Tag Archives: TechCrunch

Apple was paid $1B for rights to feature Google search engine

It’s no accident that Google is top dog for search on iPhones and other Apple products. It cost the company $1 billion in 2014 according to possibly leaked documents.  

It’s being reported that as part of a five-year case against Google’s apparent use of Oracle’s Java technology, a court heard that “at one point in time the revenue share [between Apple and Google] was 34 percent,” according to a Bloomberg report.

Apple received $1 billion from its rival in 2014, according to a transcript of court proceedings from Oracle Corp.’s copyright lawsuit against Google. The search engine giant has an agreement with Apple that gives the iPhone maker a percentage of the revenue Google generates through the Apple device, an attorney for Oracle said at a Jan. 14 hearing in federal court.

Apple-Google1Oracle has been fighting Google since 2010 over claims that the search engine company used its Java software without paying for it to develop Android. The showdown has returned to U.S. District Judge William Alsup in San Francisco after a pit stop at the U.S. Supreme Court, where Google lost a bid to derail the case. The damages Oracle now seeks may exceed $1 billion since it expanded its claims to cover newer Android versions.

Apple has something to be embarrassed about, claiming that it is dedicated to protecting customer information and not profiting from it.

TechCrunch reported that “Another factoid thrown up by the case included a claim that Android has generated $31 billion in annual revenue to date, of which $22 billion is profit.”

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Reports of the death of IP licensing appear to be exaggerated.

 

Image source: valuewalk.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.

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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.”

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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.

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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.

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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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