Judge Ellis also detailed the economic terms of the assignment between BT and IPValue.  Specifically, BT is entitled to “50% of the ‘Adjusted Gross Proceeds’ derived from exploitation of the ’835 Patent, except ‘that, where there is a sale of any [patent] during the first twelve (12) months, [BT] will receive 90% of the Adjusted Gross Proceeds received from such a sale.’” In other words, IPValue had a year to try to sell the patent in exchange for a 10% commission on the sale’s profit, or otherwise exploit the patent through licensing.  By transferring the patent to a wholly-owned subsidiary (Suffolk) and bringing suit against AOL and Google, IPValue’s choice became evident.

However, Suffolk and IPValue’s ownership of the BT patent is not absolute. An additional measure protects the amount of Adjusted Gross Proceeds from which BT collects its share.  Judge Ellis explains that the assignment prohibits IPValue from retaining contingency counsel at rates higher than 20% of recoveries.  Further, under certain circumstances, BT obtains an “exclusive option” to re-acquire the patent for $10.  According to Judge Ellis’s order, “triggering events include: (i) the failure to meet initial performance requirements [and] (ii) the decision to cease exploiting the patents.”  By carefully structuring its contract, BT essentially employed IPValue as a ‘privateer’ to pursue patent enforcement on its own behalf in exchange for half of the profits.  The exclusive option clauses enable BT to recover from an inept enforcement campaign and reclaim the patents, allowing the company the option to pursue other monetization efforts.

AOL and Google challenged the BT-IPValue arrangement, claiming that the level of control BT maintained over the portfolio left Suffolk without “all substantial rights,” undermining its ability to bring a lawsuit.  That challenge failed when Judge Ellis found all of AOL and Google’s legal arguments unpersuasive.  According to Judge Ellis, the agreement left Suffolk with the “core rights” to practice and enforce the patent, as well as “all other substantial rights.” Meanwhile, BT retained only a non-exclusive license, rights to share in revenue, and certain policing mechanisms designed to protect that revenue share, while not amounting to substantial property rights.

The relationship between BT and IPValue apparently dates back to 2001, the same year IPValue was formed, suggesting the execution of a long-term IP monetization strategy.  IPValue’s other partners include Round Rock Research, the company that acquired patents from Micron under a variety of complicated circumstances.  Meanwhile, Goldman Sachs, part of the joint venture that created IPValue, continues to get involved in IP monetization, by financing Alcatel-Lucent based largely on its patents–the same patents RPX already failed to monetize.

In addition, the arrangement between BT, IPValue and Suffolk is precisely the type of business practice currently being discussed by the antitrust division of the Justice Department.  A workshop held on December 10 discussed the potential benefits and harms of specialized patent assertion companies and privateering.  Far more detail on the DOJ’s workshop is warranted, but suffice it to say that if they want to understand how privateers are engaged by large companies to enforce patents, the Suffolk case is one they will likely keep their eyes on.

Much of Dynamic Advances’ complaint is devoted to explaining the coverage and importance of the ’798 Patent.  Independent Claim 9, also quoted in the complaint, provides:

A computer-implemented method for processing a natural language input comprising:

• receiving a natural language input;
• providing from said natural language input a plurality of language-based database objects;
• identifying a finite number of permutations of the plurality of database objects, the database objects being stored in a metadata database comprising at least one of a group of information comprising case information, keywords, information models, and database values; and
• interpreting at least one of the permutations to provide determination of a result of the natural language input.

Dynamic Advances compares this description to one of Apple’s own patent applications for an “Intelligent Automated Assistant” (presumably Siri):

The Assistant receives the input, provides a plurality of words/phrases based on that input, identifies a finite number of combinations of the words or phrases as candidate syntactic parses, and interprets at least one of the candidates as the representation of user intent. In processing the input, the Assistant refers to and uses database objects such as keywords in its vocabulary database, objects in its personal memory databases, or information in its domain or task databases.

The complaint also quotes an un-named “patent analytics service” claiming that the patent “has been cited more than 93.5% of issued United States patents.”  The service is most-likely Patent Buddy, as the analytics on the’ 798 liked above, from Patent Buddy, provide the identical claim of 93.5%.  The patent also boasts two highly qualified professors:

At the time they invented the claimed technology, Dr. Hsu was a Professor of Decision Sciences and Engineering Systems at Rensselaer and Dr. Boonjing was a doctoral candidate at Rensselaer. Dr. Hsu currently is a professor of Industrial and Systems Engineering at Rensselaer. Dr. Boonjing is currently a professor of Mathematics and Computer Science at King Mongkut’s Institute of Technology Ladkrabang in Thailand. In addition to being awarded the ’798 Patent for their joint invention, Dr. Hsu and Dr. Boonjing have co-authored a number of articles on natural language processing technology.

Dynamic Advances ownership records suggest a possible link with patent monetization firm IPNav.  According to Texas state records, one of Dynamic Advances’ owners is an entity called Spangenberg Family Foundation To Benefit Children’s Education and Healthcare.  The Foundation recently contributed to the Baylor Health Care System Foundation to fund a Neonatal Intensive Care Unit (NICU).  IPNav Chairman Erich Spangenberg is mentioned in this article referencing the donation.  In addition, IPNav’s website claims that the company “has already helped a number of major educational institutions.”  About a year ago, IPNav and Rutgers announced the creation of a Disruptive Innovation Fund to provide $1M to support commercialization of technology developed at the university, so a Rensselaer partnership would not necessarily be IPNav’s first deal with a university.

Rensselaer’s decision to generate revenue from the investments made in securing IP rights reflects an increasingly realistic view of IP rights generally.  That is, if a university decides to invest money to obtain patents, then those patents should be deployed when it makes financial sense to do so, and should be deployed in the most efficient manner under the circumstances.  Of course, litigation may, or may not, be the most efficient use of the ’798 Patent, but Rensselaer and Dynamic Advances’ actions demonstrate that they are willing to consider litigation as an option.

Meanwhile, another upstate New York professor shared a slightly different perspective.  Aija Leiponen from Cornell claims that there is a “consensus among analysts that an agreed level of maximum royalties would be beneficial for consumers and the industry as a whole.”  Doing so, says Leiponen, “would shift incentives away from intellectual property creation and royalty extortion and toward product innovation and commercialization.”  Leaving aside Leiponen’s characterization of royalty compensation as “extortion,” the professor is correct in his statement that an arbitrary cap on royalties would shift incentives away from intellectual property creation.  The problem, however, is Leiponen’s failure to acknowledge that “product innovation and commercialization” necessarily follows intellectual property creation.  That is, before a person develops and delivers a new or improved product to market, someone necessarily first conceived of it, and such conception leads to the instigation of intellectual property rights.

Dynamic Advances represents a key example, where the conception of the specific natural language processing techniques occurred at some point prior to May of 2001 (when Rensselaer applied for the ’798 Patent), but (allegedly) wasn’t introduced by Apple until 2011.  What’s more, the technology licensed by Dynamic Advances has been public knowledge since 2002.  Leiponen’s view would stunt the already slow progression of converting intellectual capital into useful products by removing a key incentive to publish such knowledge in the first place.  While eliminating compensation (through colorful allegories like “extortion”) might produce short-term gains for product developers, it threatens the long-term benefits provided by patents for centuries by incentivizing an ever-increasing crop of intellectual capital upon which new or improved products can be built.

Becton Dickinson made a surprising announcement today.  From the press release:

David V. Elkins, 44, Executive Vice President and Chief Financial Officer, has informed the Company of his plans to pursue an entrepreneurial opportunity at Round Rock Research, LLC, a technology licensing company, serving as its CFO.

Yes, that Round Rock Research.  The one formed by John Desmarais, with patents that Micron still holds an interest in.  On his reasons for the move, Elkins is quoted in the press release as saying:

While my decision to leave was difficult, this new entrepreneurial opportunity is something that makes sense for me and my family.  This will give me an opportunity to work with a long-time friend at Round Rock as its CFO and help the company execute its growth strategy. 

Elkins received approximately $1.5 – $3 M per year in total compensation between 2009-2011 while at BD, including over half a million each year in salary and bonuses.  Thus, getting Elkins interested enough to leave that security behind, in pursuit of an “entrepreneurial opportunity”, speaks highly of his interest in the Round Rock business model and the asset class generally.  As the son of a former CFO, I remember first-hand how deliberate, conservative and calculating the bean-counter types tend to be, so bagging one from a Fortune 500 company sends a clear message about the financial future of IP-based business models.

According to a press release issued yesterday, the German patent fund Patentportfolio 2 S.a.r.l. acquired 400 patent assets from publicly held BT Group PLC. The group is funded by the German investment fund Alpha Patentfronds 2, and strategic IP advisory services will be provided by IP Navigation Group (Europe).

See German Patent Fund Acquires Substantial Portfolio From British Telecom.

Patentportfolio 2′s first strategy was to auction covenants not to sue through ICAP Patent Brokerage.  This week, however, several of Patentportfolio 2′s patents turned up in patent litigation  filed in a Delaware District Court by a company called GlobeTecTrust, LLC, formed in September of this year.  As a Delaware limited liability company, information about GlobeTecTrust will essentially remain a mystery unless it’s owners want to talk.  Sixteen separate lawsuits accuse companies like AT&T, Cablevision, Charter, Cox, Level 3, Time Warner, and Verizon of infringing a variety of optical networking patents.

According to USPTO records, the lawsuits involve a portfolio of six patents assigned from British Telecommunications to Patentportfolio 2, signed on July 19, 2011 and recorded in late September of 2012.

In court documents, GlobeTecTrust claims to be the “exclusive licensee” with the “legal right to enforce rights under the [patents], sue for infringement, and seek all available relief and damages.”  Given that no other assignments were recorded for the asserted GlobeTec patents, it is reasonable to assume, for the moment, that Patentportfolio 2 granted the exclusive license to GlobeTec to maintain ownership of the patent assets, receive a share of any licensing and enforcement revenue, and remain an outsider to the litigation.  After all, Patentportfolio 2 is not your typical patent owner.

Rather, Patentportfolio 2 is part of a complicated investment structure involving a trust funded by German investors which serves as a limited partner in a patent monetization fund (Alpha Patentfronds).  Alpha, in turn, owns patent portfolio companies, such as Patentportfolio 2.  Joff Wild, who studied similar German patent investment vehicles, noted that much of the difficulty such investments have encountered is not in acquiring patent rights, but rather in securing licensing deals.   This likely provides motivation for Patentporftolio 2′s exclusive licensing arrangement with GlobeTecTrust.

But what does all this have to do with Charles River?  Researching a newly formed Delaware LLC sharing an address (1105 North Market Street, Suite 1300, Wilmington,DE 19801) with literally hundreds of other shell companies is no easy trick.  However, a friend tipped me off that someone at GlobeTecTrust had the good sense to secure domain names like GlobeTecTrust.com and GlobeTecTrust.us, both on July 16, 2012.  Alas, GlobeTecTrust.com is registered to “Domains by Proxy,” a privacy service offered by GoDaddy.com.  Another bust.

However, GlobeTechTrust.us is actually registered to David Yurkerwich using a Post Office box in Fairfield, Connecticut (and a New York cell phone number) as his contact information.  Coincidentally, Charles River also lists Yurkerwich as a Vice President in its Intellectual Property consulting business.  Yurkerwich is a fellow member of the IAM 300, and according to his profile “assists clients throughout the world with the valuation, licensing and sale of technology and intellectual property.”

Of course, all this proves is that some person, who happens to be a Vice President at Charles River Associates as an IP licensing advisor just happened to have registered a domain name identical to the name of a Delaware LLC that filed sixteen separate lawsuits against major telecom and cable providers.  Less certain is whether GlobeTec is an officially sanctioned CRAI operation, or whether Yurkerwich might be running this one “off the books.”  Also uncertain is, assuming CRAI is officially involved, when they came into the picture, and whether they are working with or displacing IP Nav.

Continuing, Ryan provides a timely example: “We did, in the last quarter, to certain companies, four or five licenses, and we got that all in one quarter as opposed to having it come in four different quarters.” Acacia issued a press release summarizing it’s earnings, and revealing that Cisco (CSCO) entered agreements with Acacia and some of its subsidiaries “to resolve pending patent matters,” including a list of four specific subsidiaries: Lambda Optical Solutions LLC, Teleconference Systems LLC, Video Streaming Solutions LLC, and Unified Messaging Solutions LLC. The revelation led to much speculation identifying Cisco as the likely company responsible for the $36 M revenue concentration. JPMorgan research analysts reportedly reached a similar conclusion.

(See Acacia CEO Paul Ryan Clarifies Second Quarter Results And ‘Key Performance Metrics’)

A look at the four portfolios licensed to Cisco reveals that each came from a very different source.  First, Cisco tangled with Teleconference Systems, LLC in a 2009 Declaratory Judgment suit filed in California over Patent no. 6,980,526.  The ’526 patent is assigned to Margalla Communications, and co-invented by Margalla founder Saqib Jang.  According to Margalla’s website, Jang is “personally involved in all Margalla Ventures activities” which include “raising capital, due diligence, mergers & acquisitions, and venture capital advising.”  Curiously, those activities at one point led to Jang’s invention of a videoconferencing method:

1. A method for videoconferencing using Internet Protocol (IP), the method comprising the steps of:

installing a videoconferencing services switch at an access point to a service provider IP network;at the switch, registering a plurality of subscribers for videoconferencing services, each subscriber including a plurality of endpoints;

receiving subscriber-specific settings to be applied to multiple videoconferencing calls from the plurality of endpoints associated with each subscriber;storing the subscriber-specific settings at a location accessible to the switch; and

configuring the switch to connect calls from the plurality of endpoints at each subscriber based on the corresponding subscriber-specific settings.

Lambda Optical Solutions, LLC filed a Delaware lawsuit against Cisco and several other companies back in 2010 over Patent No. 6,973,229.  The patent was originally owned by First Wave Intelligent Optical Networks, Inc., and was reformed as Lambda Optical Systems following an acquisition by VC firm Sevin Rosen in 2003.  The first independent claim of the ’229 Patent, which was confirmed during reexam, describes an optical switch:

1. An optical transport switching system for use in an optical network, comprising:

an optical access ingress subsystem which is adapted to receive an optical signal associated with an access network;an optical access egress subsystem;a transport ingress subsystem;

a transport egress subsystem; and

an optical switch subsystem which is adapted to ingress the optical signal into the optical network by optically coupling the optical access ingress subsystem to the transport egress subsystem and which is adapted to selectively provide optical coupling between the transport ingress subsystem and at least one of (1) the optical access egress subsystem, and (2) the transport egress subsystem.

Video Streaming Solutions LLC, filed suit in March of this year over 8 different patents originally owned by Philips, and sold to Acacia via one of Coller Capital‘s IP acquisition funds.  Included in the suit is Patent no. 6,157,673, which describes the de-multiplexing of data, and accused of being used in Cisco’s IP TV headend solutions.  Claim 17 from the ’673 patent illustrates the application of a de-multiplexing for television programming data.

17. A method of decoding a plurality of transport streams comprising:

de-multiplexing data for at least one elementary stream corresponding to a program from a currently accessed first transport stream of said plurality of transport streams and decoding the de-multiplexed data;

during said de-multiplexing, accessing and extracting program specific information from a second transport stream of said plurality of transport streams, indicating a correspondence between packet ID numbers and data for programs in said second transport stream; and

using the extracted program specific information in an event of a channel change necessitating that data for at least one elementary data stream corresponding to a program in said second transport stream be de-multiplexed.

Finally, Unified Messaging Solutions, LLC, which acquired exclusive licensing rights to patents from J2 Global, was mentioned in Acacia’s press release despite no record of the company actively litigating against Cisco.  Unified Messaging has, however, actively litigated a number of patents originally acquired by J2 through an acquisition of Netoffice.  Included in the portfolio is Patent no. 6,857,074, describing a messaging platform accessed through a browser interface that notifies users of available messages.

1. A communications messaging platform, comprising:

at least one computerized server system programmed to implement:

a messaging function configured to receive messages and configured to place the messages in storage areas associated with respective mailboxes associated with respective intended recipients of the messages, the messages being of any one or media types selected from the group consisting of an audio media type, an image media type, and a data media type; and

a notification function configured to send notification messages to respective ones of the intended recipients after receipt of the messages, the notification messages alerting the respective ones of the intended recipients of the receipt and availability of the messages at their respective mailboxes,

wherein:

the messaging function is configured to interface with the intended recipients through a browser interface;

the intended recipients are capable of accessing their respective mailboxes and the messages associated therewith through the browser interface; and

the messaging function couples information associated with the messages to the respective intended recipients via the Internet.

To use the new Infringement Finder feature, simply navigate Google Patents and type in any patent number you might be investigating.  For example, suppose you want help identifying infringers of US Patent 6,091,319, a patent on RFID technology now owned by patent licensing firm Round Rock Research, LLC.  Once the patent record is received, select the new “Find prior art” link near the top of the screen.

This link brings you to a new page of search results based on keywords extracted from the patent.  By default, Google sets the “end date” of the search results as the priority date of the subject patent.

To access the Infringement Finder feature, you only need to remember one of the simplest truisms of patent law: That which infringes if later anticipates if earlier.  Thus, by changing the “earlier” (End date) to become “later” (Start date), you can sift through a variety of sources that might indicate infringement.

Google’s motivation to create this new feature are not entirely clear, but they have provided what should be a useful advancement in patent analysis.  By speeding up access to information that may lead to evidence of infringement, Google puts more power back into the hands of inventors and patent owners.  Perhaps they hope to gain a little positive patent karma after taking ownership of a large patent portfolio from the former Motorola.

Joff Wild at IAM reported that Peter Holden, formerly of Coller Capital, partnered with IP Value to create a new IP investment fund.  Wild’s reports confirms rumors that surfaced during litigation between Coller and a scorned, would-be patent buyer.  Meanwhile, Eran Zur’s departure from RPX was delayed from August 1st to August 10th according to an earlier report from the company.  Zur’s updated LinkedIn profile as of this week announces a new role as Managing Parter at Koru Ventures.

As usual, each bill is packed with problematic language, unintended consequences and blatant pandering to special interest groups.  Of course, most readers already knew this when they read the first sentence, above about bills pending in Congress.

Re-designing Design Patents

Many would likely predict that the PARTS Act is dead-on-arrival, except for two factors.  First, people actually care about design patents now that Apple is seeking $2 B worth of damages over them.  Second, the bill’s sponsor, Darrell Issa, was a key voice during the AIA debates and could be in line for the Commissioner of Patents position if the Republican’s retake the White House.  The operative portion of Issa’s PARTS bill states:

With respect to a design patent that claims a component part of a motor vehicle as originally manufactured–

(A) it shall not be an act of infringement of such design patent to make or offer to sell within the United States, or import into the United States, any article of manufacture that is similar or the same in appearance to the component part that is claimed in such design patent if the purpose of such article of manufacture is for the repair of a motor vehicle so as to restore such vehicle to its appearance as originally manufactured; and

(B) after the expiration of a period of 30 months beginning on the first day on which any such component part is first offered to the public for sale as part of a motor vehicle in any country, it shall not be an act of infringement of such design patent to use or sell within the United States any article of manufacture that is similar or the same in appearance to the component part that is claimed in such design patent if the purpose of such article of manufacture is for the repair of a motor vehicle so as to restore such vehicle to its appearance as originally manufactured.

Apart from the influences and justifications for the bill, the construction of the new proposed law is puzzling.  According to the bill text, it would never be an act of infringement to make, offer to sell or import an article matching the appearance of a patented, motor vehicle component part, but it would be an act of infringement–in the first 30 months of the part being offered for sale–to use or sell the part?  In other words, prior to expiration of the 30-month period, an after-market parts-supplier could advertise and offer unlicensed replacement parts, but would only incur infringement by actually selling the part.  Even more confusing, the ultimate purchaser would also be on the hook for using the part.

Semantics aside, the purpose of the bill is clear: to remove a tool that automotive manufacturers currently use to curb the sale of third-party, aftermarket, unauthorized replacement parts.  Testimony during a recent subcommittee hearing centered around exterior component parts, such as vehicle fenders and hoods.  Automotive companies, in recent years, have taken to patenting these discrete vehicle body components, rather than patenting vehicle designs as a whole, in an effort to prevent after-market companies from selling slavish copies of body parts and undercutting prices set by the original manufacturer.

However, body parts are not the only vehicle parts subject to design patents.  Consider, for example, US Patent No D659714for a throttle body.  Other automotive-related design patents include components like valve covers, pumps and even basic machine elements whose novelty is sometimes best conveyed through illustration rather than language.  Of course, the proposed law may not apply to these types of patents if the phrase “to restore such vehicle to its appearance as originally manufactured” is interpreted to apply only to vehicle exteriors.  However, that logic still raises questions about the proposal’s applicability to another important category of automotive-related design patents: tire tread patterns.

Proponents of the bill include after-market automotive parts companies and insurance companies who want easier access to cheap, after-market alternatives to original equipment components.  To drum up support, Issa claims that his design patent legislation will help protect Americans who like to work on their own cars.  In reality, it will only disincentivize automotive designers from exploring creativity in automotive design and cut into replacement part sales for a recovering domestic auto industry.  Even more importantly, Congressional testimony from Brinks Hofer’s Kelly Burris points out that the bill would also apply to motorcycles. The bill also threatens to stifle creativity among independent hot rod and chopper designers.

One-Sided Cost Recovery

A pair of congressmen, Peter DeFazio and Jason Chaffetz, introduced H.R. 6245, and has already been widely reported as posing a threat to so-called “patent trolls.”  Of course, nothing in the legislation is specific to non-practicing entities, or even to the practice of acquiring patents for the purpose of generating licensing revenue.  The bill, however, does attempt to address frivolous lawsuits, but only covering specific technology areas.  From the bill text:

Notwithstanding section 285, in an action disputing the validity or alleging the infringement of a computer hardware or software patent, upon making a determination that the party alleging the infringement of the patent did not have a reasonable likelihood of succeeding, the court may award the recovery of full costs to the prevailing party, including reasonable attorney’s fees, other than the United States.

Attempting to undercut debate and rebuttal over the need or benefit of the proposed bill, commentator Mike Masnick wrote, “I fully expect to see patent system supporters throw a massive hissy fit over this very, very minor change to patent law, but it’s so minor that I’m at a loss as to how they’ll have any compelling argument.”  In reality, this is a major change, not a minor one.  And there are compelling arguments against it, including the blatant pandering to specific lobbying groups, its unilateral application and lack of workable guidelines.

First, the bill is limited to computer hardware or software patents.  However, if frivolous lawsuits are a bad thing (and few would say they aren’t), then they are bad regardless of subject matter.  The fact that the bill is limited to computer and software patents illustrates the blatant special interest group pandering.  The bill’s proponents have absolutely no interest in providing legislation that is in the best interest of all stakeholders and should be reconsidered or re-drafted based on that reason alone.

Second, the bill is entirely one-sided in multiple ways.  For one thing, accused infringers can easily raise frivolous defenses to run up litigation cost for indigent patent owners, yet the bill provides no mechanism to deal with these types of issues.  In addition, the bill applies to lawsuits “disputing the validity” of a patent.  Thus, if a patent owner attempts to initiate licensing discussions with a company outside of litigation, the company would be able to file a declaratory judgment action, casting the patent owner into unwanted litigation, while arguing for the patent owner to pay the company’s high-priced attorneys to boot.  This, combined with the final point, threatens to chill even good faith assertion of patent claims out of fear that a court would misunderstand what it means to have a “reasonable likelihood of success.”

Finally, no guidelines are provided on what a “reasonable likelihood of success” is or looks like.  What if patent claims ultimately require discovery of non-public information to prove?  What if a district court adopts an unexpected claim construction?  Would invalidation of a patent at trial open the door for demonstrating lack of a “reasonable likelihood,” or does the presumption of validity protect patent owners in this instance? Does it make a difference if the patent owner was aware of the prior art before the lawsuit was filed?

Ultimately, the SHIELD act is too blunt an instrument, and only addresses one side of litigation abuses. If debate on the bill is to go further, serious changes are warranted.

Acacia reports a concentration of 72% of Q2 revenue attributable to a single licensee, leaving only $14 M distributed among a remaining 37 agreements. In other words, outside of this one agreement, Acacia generated an average of less than $380,000 per license. Even worse, a full 85% of the Q1 and Q2 combined revenue is attributed to just four licensees. Thus, of the $149 MM earned by Acacia in 2012, only 15% (or $22 M) worth of revenue can be attributed to 95% (or 74) of its license agreements. Therefore, outside of four major deals (representing 5% of its business in the first half of the year), Acacia generated an average of less than $300,000 per agreement.

This is obviously a serious problem for Acacia, since the overwhelming majority of their time is spent earning a very small proportion of their revenue. There are several ways Acacia could reverse this trend, which I’ll explore in some future posts.

However, Acacia’s concentration figures are interesting for another reason.  Back in February, with very little information to go on, GametimeIP reported that Microsoft and Samsung combined for about $40-$65 M in licensing revenue for the ADAPTIX portfolio.  From Acacia’s most recent 10-Q (with dollar amounts in brackets for convenience):

One licensee individually accounted for 72% of revenues [$36 M] recognized during the three months ended June 30, 2012, and four licensees individually accounted for 36% [$53 M], 24% [$36 M], 13% [$19 M], and 12% [$18 M] of revenues recognized during the six months ended June 30, 2012.

The 24% ($36 M) agreement came in the second quarter, which means Acacia did individual deals in Q1 of $53 M, $19 M and $18M. Of those, two of them should be the Microsoft and Samsung licensing deals, which implies a combined deal range of $37-$72 M. Of course, remaining unanswered are questions about which company paid more, and about the identity of the third large deal in the first quarter.  For sure, an agreement of this size would merit an announcement by Acacia.  Besides Microsoft and Samsung, first quarter deals announced by Acacia included:

• magicJack
• Tealeaf Technology
• Compuware
• CA
• Abbott Labs
• Origin Healthcare
• Comerica Bank
• Tellabs
• Amazon.com

Most of the companies on the above list would have had enough cash on their books at end of 2011 to be able to afford an 8-figure settlement, but it would take more investigation to figure out which one had the proper motivation to enter into such a large deal.  The other remaining mystery is the identity of the $36 M licensing deal Acacia struck during the second quarter.  Based on Acacia’s 8-K filings, the candidates are:

• CDW
• Cisco
• Thomson Reuters
• HP
• Fujitsu
• CMC Magnetics
• Verizon
• Regions Bank

Once again, several large companies appear on the list, so many are likely candidates.  Verizon seems to be an unlikely candidate, since patent litigation between Adaptix and the mostly Verizon-owned Cellco Partnership remains pending.  During the earnings call Q&A period, a lot of questions centered around Cisco and the possibility of broad, term license agreements. Of course, Acacia refused to reveal specifics, so the mystery remains.

Schwartz and Kesan–whose paper is the product solely of academic research, not corporate funding like Bessen & Meuerer–focus their critique on problems in Bessen & Meurer’s data gathering techniques.  Essentially, the Chicago pair argues that the $29 B NPE “direct cost” figure is based on data gathered from a biased data set, while the benefits of NPEs are poorly accounted for.  From the study, Analyzing the Role of Non-Practicing Entities in the Patent System:

(1) Figures Based on Biased Sample. Bessen & Meurer’s $29 billion calculation of the direct cost of NPE patent assertions should be viewed as the highest possible limit. The true number is very likely to be substantially lower. It is the outer bound because the survey is not a random sample; instead it likely is a biased sample, which renders Bessen & Meurer’s extrapolation of the total costs similarly biased too high.
(2) Lack of Basis for Comparison of Figures. The vast majority of the $29 billion figure consists of settlement, licensing, and judgment amounts. For economists, these are not “costs,” as they are classified in the Bessen & Meurer study, but rather “transfers.” Such transfers to patent holders are the contemplated rewards of the patent system. Furthermore, before declaring litigation costs (i.e., lawyers’ fees) too high, there must be some basis for comparison. Bessen & Meurer provide no such comparison. For further academic studies, we propose comparing them to either the ratio of lawyers’ fees to settlements in practicing entity patent litigation or complex commercial litigation more broadly.
(3) Questionable Definition of NPE. Bessen & Meurer’s calculations rest upon a questionable and very broad definition of NPE. We suggest that they disaggregate among different categories of NPE, which should be possible with RPX’s database.
(4) Lack of Credible Information on Benefits of NPEs. Bessen & Meurer’s estimate of the benefits of the benefits of NPE litigation is based upon an analysis of very limited information, namely SEC filings from 12 publicly traded NPEs. We recommend a survey of NPE plaintiffs analogous to the survey of NPE defendants to provide more complete information on this issue.

Schwartz and Kesan present a compelling critique that soundly calls into question the reliability of Bessen & Meurer’s conclusion.  Further, the amount of important data excluded from Bessen & Meurer’s paper, combined with financial support from the Coalition’s broad array of corporate members, raises suspicion about the Boston University authors’ motives.  The sum total of affairs leads many familiar with IP monetization to believe that Bessen & Meurer paint a completely backward view of the benefits of IP as a whole.

IAM Magazine’s Joff Wild came to a similar conclusion, writing that “In fact, as things stand the likelihood is that they [Bessen & Meurer] are wrong, perhaps spectacularly so. The onus now is surely on the Boston University pair to respond to the points Schwartz and Kesan have made. Let us hope they do so sooner rather than later.”  Of course, a question still remains about how widely distributed the Schwartz & Kesan study will become.  Hopefully, every journalist who covered Bessen & Meurer’s paper has already received a copy, but it remains to be seen whether Schwartz & Kesan’s work garners the attention it so clearly merits.