensing revenues commensurately with the risk profiles of high-quality assets.
Ultimately, greater transparency, increased deal flow, and expert advisory on underlying market value may be critical to closing this gap.
2. De-globalization: Shifting Dynamics in Courts and Business Strategies
In 2024, deglobalization may significantly reshape the patent market, most notably through growing competition among patent courts and local governments. Nations are increasingly advancing their agendas through, or at least impacting, their patent systems, seeking to create favorable environments for domestic innovation, markets, and IP protection. This trend is leading to a more competitive landscape where patent courts actively vie for high-profile cases, each showcasing their efficiency, expertise, and proclivities.
Re-insourcing and vertical integration
The effects of deglobalization are also evident in corporate business strategies, with the semiconductor industry serving as a prime example. In response to growing concerns over supply chain security and technological sovereignty. Companies are increasingly turning to re-insourcing and vertical integration. Apple, Amazon and Microsoft, for instance, have all announced new in-house chip design initiatives and dedicated teams. These companies are focusing not only on manufacturing, but also on securing patents critical to their vertically integrated processes. This trend reflects a broader strategic effort over production and innovation cycles, driving patent activity and a stronger emphasis on building robust IP portfolios to safeguard these new business ventures.
Chevron, PTAB and the UPC
Separately, attention is now on the US Supreme Court’s ruling on Chevron deference expected in June. If Chevron gets axed, significant questions may arise regarding the future role of the Patent Trial and Appeal Board (PTAB), and the broader unified litigation strategies built around it. At the same time, another year of Unified Patent Court (UPC) promises to be transformative, and an early harbinger may be found in a new case filed by historically conservative Dolby Laboratories.
Finally, 2024 may prove to be a year in which patent owners and innovators regain some ground. With a combination of sound policy, persistence, and a perhaps a measure of good fortune, there is hope that policymakers in the EU could take a more balanced approach to efficiency in IP enforcement. Ideally, the lessons of IP history may not be overlooked, and so-called “efficient infringement” may be recognized for what it really represents.
3. Artificial Intelligence (AI): Can It Revolutionize Patent Valuation?
In 2024, the potential of Artificial Intelligence (AI) in patent valuation remains a subject of keen interest, but has flourishes of forward movement and notable failure as the machine learns like a prodigy. While AI-driven engines, with their ability to process extensive patent-related data have significantly modernized many aspects of the traditional valuation approach, a core problem is a lack of high quality training data. There is no Zillow for IP like The New York Times and other value added literature was for ChatGPT (legal commentary aside). This limitation underlines the continued (and perhaps heightened) relevance of manual curating and maintaining a disciplined and continued tie to “real world” data.
At the same time, there's a growing anticipation in the industry for performance metrics to evaluate the effectiveness of AI-based valuation engines and in mechanisms for securely managing and learning from transaction – related information. Data has reliably been an antiseptic to bias for a millennium and we think IP is one of many areas where facts matter.
Finally, we at Tech+IP believe that revolutions are iterative and that 2024 will be more about understanding how, when and why AI should be used by experienced IP professionals and less about the machine itself. Some of the high-profile crashes of 2023 in IP-backed lending get replaced with further data and the opportunity to course correct as prudent.