Tag Archives: Marathon Patent Group
Q2 2016 Figure 2

Shares of patent licensing cos were off in 2Q after a torrid start to year

After a record-breaking first quarter, public IP company shares (PIPCOs) under-performed most stocks versus the S&P 500 index in the second quarter.

Following a five-year leading return of 13.1%, vs. 0.8% for the S&P 500, the PIPX IP Sector Index of 13 patent licensing stocks fell in the second quarter -4.4% vs. a 1.9% gain the broader market index.

Bucking the trend was Marathon Patent Group (MARA), which was up 37.7% on settlement activity. Despite and increase in its shares of 16.1% in the second quarter, Acacia Research (ACTG) is rumored to be exploring combining with a pre-IPO business because of the difficult environment for patent licensing.

“Acacia may acquire a pre-IPO business, allow struggling IP business to wind down, former employees say.” reports the Patent Investor.

Q2 2016 Figure 2

“The value of $1 invested in the S&P 500 in Q3 2011 would now be $1.57 while the value of the same $1 invested in the PIPX would be $0.56,” says Dr. Kevin Klein, who compiles the PIPX for IP CloseUp,”

Q1 2016 Fig 2

Unwired Planet (UPIP) was the PIPX worst performer, down 32.3%. On April 7, UPIP announced that it was divesting its patent licensing business. 

The PIPX IP Sector Index is a capitalization-weighted, price-return measure of the change in value of this segment of publicly traded companies. This means that the performance of larger companies like InterDigital, Rambus and Tessera have a proportionately larger impact on overall index performance than swings in smaller public company shares followed.

For the full PIPX Index report for the 2Q, go here.

Q2 2016 Figure 3

Image source: PIPX IP Sector Index

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Leading IP stocks for 1Q include VRNG, RMBS, TSRA, VHC & RPXC

Despite a soft first quarter 2015 for the 13 IP licensing company stocks that comprise the PIPX IP Stock Index, versus the S&P 500, individual winners and losers that bucked the trend.

Vringo (VRNG), down 80.9% over the past 12 months, was up 18.2% in the quarter one, the most in the group. Also advancing were Rambus (RMBS) was up 13.4%, Tessera (TSRA) 12.6%, Virnetx (VHC)10.9% and RPX (RPXC) 4.4%.

Unwired Planet (UPIP), Acacia (ACTG) and Marathon (MARA) were down, 43.0%, 36.8% and 31.0% respectively for the quarter. For MARA it came after a stellar 2014 where it gained some 170%, so some profit-taking is not unexpected. InterDigital (IDC) also cooled off after a torrid 4Q 2014.

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PIPX under-performance relative to the S&P 500 was more muted in the first quarter. This appeared to be less a result of improving performance among PIPX sector companies as a group, than improved performance among a handful of larger Index leaders (Tessera and InderDigital), whose weighting impacted overall results (see final graph).  

Fig2
Vringo’s stock was beaten down significantly in the 2014 as the result of adverse decisions in court, so its gain is less impressive in relative terms. Its improved stock performance is either being considered by some investors as a positive harbinger, or the shares are enjoying a favorable bounce due more to traders than long-term investors.

The role of depressed patent values as a result of the American Invents Act, IPRs and proposed proposed additional anti-patent litigation legislation in poor PIPCO performance is difficult to determine. The likelihood is that investors are beginning to regard some companies as better capitalized and and more sufficiently equipped for the long hall, whatever the scenario.

Those larger players that appear to be in possession of sufficient numbers of good patents and licensing opportunities, appear to be the best position to perform over time.

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Fig3The PIPX Index, compiled exclusively for IP CloseUp by Dr. Kevin Klein, Director of IP Licensing at Freescale Semiconductor, is designed to provide a measure of the market value and health of the intellectual property licensing business. The index consists of 13 public companies all whose market capitalization exceeds $100M, whose primary focus of licensing and enforcement of patent intellectual property. The companies included in the index are listed in Table 1. Several of the companies’ market capitalization has fallen below $100M since being added to the index.

“The PIPX index starting from July 2011 through March 31, 2015,” says Dr. Klein. “Somewhat surprisingly, given the amount of interest and attention provided to IP licensing in recent years, the index trends down from July 2011 to about the middle of 2012 and from there has been relatively flat. This performance stands in contrast to that of the broader economy and of publicly traded companies in general.”

The 2015 1Q PIPX update can be found here.

Fig5

Image source: PIPX IP Sector Index, Q1 2015 Update

2014PIPXyr

A Few IP Stocks Shined in 2014; Most Declined, Some Significantly

Size helped in 2014 when it came to public IP licensing company stock performance, but it did not assure success.

As a group, the twelve companies in the PIPX Public IP Performance Index out-paced the S&P 500 for the 4Q 2014 9.1% to 4.4%, with Neonode, Tessera and InterDigital leading the way, all with 4Q gains in excess of 30%.  Marathon, under $100M in market cap for most of 2014 and not represented on the graph below, was up 17% for the quarter and 167% for the year.

2014PIPX4QFor the year 2014, however, companies in the index fare much worse, with PIPX companies generating a collective return of just 4.3% vs. 11.4% for the S&P 500. Tessera and InterDigital were notable performers each with 40% returns for the year. Rambus and Acacia were up about 17% each.

Eight of the twelve companies in the PIPX, which is provided to IP CloseUp by Dr. Kevin Klein of Freescale Semiconductor, were down, led by ParkerVision, VirnetX and Vringo. RPX was down 18.5% for the year and WiLAN 11.3%.

The PIPX is weighted by value or market capitalization, so poor performance by smaller companies has less of an overall impact on index performance.2014PIPXyr

Conclusions? 

It is difficult to draw too many conclusions from this, the first year of the PIPX. Investors tended to reward higher value stocks, but size was not a guarantee of performance, with RPX and others down against both the index and S&P 500.

It’s important to recognize that despite uncharacteristic pressure on patent values due to legislative reform and judicial decisions, good assets have continued to hold value. With the recent Rockstar settlements and sale of 4,000 patents to RPX, we could be at or near the pricing bottom, depending on the nature of 2015 patent reform.

A few small stocks bucked the trend, notably Marathon (MARA), which was not on the PIPX list because it was under $100M in market cap for most of the year. It is now at $110M and is being added. MARA ended the year up 167%. I’m pleased to say that Brody Berman Associates, my firm, helped to develop with the company’s early messaging.

Other companies not in the index performed poorly and their results can be readily tracked on he IP CloseUp 30 found here. (Paste the URL onto you home screen or desktop for easy, real-time monitoring of the public IP sector.)

Image source: Freescale Semiconductor

bull-and-bear2-300x290

Nine Companies in IP CloseUp 30 Index Fall Below $1/share

More than one-third of the IP CloseUp® 30 public patent licensing companies (or PIPCOs) are currently selling for less than or about $1 per share — Opportunity of red flag?

With the S&P 500 and other major market indices up slightly for the year, about as expected, PIPCOs continue to defy expectations both on the down and the up side.

As of mid-day December 17, nine IP CloseUp 30 companies are trading below $1 per share and two others are just barely above gold-bear-market-cnbcit. The laggards include Copytele, DSS, Hipcricket, Inventergy, MGT Capital, Opti, Inc., Paid, Inc., Single Touch, Unwired Planet and Vringo. Pendrell is at $1.27 and Spherix at 1.13, 2014 lows. VirnetX is down 75% for the year and Finjan 64%.

It remains to be seen whether 2015 investors will regard these stocks, beaten down by new patent laws and lackluster performance, as buy or sell opportunities.

Patent licensing stocks continuing to outperform the market by a wide margin are Tessera, Rambus, InterDigital, Marathon Patent Group and Acacia Technologies. Collectively these stocks are up well over 50% in 2014. Marathon is up 188%.

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ipcu30-blurb2-21Year end stock selling can be fueled by many things, including mutual funds that announce their mandatory distributions, typically in mid December. This year fund distributions have been particularly high because many have taken gains from previous years, including a huge 2013. Some investors sell to avoid the taxes passed on by funds. The plunge in oil prices is adding volatility as is the Fed’s suggested easing of economic support.

PIPCOs that have transcended the general public NPE stock trend appear to be well-positioned for 2015 and may benefit from proposed new patent legislation should it pass.

Image sources: ipcloseup.com; promotaka.com

hurdles

Some Licensing Companies will Likely Benefit from Higher Patent Hurdles

As businesses adjust to new judicial and legislative requirements public patent licensing companies will have to work harder and think smarter to compete against the stock market and each other.

Some are better-positioned to succeed than other.

Investors will soon learn which patent licensing companies are best-prepared to respond to the new patent quality and anti-monetization requirements handed down by the lawmakers and the courts.

Public IP companies (PIPCOs) not only need to surmount new legal obstacles to monetize their assets, but at some point in the near future will no longer have the benefit of a bull market to buoy their shares. Such obstacles will actually suit some companies as they rise to the new challenges, and competition increase. It’s hard to keep a good patent down, especially a heavily infringed one; nor is it easy to deter a determined patent holder.

PIPCOs have benefited from the momentum of a 65-month bull market, by most accounts, now in its final stages. Balance sheet basics like cash flow, market value and the ability to grow in adverse market conditions will be increasingly important as investors seek shelter. This provides opportunities for companies like Tessera, InterDigital and Rambus, all market valued at $1B or more. This will put pressure on thinly traded nano-caps, whose low value will present challenges in weak market for speculative stocks. Exceptions will be those tiny companies whose stock price outpaces their revenue stream.  

Market Cap

In “Higher patent quality hurdles may help some Licensing companies to prevail” in the January IAM Magazine I look at the PIPCOs that have out-performed the S&P 500, thus far, and those positioned to continue to. I also consider  RPX’s (NASDAQ: RPXCIP business model which has suffered, possibly from a perceived lack of need for defensive aggregation under new Patent Trial and Appeal Board (PTAB) reviews.

“A kind of normalisation appears to be taking place in the NPE space,” the Intangible Investor piece states. “While IP rights and Alice have made it more difficult for most companies (and law firms) to collect big damages awards, they have not affected all PIPCOs the same way. Those with quality and capital, and room to grow are in a good position to prevail. Stock prices are depressed as over-reacting investors adjust to lower patent values, but some smart investors will see this as a buying opportunity.”  

Stock Performance

The businesses in the IP CloseUp® 30 that exceed $1 billion in market cap all did well through the first three quarters, some even outperforming the S&P 500, which was up 5% at that point. Most of the rest performed poorly, with the notable exception of Marathon Patent Group (NASDAQ: MARA), whose share price was up 120% at the end of the 3Q. (It’s up 147.7%% over the past year as I write this.)  Of the seven most highly valued IP licensing plays RPX performed the worst. (See current 12-month performance comparison below.)

S&P Comparison

“IP licensing companies are a very small part of a larger public equities market,” says Mark Argento, senior equity capital markets at Lake Street Capital, who has been following PIPCOs for almost a decade. “Only a half, or so, are institutional grade stocks because of their size and volume. Investor sentiment is improving. We need to remember there is a difference between long-term investors and short-term traders.” (See 3Q market cap and 12-month return charts on this page.)

The January IAM will be published in late November.

Image source: Lake Street Capital Partners; Freescale Semiconductor; tnoonz.com; yahoofinance.com.

PIPX 3

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LES Hot Topic: “Public IP Cos, Their Impact and Business Models”

Licensing Executives Society session at annual meeting in SF will also look at PIPCOs’ profile, performance and future.

This year’s LES annual meeting in San Francisco, it’s 50th, will provide many timely sessions, including one on the future of PIPCOs – public IP (licensing) companies.

Moderated by your dedicated IP CloseUp reporter, Bruce Berman, it features the CEOs of two prominent public IP companies, Joe Beyers, or Inventergy (INVT) and Doug Croxall of Marathon Patent Group (MARA). Additionally, Mark Argento, Senior Equity Analyst at Lake Street Capital, with round out the panel with a discussion of what Wall Street expects of PIPCOs and what they will need to do to succeed.

Readers of IP CloseUp are still eligible for a $100 discount if they use the IP CloseUp discount code: IPCU14 when registering here.

Alternatively they can click on the LES box on the right of the IPCU home page.

Please stop buy if you are there and say hello. We enjoy meeting our readers and those interested in the future of IP, especially those ROI-focused patent holders, both NPEs and operating companies.

See below for a preview.

Workshop 6: Hot Topic – “Public IP Companies – Industry Impact and Business Models”

“Public IP Companies (PIPCOs) have doubled in number since 2012 and some have grown in size. They are causing many patent holders to rethink monetization strategy and infringers to develop new defensive strategies. Most of the PIPCOS are small companies that rely on quality patents to generate revenue and value. This workshop will focus on how a range of publicly held IP licensors, some of which are operating companies, employ innovative business models to in order to generate significant returns on their patents.

“This session will define PIPCOs, discuss how they impact IP rights, especially patents, and identify what they mean for innovation in the years ahead. The session also will address what the future might hold for PIPCOs, especially in light of the America Invents Act and the introduction of Inter Partes Reviews by the UPSPTO.

“The panel will consist of CEOs from two important PIPCOs: Doug Croxall from Marathon Patent Group (NASDAQ: MARA), who has worked closely with Erich Spangenberg and IPNav, and Joe Beyers of Inventergy (NASDAQ: INVT), former Vice President of IP Licensing at Hewlett-Packard and Chairman at Allied Security Trust.

Also joining will be Mark Argento, Senior Research Analyst and an IP specialist at Lake Street Capital. Bruce Berman, CEO of Brody Berman Associates and author of “The Intangible Investor” will moderate. The presentations and discussion will include what their access to the capital markets means to licensing, as well as the uneven PIPCO performance to date. Other topics will include the investing community’s understanding of licensing companies and their impact on the IP eco-system.”

Moderators:
Bruce Berman, CEO, Brody Berman

Speakers:
Mark Argento, Senior Research Analyst, Lake Street Capital Markets
Joe Beyers, Chairman and CEO, Inventergy
Doug Croxall, CEO, Marathon Patent Group

 

Image source: lesusacanada.org

McCarthy

Patent Troll “Witch Hunt” Slammed; IP Litigation Tactics, Too

Companies and lawmakers who bash businesses that license patents got a dose of their own bitter medicine this week when their techniques were compared with those of fear-mongering, 1950s anti-communist demagogue Joe McCarthy.

“Villains of the new millennium” is how Jamie Siegel, an Acacia Research Group’s Senior Vice President, characterized the portrayal of non-practicing entities NPEs, also known as patent “trolls,” by those that stand to gain from their demise and who routinely disparage them in the press.

Speaking at the second annual Benchmark Litigation U.S. awards dinner in New York, Siegel was quoted in a story by reporter Michael Loney that appears in the Managing Intellectual Property blog as saying.

“[J]ust as McCarthyism sought to unfairly tag so many with the ‘red’ moniker, Congress, the press, many giant software companies, and even our president, today Jaime-Siegel-retouchedseek to slap the moniker of ‘troll’ on attorneys and business people who are doing nothing more than monetising assets that they own – assets whose very existence is protected by Article 1 Section 8 of our Constitution.” Siegel joined California-based Acacia from Sony last year.

Siegel added that the hysteria around NPEs has been further inflamed by a lack of knowledge, including from the U.S. president. He said Barack Obama showed a lack of understanding when he issued executive directives to change the patent system. Contrary to public perception, he reminded the audience of lawyers, NPEs are good for innovation.

[Gene Quinn in IP Watchdog ran well-linked piece this week that took a deeper look at the sources of NPE-bashing, “Obama on Patents: The One-Sided USPTO Patent Ligation Beta.”]

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In a separate but related development this week, Hon. Randall Rader, Chief Judge of the Court of Appeals for the Federal Circuit (CAFC) provided his strongest and most vocal defense of patent holders’ rights to date.

At a global IP conference in California Law.com reported that he said that  the problem of so-called patent trolls really boils down to a problem of excessive litigation costs. And it’s lawyers who are driving up those costs by spending millions on discovery in search of elusive “smoking-gun” documents.

“You yourselves should be going to your trial judges and requesting restrictions on discovery,” he added. “We cannot tolerate $3 million in discovery expense.

randall-r-rader2While chastising lawyers Judge Rader did not challenge their clients who can afford to pay the exorbitant legal bills and make it increasingly difficult for plaintiffs to file a legitimate complaint. No mention was made of the role recent legislation, which effectively forces holders of even the best patents to sue first to get the attention of an alleged infringer and prevent a declaratory judgement, and negotiate a license later.

“The problem isn’t the patent system. The problem isn’t even trolls,” Judge Rader said, and any effort to single them out will inevitably penalize universities, research clinics and other legitimate contributors to the U.S. innovation system.”

Doug Croxall, CEO of Marathon Patent Group (MARA), a patent licensing and management company, said that “the focus should be on patent quality not ownership. Many companies are unaccustomed to having good patents enforced by knowledgeable parties. We need to embrace good inventions, not fear them.”

Image source: daylife.com/photo/09r76Bpdgh003; patlawcenter.pli.edu; acaciaresearch.com


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