Public IP licensing companies (PIPCOs) are very much alive and some company shares are doing surprisingly well, despite increased obstacles to patent licensing.
PIPX reported a 20.4% gain for the 3Q vs. just 3.3% for the S&P 500.
It was the PIPX’s best performance since the index began tracking IP licensing companies in 2011. The PIPX is a capitalization-weighted, price-return measure of the change in value of this segment of publicly traded companies.
“InterDigital and Tessera, comparative giants in market value, were responsible for 20% of the index move,” said Dr. Kevin Klein, Vice President and GM of Products and Licensing at VORAGO Technologies, who compiles the data. “Acacia was the biggest individual gainer, up 48.2%; WiLAN was the biggest loser, down 39.4%. ”
It is difficult to attribute any one specific factor to the record quarter. However, PIPX has been volatile, and somewhat counter-cyclical since its inception. The index could be seen as a hedge against S&P 500 performance. Additionally, patent licensing and sales have started to come back, and patent damages awards are being paid, although at reduced amounts.
The Patent Trial and Appeal Board has been instituting fewer Inter Partes Reviews (down to about one-third of petitions filed), but is still seen by many as a somewhat arbitrary impediment to patent licensing and enforcement.
The value of $1 invested in the S&P 500 in Q3 2011 would now be worth $1.62 while the value of the same $1 invested in the PIPX would be $0.68.
PIPX Performance by Quarter
Added to the index is FORM Holdings (NASADQ: FH), a diversified holding company that specializes in identifying, investing in and developing companies with superior growth potential. Removed were Vringo, which was absorbed by FORM Holdings, and Unwired Planet, which was delisted on June 18.
For the full 3Q report, go here.
Image source: PIPX Public IP Index