Friday 3 March 2017


Guest Post: Intangible value underlying the Snapchat IPO

Afro Buff has been grazing for guest posts for you. This one comes from Reinhardt Biermann who readers may recall won the UNISA Domain Name Essay competition promoted on Afro-IP and won a trip to Geneva. This time, Reinhardt, captivated by Snapchat's IPO, gives us his thoughts on:

The Intangible Value of a Tech Startup
In one of the biggest technology IPO’s on the New York Stock Exchange, a tech startup has surprised investors and commentators alike, with a surge in stock prices on the opening day of trading.
I first encountered SNAPCHAT in 2012 during an exchange programme in the Netherlands. Students from the US were all sending “Snaps” to each other, trying to convince their Dutch, South African and Australians counterparts to join in. At that stage, the general consensus was the following (and still remains for many): What is the point of sending videos or images that cannot be stored on your mobile device?
Based on yesterday’s results, the company’s market value appears to be around $28.1 billion.

What sits behind the so-called value of SNAPCHAT and is it merely an empty vessel for a digital generation?
The initial interest behind the platform was the fact that Snaps were only accessible for 10 seconds. This has changed in recent times, with a screenshot making it possible to store the Snap on a device. The sender does however receive a notification when the recipient does take a screenshot of a Snap. There are also Apps that have sprung up with the capability to store photos and videos.
The main features of SNAPCHAT are the unique elements of the Snaps, the inclusion of Geofilters (graphic layovers that users can insert when in a specification geographical area), Lenses[1] (augmented reality for selfies), Stories and Discovery.  

Intellectual Property
From an intellectual property perspective, the intangible assets of a company are often made up of patents, designs, trade marks, copyright and frequently, while not emphasised enough, confidential information, know-how and trade secrets.
The company has indicated that approximately 158 million people use the App daily, sending 2.5 billion Snaps on the platform. The average user spends in the region of 30 minutes a day on the platform. It therefore appears that a substantial portion of the intellectual property correlates to the data and information of millennials, entrenched within this platform, a segment of the market that so many companies have struggled to connect with. However, the biggest challenge for SNAPCHAT has been monetizing these aspects, as the company remains unprofitable. Furthermore, privacy and data concerns have been raised, as it remains ever difficult to manage consumer information responsibly and with the appropriate protection tools.
The SNAPCHAT trade mark, which has been registered in South Africa, is also an important part of the company’s intellectual property. In addition to registered trade mark rights, SNAPCHAT has acquired a substantial goodwill and reputation in the market place. This places the company in a strong position to enforce its rights against any trader that may wish to use the same or similar trade mark in the social media industry.
The company has started to bolster its patent portfolio, with recent acquisitions from Yahoo and other technology entities, which has made the company more attractive for investors.

Risks and pending litigation
SNAPCHAT filed a US patent application during 2012 for the so-called “tap and hold” function on the shutter to record a video or photograph (see However, a company called Mojo Media filed a similar “tap and hold” patent application shortly thereafter. SNAPCHAT’s patent application was granted by the US Patent and Trade Marks Office in 2013, but it seems that action was instituted by Mojo Media.
There is also ongoing litigation between Snap Inc. and a Canadian entity, Investel Capital Corporation, who is seeking to invalidate the patent SNAPCHAT obtained in respect of its Geofilters technology. The other side argues that its technology was made available to the public before SNAPCHAT’s patent application was filed.[2]
Furthermore, there is also the settlement that was reached (in quite similar fashion to the Winklevoss brothers’ dispute with Facebook), with an early SNAPCHAT employee, who apparently jointly owned some of the intellectual property. This intellectual property in question includes ghost-shaped logo ("Ghostface Chillah", named after Ghostface Killah of the hip-hop group Wu-Tang Clan), the PICABOO trade mark (which was subsequently rebranded to SNAPCHAT) and possibly the “evaporating photographs” concept.

Is the tech bubble waiting to burst?
Some are of the view that the recent tech investments may be a repeat of the dotcom crash in the 2000’s. However, we live in strange times, with the NYSE reaching record levels and the London financial markets remaining surprisingly stable in times of protectionist movements, amidst fears by investors and consumers.
Consumer data and confidential information (specifically pertaining to millennials), appear to be increasingly valuable forms of intellectual property, and may be inflating the valuations of tech startups. However, the market appears hungry and ready to throw money at it. Together with an increasing patent portfolio, investors seem hypnotized by the potential value thereof.
Can the data and technology of modern-day tech companies translate into strong financial returns? Only time will tell.

Reinhardt Biermann

[1] Taco Bell apparently spent between $500 000 and $750 000 on a sponsored lense/filter that was viewed 224 million times in a single day.

[2] In another ongoing dispute, Vaporstream Inc. v. Snap Inc. (case number 2:17-cv-00220), Vaporstream has instituted patent infringement claims against SNAPCHAT in relation to a system for sending and receiving private electronic messages. SNAPCHAT has argued that the type of invention relied on is not eligible for patent protection, in terms of the case of Alice v CLS Bank International (a 2014 US Supreme Court decision). SNAPCHAT has asserted that the subject matter of the invention is not patentable, as it relates to attempting to keep secret the identity of a sender and recipient of a message, on a computer.

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