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The patent bubble has been pricked. Apple, Google and Microsoft bid up smartphone invention prices to frothy heights last year to gain a market edge. InterDigital, owner of nearly 20,000 patents and applications, hoped to capitalize but couldn't find a buyer. There's still value to pan, but the gold rush is over.

Like every investment mania, a genuine nugget set off the one in patents. The number of Americans with smartphones nearly doubled last year. Companies that controlled rights to important developments demanded ever-higher royalties and sued rivals en masse for infringement. That's why tech giants teamed up to buy 6,000 patents from bankrupt Nortel for $4.5-billion (U.S.) – or five times the original bid. The chief legal officer for Google, which lost the Nortel auction, warned afterwards that the "patent bubble will pop." Then it went on to pay $12.5-billion for unprofitable Motorola Mobility.

Like all bubbles, investors excitedly bid up the equivalent of marginal properties and swampland. Kodak's shares spiked when it put a patent estate up for sale. Breathless analysts estimated the collection could be worth $3-billion, even though it wasn't heavy on wireless technology. The Nortel sale imputed a value of $800-billion to Kodak's patents. Now, the photographic icon is in bankruptcy.

InterDigital faces a slightly less painful normal. Its market value spiked to nearly $4-billion on news it was being sold last year. That was just more irrational exuberance. While Nortel's patents were largely unencumbered, InterDigital had licensed out many. Nortel also invested $25-billion in R&D from 1998 to 2007, while InterDigital spent a fraction of that, according to brokerage Arete Research. InterDigital's value is back down to $1.6-billion after pulling itself from the auction block on Monday.

These reversals of fortune don't necessarily mean intellectual property rights are headed for a prolonged slump. The bubble inflated prices, but unlike in housing, there's no supply glut. Instead, prices are more likely now to be based on thoughtful metrics, like the value of the royalty streams each patent produces. That's bad news for investors in companies such as Research In Motion who hoped they too might strike patent gold.