Apple acquires former Pantech patents from Korean NPE with government links

Apple has just done something that it doesn’t do very often. It has acquired a patent portfolio from a non-practicing entity (NPE) — a type of company with a business model that is often pejoratively referred to, including by Apple itself, as ‘patent trolling’.

What makes this transaction even more interesting is the original source of the patents in question.
 
According to US Patent and Trademark Office (USPTO) data, a Seoul-based entity named Goldpeak Innovations Inc assigned 11 patents to Apple on 22nd May this year. This assignment was recorded with the USPTO on 29th June.

Here’s a screenshot of the relevant USPTO assignment record:

Goldpeak itself acquired these 11 patents as part of a larger haul of at least 230 assets that were transferred to it in multiple assignments by Pantech on 31st October 2016.

For those that haven’t heard of Pantech, here’s some background…

Once upon a time in Korea
Think of Korean mobile phone brands, and probably only two names will come to mind. But there was once a third player on the Korean smartphone scene that challenged industry giants Samsung and LG for domestic supremacy.

Pantech was apparently at one point the country’s second largest smartphone maker, overtaking LG. However, unlike its peers its popularity and reach did not extend far outside of its home market — though some Pantech handsets were sold abroad, including by AT&T and Verizon in the United States.

As the years went by Pantech struggled to compete against its much larger, and more globally oriented, counterparts. The company ceased to be profitable and amassed huge debts. By August 2014, the situation had become dire enough for Pantech to file for bankruptcy.

Silver lining
Pantech had made hay while the sun was shining, however. Its fairly hefty patent portfolio began to attract potential buyer interest after the Korean bankruptcy court approved it for sale. An analysis by Envision IP indicated that while Pantech’s patent stash couldn’t match LG’s or Samsung’s in the quantity stakes, it might compare favourably with them in quality and value creation potential, offering a similar profile in terms of average forward and reverse citations and potential relevance to key tech growth areas like augmented reality.

Among the rumoured suitors were Chinese giant ZTE, Indian upstart Micromax, and a consortium of US-based investors. However, concerns about ‘technology leakage’ — in other words, the perceived danger of locally funded and developed IP assets ending up in foreign hands, without any guarantee of adding value to the domestic economy — signified that efforts would be made to keep the patents in Korean ownership.

In July 2015, a consortium led by Korean optical drive maker Optis and telecoms equipment provider Solid bought Pantech and its patents — in addition to taking on several hundred of its R&D and manufacturing personnel — in a deal estimated to be worth ₩40 billion (US$34.7 million).

Sovereign interest?
Pantech’s pain didn’t end there, however. Despite the rescue package and the release of a new model, Optis announced in May this year that Pantech would be suspending smartphone production and undergo further restructuring. Rival LG shot down rumours that it was in talks to acquire the company and give it yet another new lease of life.

Image credit: Russian Aeronautical Society

Behind the scenes, Pantech’s new owners had already been seeking ways to generate value from the stricken company’s patent holdings. This is where Goldpeak comes into the picture.

After its October 2016 acquistion of Pantech patents, Goldpeak subsequently assigned several to Intellectual Discovery (ID) — a public-private entity set up by the Korean government in 2010 to run the country’s first sovereign patent fund (SPF).

Goldpeak’s own management team includes two former ID executives — Choongsoo Park and YoungJoon Rhee. I understand that both Park and Rhee left their positions at ID during 2016. However, that does not necessarily mean that their association with the SPF operator is completely over, or that Goldpeak is a totally independent initiative. As Jacob Schindler at IAM speculates, Goldpeak could be an ID spinoff, designed to put the state-backed entity at arm’s length from patent enforcement campaigns. It would appear that ID has adopted this strategy in the past; in early 2015, it assigned several patents to a newly created company headed up by another of its former employees, which subsequently asserted them in litigation in the Eastern District of Texas.

Furthermore, in addition to the assets it received from Goldpeak, ID has also acquired patents directly from Pantech; and the latter has also assigned assets to affiliates of ID subsidiary Idea Bridge, which offers IP-backed financing products. All of this hints at a somewhat deeper, more complex relationship between the three parties than simply that of buyer and seller.

Apple’s thinking
As for Apple’s reasons for acquiring eleven of these Pantech patents, we can make some educated guesses.

Based on past news coverage and USPTO data, Apple has rarely purchased patents on the open market. When it has obtained third party patents, it has typically been in the context of a broader M&A deal in which it is acquiring an entire business.

Image credit: Franco Folini (CC BY-SA 2.0)

The most significant exception to this was its participation in the Rockstar Bidco consortium, which purchased the patents of another bankrupt company, Nortel, in a US$4.5 billion deal back in 2011.

Some of these patents were assigned directly to Apple or to the other consortium members (BlackBerry, EMC, Ericsson, Microsoft, and Sony), with the remainder put under the management of a specially formed NPE which inherited the Rockstar name. Apple continued to acquire tranches of patents from Rockstar until the latter sold what remained of its portfolio to patent risk management firm RPX in late 2014.

Aside from this, Apple has also dallied with patent monetisation through its association with NPE Digitude Innovations.

However, it seems unlikely that generating revenue through sales, licensing, and assertion would have been Apple’s prime motivation in obtaining the ex-Pantech assets, since there has never been any indication that such activities constitute an important part of Apple’s IP strategy.

Perhaps the patents could help Apple to beef up its armoury as it faces off with Qualcomm and contemplates future infringement disputes, particularly as it seeks to expand its presence in China.

Another possibility is that the US company saw the chance to remove patents from the market that could end up causing trouble further down the line.

Apple may have been approached by Goldpeak with a view to licensing the patents, and got its hands on some of the assets as part of the eventual agreement between the two parties.

It might have gotten a licence to the rest of the Goldpeak portfolio thrown in with the deal, immunising it — and perhaps some of its business partners — against any assertion campaigns the NPE might have planned for the future.

With several hundred former Pantech assets still in its hands, assertion campaigns may be precisely what Goldpeak has in mind.