Tag Archives: licensing

Topsy turvy: InterDigital posts 66% drop in 3Q net; Acacia up $158.4M

Public IP company stalwart, InterDigital, with PIPCO-leading performance over the past five years, was hit by a significant drop in its net earnings in the 3Q. Its performance was in stark contrast to the oft-beleaguered Acacia, which posted a quarterly net profit of $158.4 million.

For Acacia Research Corporation (ACTG), the motivation was a one-time gain as a result of an unrealized return on its investment in Veritone Inc. (VERI), the artificial intelligence company that went public earlier this year.

InterDigital (IDCC) posted a 66% drop in 3Q net, as its income from patent royalties fell to $34.7M from $103.5M. “The decline in patent licensing was mainly because of a plunge in past patent royalties,” reported The Patent Investor.

Earning for PA-based IDCC actually came in better than expected. CEO Bill Merritt emphasized the company’s continued efforts to manage for the long-term, saying “the strong visibility over our revenues and future cash flows, given our high fixed-fee revenue contribution and long-term agreements, put us once again in a position to return value to shareholders with last month’s announcement of our third dividend increase in the past four years.”

Four Million Shares

Acacia’s $50 million in loans to Veritone converted in the AI firm’s May 2017 IPO into 4.12 million shares of Veritone. That included 1,969,186 shares and a warrant to acquire 2,150,335 shares that converted into stock with the IPO. Acacia also has 1,120,432 Veritone stock purchase warrants with a strike price of $13.26. The company said its cash and short-term investments totaled $158.6 million, as of September 30, 2017.

Acacia appears to have made generated a better return from its well-placed loan than it has from its recent patent licensing initiatives. That may be its smartest patent monetization play yet. InterDigital is down approximately $15 per share YTD; Acacia about $.50.

For a performance comparison of InterDigital, Acacia and other PIPCOs, visit the IP CloseUp 30™, here.

Image source: truebluetribune.com 

 

“Turn and face the strange” – Patent values fall to earth; PIPCOs, too

Changes, or should we say “ch-ch-changes,” channeling David Bowie, who reinvented himself repeatedly, have decimated the performance of most publicly held patent licensing companies.

Public IP licensing companies (PIPCOs) are changing their names and restructuring in an attempt to reframe themselves. The move appears part of an effort to shed the past, given that many of these businesses have significantly under-performed the S&P 500 Index.

With patent values at historic lows, a fresh perspective is welcome. But can PIPCOs turn the corner and successfully adapt to changing times (and valuations) in the patent space? Only some are likely to succeed.

A fuller discussion of public IP companies, “PIPCOs adapt to ch-changing times,” can be found in my “Intangible Investor” column in the September IAM magazine, out today. Subscribers can find the piece here. It includes companies that have changed their name or issued reverse splits of their stock. or otherwise reinvented themselves as operating companies with product sales.

A Closer Look

A closer look at the IP CloseUp 30 reveals several significant developments. One trend which financial analysts tend to question is rebranding; another is a reverse split, where a $0.50 stock can suddenly become a $4 one when investors are provided with fewer shares at a higher price.

To casual observers, it can appear that performance has taken off, when in fact the weak stock price is merely being obscured by a diminished public float. Many PIPCOs were formed by a merging a private enterprise into a public shell, which while not disreputable, often comes with baggage.

While one can appreciate different patent strategies – the need to monetize good assets through different business models – the perils of public ownership are ill-suited for the majority of companies whose primary focus is licensing.

Still, there are public and private patent licensing company successes, including Finjan, which has successfully fended off multiple IPRs, Network-1, inventor-owned PMC (Personalized Media Communications), which continues to license, and colleges like Northwestern and NYU, which have scored big on pharmaceutical licensing.  

Stanford University’s patent licensing take in shares of Google are said to be worth more than $300 million.

Image source: wikipedia.org

IP Dealmakers’ event Nov. 17-18 will focus on new opportunities; IP CloseUp readers can save $200

IP Dealmakers Forum is one of the more anticipated IP events of the year, especially for those engaged in patent licensing, sales, and M&A transactions. It also of signficant interest to investors. 

This year‘s event will feature a new track, Dealmaker Deep Dives, a shorter, more targeted discussions with experts taking an in-depth perspective on a specific set of issues. Each session includes extended time at the end for Q&A so the audience can really take advantage of the speakers’ expertise.

IP CloseUp readers go here for a promo code that provides a $200 discount.

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Seizing Opportunities

“With the doom and gloom over patent licensing, the last couple of years we wanted to make sure the event was addressing the many new opportunities in the market,” said Forum director Wendy Chou, “In conversations with our board of advisers, past attendees and current IP holders, we were able to identify transaction areas that are being overlooked.”

Session titles include:

       – Seizing Opportunities to Invest in China’s Developing IP Market

       – Defining the IP Landscape in IoT: Strategy, Standards & Licensing

      – Trade Secrets — What IP Investors Need to Know

There also will be a panel on “efficient infringement,” a timely topic that grew out of attendee conversations during Q&A last year. The session is called:

Building a Better IP Market: Efficient Transactions vs. Efficient Infringement

  • A look at past attempts and business models
  • What does an efficient IP market look like?
  • Identifying challenges to progress

In terms of format, IP Dealmakers Forum (IPDF) has moved from all panel discussions to a mix of panels with patent holders, deal experts and investors taking an in-depth perspective. In 2016, as in past years, there is a strong lineup of speakers with a diverse mix of senior executives representing corporations, licensing companies, public and private market investors, law firms and other strategic advisors.

One-to-Ones

Face-to-face meetings continue to be a highly utilized aspect of the event, where attendees can schedule 30 minute sessions with one or more other attendees at any time during the event. A total of more than 425 meetings were scheduled over the past two IPDF, and the producers expect an even better response in 2016.

The IP Dealmakers Forum is organized by The IP Investment Institute, LLC and its partners Wendy Chou and Eric Salvarezza.

For the full IPDF agenda, go here.

To register, go here. There are still some remaining seats.

IP Marketplace

The IP Dealmakers Forum explores the challenges and opportunities in the changing IP marketplace. Lack of IP transaction data, information, and transparency pose serious challenges to market efficiency. However, they can create opportunities for investors who know how to leverage news, manage risks and connect with the right players.

IPDF attracts senior IP market participants from the finance, legal and business communities.

Image source: ipdealmakersforum.com

Responsible Patent Licensing is focus of Wall Street event

Not all patent licensing businesses are alike.

“NPE 2016: The Business of Responsible Licensing,” scheduled for March 22 at the Convene conference in New York, will differentiate patent monetization companies by examining their business models, strategies and the managers who run them.

The conference will focus on the non-practicing entity (NPE) industry, including both public and private companies. In 2015, the NPE 2016 brought together leaders from the licensing company sector and the wider corporate IP and investment communities to discuss the challenges and opportunities of running a patent licensing business, especially in today’s challenging climate.

NPE 2016 is the only gathering that examines how NPEs operate and contribute to the innovation and the economy.

3J6A3349Moderator-led panel discussions with audience Q&A at the end of each will be featured. Sessions are designed to focus on the specifics of building and running successful NPE, as well as on the opportunities available to investors.

Beyond Monetization

This year’s sessions will consider licensing best practices, building and managing a patent portfolio, licensing dos and don’ts, litigating in Europe once the Unified Patent Court has been launched, licensing opportunities in new sectors and moving IP commercialization beyond monetization.

Last year’s attendees included:

• NPE executives
• In-house counsel and legal directors
• Private practice lawyers
• Licensing executives
• Patent brokers
• IP policy professionals
• Investment professionals

IP CloseUp readers who use the promo code IPCLOSEUP before February 19 are eligible for a $150 discount off of the full $895 registration.

For more information about NPE 2016 or to register, go here.

For he full program, go here.

 

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Image source: convene.com; iam.com

 

“Patent Investor” tracks licensing company shares & developments

A new weekly is the first to feature in-depth coverage of public intellectual property monetization companies (PIPCOs). 

I’ve been following The Patent Investor for a few weeks, wondering what news it could provide beyond what I already know and hear about the PIPCO space.

What I discovered is that TPI regularly contains news of developments and trends useful to those interested in or affected by patent licensing businesses – especially the publicly held kind. Editor/reporter Dan Lonkevich goes beyond news releases and news about PIPCOs reported in the business press, to provide the relevant facts that investors need to make informed decisions, and those on that defendants in NPE disputes may wish to be aware of.

He is also not afraid to report bad news or delve into SEC filings, nor is he reluctant to portray a company in a less than favorable light – essential for a credible investor newsletter.

Lonkevich previously worked as the senior editor for The DealFlow Report, a unit of The Street Inc. Prior to that he was a reporter for Bloomberg News in New York. While at Bloomberg, he covered the insurance TPI_Mastheadbusiness, mergers and acquisitions and oil and gas companies. Prior to that, he worked as an associate editor for The National Underwriter and was a reporter for Bestweek, a newsletter  covering the insurance business published by insurance rating company A.M. Best Co.

The Patent Investor, which began publication last year, looks at the publicly listed businesses involved that license and sell patents, and the performance of their shares. TPI differs from Intangible Investor, a column that I write for IAM magazine, which considers PIPCOs, as well as a broad range of indirect investors or IP stakeholders, including operating businesses.

The website describes the newsletter as “uniquely and solely devoted to covering the patent monetization business, unlike more mainstream business and legal publications. It is intended to be of interest to investors, inventors, entrepreneurs, attorneys and investment bankers who work with the growing number of patent monetization companies.”

At $899 for an annual group subscription ($299 for individual subscriptions) TPI, while good value, is not for everyone. However, the cover of each issue, with the first paragraph of key stories, is available for free. Those interested in a sample issue or subscription can receive one.

To see the cover of the latest issue or for a sample, go here.

TPI’s article archive can be found here.

Image source: thepatentinvestor.com

2014 Patent Verdicts Suggest the Best IP Rights Remain Valuable if More Difficult to Monetize

While $50 million-and-up patent verdicts were up in the first half of 2014, there were only two wins higher than $131M and none from NPEs.

The uncertainty brought about by legislation and the courts has not put a damper on patent wins, but it likely has influenced them by putting an unofficial ceiling on some.

If first half 2014 wins are any indication, patent enforcement has moved more to a middle ground with higher but less spectacular wins among a broad range of technologies. Med tech, pharma and high-tech all participated.

Interestingly, not a single NPE was among them, suggesting that despite their increased activity and asset quality they, or those that defend against them, are electing to settle before trial.

As reported in IP Law 360, many of the large verdicts this year involve patent cases between competitors (operating companies), where the stakes and dollar amounts involved can be high. Others involve non-practicing entities, and the well-publicized reluctance of many companies to settle with such companies might lead to some sizable awards, said Lex Machina general counsel Owen Byrd.

“Clearly, some defendants are gambling and playing hardball and losing, when in the past they might have settled,” he said.

“While cases that result in nine-figure patent damages awards make headlines, Apple-vs-Samsung-lawsuit2they represent only a tiny fraction of all patent litigation, since most cases settle,” said the publication.

“Less than 2 percent of patent cases involve an award of compensatory damages, and while $15 billion in patent damages has been awarded across the U.S. since 2000, the 10 largest awards make up more than half of that total, Lex Machina found.”

The $50M+ awards for the first half of 2014. (Some of these are likely to be appealed.)

Edwards Lifesciences v. Medtronic – $393M

ViaSat v. Space Systems – $283M

Alfred E. Mann Foundation v. Cochlear Corp. – $131M

Apple v. Samsung – $120M ($2.2B sought)

Mylan v. SmithKline – $107M

Power Integrations v. Fairchild Semiconductor – $105M

SimpleAir v. Google – $85M

 

Click here for the subscriber content from IP Law 360.

 

Image sources: creatprint.com; http://blog.laptopmag.com/  

Valuations Soar on Smartphone Patents and Stocks

Speculation is Boosting Some Companies for Now; The Shortsighted are Paying a Premium to Compete –

What hath the Nortel auction wrought? Never before has it been so apparent that the right patents in the right hands (at the right time) are valuable financial assets.

InterDigital’s stock had been up 73% since July 18, a period which saw a better than a 15% across the board market correction. As of this morning InterDigital (IDCC) is stil up an astonishing 57.5% year-to-date.

After bidding $4 billion for Nortel Networks wireless patents and losing to a group let by Apple and Microsoft, Google has purchased more than 1,000 patents from IBM. Most of the patents, I understand, have little to do with Google’s primary businesses. Google continues to be in discussions with InterDigital. Now, apparently Samsung, Apple and others are interested in ID’s portfolio or, possibly, the entire company. This has bid the stock price up considerably.

TechCrunch wrote on August 4 that Google, late to the patent game, is in a tight corner and may be an unwilling buyer. (4G patents are terrific, but wouldn’t Google benefit from acquiring other, somewhat less expensive but strategic patents that read on Microsoft, Apple and others’ products? The IBM purchase were likely castoffs from its vast portfolio. High-performing IBM does not currently appear to need the cash but may be more motivated by Android/Linux success.)

Personalized Media Communications, for example, has 59 self-generated patents than read on many mobile and other display devices. It already has settled suits with Motorola Mobility and Cisco, and a number of patents have successfully survived re-exam. PMC is not the biggest name in technology, but it may have the strategic assets some businesses need to compete on the IP front. (Brody Berman Associates has advised PMC about its portfolio.)

Assuming a 5 percent unit compound annual growth rate and a 10 percent discount rate, the InterDigital portfolio, believes InvestorsHub, could be worth between $3 billion and $10 billion to Apple.

* * *

Icahn Picks Bone with Motorola Management in 13D Filing

Lately significant investors who not ordinarily care about patents or IP strategy have become increasingly vocal about them. This is especially true of investors in companies that operate in the mobility field.

Activist investors are not new. For decades they have been pressuring senior managements about how to best use tangible assets, like real estate and cash. Now, however, the have become more vocal about deploying valuable intangibles, like patents.

Witness billionaire investor Carl Icahn, the biggest owner of Motorola Mobility Holdings (MMI) shares. Icahn recently stated in an amendment to his 13D SEC disclosure that he believes that Mobility should generate more value from its portfolio of some 17,000 patents, especially in wake of the Nortel sale.

“The Reporting Persons believe that the Issuer’s patent portfolio, which is substantially larger than Nortel Networks’ and includes numerous patents concerning 4G technologies, has significant value. In addition, there may be multiple ways to realize such value given the current heightened market demand for intellectual property in the mobile telecommunications industry.”

Over a two-day period ending July 21 Mobility’s share price shot up 12.4% to $25.19. It was as high as $27.68 after the Icahn comments, marking an approximately 23% move.

In a formal response, Motorola management defended itself vaguely saying “Motorola Mobility’s Board of Directors and management team continuously reviews the Company’s strategic direction and opportunities that it believes are in the best interests of the Company and all of its stockholders.”

* * *

In fairness to Mobility’s management, monetizing a complex IP portfolio is not as simple as calling for an auction and recording bids. Also, it is not merely a numbers game: “My 4G portfolio is bigger than yours.”

Still, former TWA, Marvel, and Clorox investor Icahn is well-aware, entrenched value is dangerous to shareholders and wasteful to all. (Full disclosure: an Icahn-led group retained my firm Brody Berman Associates, to conduct investor relations for Marvel Entertainment after its bankruptcy filing.) He is also aware of the power of perception and supply and demand.

The high cost of R&D and freedom to operate are motivating the current market. So is the pain of litigation. Companies humbled by patents they do not own are a healthy sign. Without significant damage awards and the occasional injunction this would unlikely be the case. Despite what some economists might think, recognizing the value of invention rights is a plus for innovation, business and even consumers.

*     *     *

Eventually the mobility patent speculation will come back down to earth, as will the recent panic selling in the broad market. Remaining will be the machinery for intensely competitive (and sometimes collaborative) patent acquisitions that has been set in motion. Companies holding the right assets are enjoying the ride.

Image sources: ipfrontline.com, endgaget.com, pulse2.com 

ROI for Intellectual Ventures Funds Scrutinized

U of TX Return on IV is Off 73%

PE investor Chris Dixon unearthed some interesting news about returns on an investment in Intellectual Ventures funds held by the University of Texas Management Company. The news was picked up by TechCrunch last week.

Go to the report ending May 31, 2010 and blow up page 7. Read how IV’s ROI for Invention Investment Funds I and II were off significantly for the period, especially compared to the holder’s other private equity investments.

Writes TechCrunch reporter Erick Shonfeld:

“The link is a PDF download of a document from the University of Texas Management Company listing all of its private investments in venture funds and private equity funds, along with their internal rates of return (IRR). One of the worst performers is Intellectual Ventures, the patent portfolio fund started by Nathan Myrhvold that has a reputation for patent extortion.

“One of its funds, the Invention Development Fund I, has a negative 73 percent IRR (Dixon mistakenly thought it was negative 78 percent, but close enough). Another fund, the Invention Investment Fund II, has a negative 10 percent return. The two funds combined are delivering a negative 36.66 percent IRR for the University of Texas.”

In fairness to IV, you can’t mix apples and oranges. Performance really depends on the specific nature of UofT’s investment and the poor current results may not accurately represent IV’s overall return on those specific funds.

Early stage venture investments often show extraordinarily uneven results until certain benchmarks are achieved in later years. The private document was likely leaked, so no context is provided and I’m sure that IV is not discussing it publicly.

*     *     *

This document is a rare peek into what is presumably a direct IP investment. It shows that where patent licensing and litigation are concerned ROI can be difficult to read and painful to watch.

I’m uncomfortable about the lack of context. It is hard to know what the performance (or lack of) really means based in relation to other PE investments or even other licensing activities.

Readers who may be able to provide additional perspective please chime in.

Illustration source: linux.sys-con.com


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