Samsung recently made an unsolicited offer of $58.5 billion USD for memory company SanDisk, which the SanDisk board then turned down. It seems Samsung — a major user / manufacturer of memory cards — has as its main reason for the offer is SanDisk’s portfolio of patents. Samsung is a major licensee of SanDisk IP; reportedly close to $400 million a year (400 billion won) in licensing fees to SanDisk (Source).
SanDisk would like to see more money on the table, but Peter Yu (a BNP Paribas analyst) noted for Forbes that if Samsung wants to play hardball and stick close to its original offer:
Samsung can also threaten to withhold intellectual property royalties, a big source of income for SanDisk, and the resulting prolonged litigation process would be a headache for SanDisk
While a deal may not be that likely given both Samsung’s history in US acquisitions and SanDisk’s reluctance to sell (as noted in the FT) this does highlight a few thoughts in terms of IP strategy:
- Licensees acquiring their licensors as a way to reduce overall costs by direct ownership of the IP;
- Using a threat of royalty dispute (or an actual dispute) as a way to encourage settlement or acceptance of a deal (the stick to the $58.5 billion carrot); and
- Given that SanDisk has contracts with Samsung’s competitor Toshiba, acquisition could be a way of depriving a competitor of access to certain IP.
Beyond a royalty dispute, Samsung could also explore (if it is a possibility) acquiring any patents that SanDisk might be infringing and using the threat of patent litigation (as opposed to a royalty dispute) as an additional stick. In addition, the threatened royalty tiff is in relation to upcoming contract talks, and as The Register notes this could all be a ploy on the part of Samsung to gain leverage in these negotiations.
Of course the possibility of these strategies must be matched with their compliance with anti-trust / competition law and other legal boundaries.
It is also worth noting that part of the reason for this takeover offer is the slump in SanDisk’s commercial position and the possibility of pressure by institutional investors attracted to the offer when facing a downward sales forecast. It seems to me that the key way to combat takeover attempts by your licensees is to be in as strong a commercial and intellectual property position as possible in order to resist these offers (or command a higher price).
![Reblog this post [with Zemanta]](http://img.zemanta.com/reblog_e.png?x-id=5d343e1a-5709-482d-8420-b423c5127821)
{ 0 comments }
