From the IAM Blog over the weekend:
Acacia Research has announced it is to make five million of its shares available in a public offering designed to raise cash “for its operations and for other general corporate purposes, including, but not limited to, working capital, strategic acquisitions and other transactions”. The move comes as its market capitalisation has soared to over $1.2 billion.
Joff also offers some other, incredible data, including Acacia’s growth from a $90 M market cap to a $1.2 Billion market cap in less than three years! It appears that Wall Street is paying attention to Acacia, and while it may take a hit if it runs into a string of consecutive courtroom battles, it is, thus far, faring quite well in the war.
But is this necessarily good news for RPX, as Joff also suggests? In one respect, of course it is. Acacia’s success may have a “rising tide” effect that RPX can benefit from. On that same note, I never said they wouldn’t be successful. I’ve only said that, after studying the financials, investor’s shouldn’t falling all over themselves to snatch up RPX at its IPO. In fact, I’ve further maintained that RPX can, itself, be financially successful, so long as its “members” are comfortable wearing a patent litigation bulls-eye over their chests.
As an aside, since writing about RPX’s “goldilocks” conundrum and receiving feedback from a reader about the RPX magnifying patent litigation problems for its clients, I’ve heard from NPEs that it’s already common to monitor RPX memberships to specifically watch for opportune times to strike RPX clients.
That said, I still maintain that Acacia’s success does not necessarily make RPX more financially stable. Investment in patent licensing entities is extremely volatile, and only a very small number of firms have been able to successfully and steadily demonstrate profitable, long-term growth by risking capital in enforceable patents. Meanwhile, RPX is yet another step removed from assertion entities.
While RPX does own thousands of patents, it has bound itself not to assert these against many large enterprises. Further, by many accounts the pendulum of patent enforcement policy appears to continue to shift in favor of defendants, as legal doctrines and statutory changes are expected to make patent ownership and assertion more expensive, making defending against patent litigation easier. During these “darker” times, patents in a general sense will start to be perceived as less of a business risk, reducing the need for RPX and other “risk management” solutions to patent licensing.
Meanwhile, firm’s like Acacia hold enforceable patents that can still represent specific risks, and while companies may fight more frequently, most will likely continue to settle more often than not because Acacia can set pricing to reflect a reasonable compromise. Their overall profit margins may suffer, but their business is likely scalable enough to continue to profit even in a down-turn. RPX, on the other hand, without legitimately enforceable patents (by agreement) has very little leverage unless the aggregate risk remains high.
The solution for RPX may lie in targeting specific patents in litigation, and negotiating purchases that lets them insulate current clients and pick up new ones. Again, as I’ve already pointed out, RPX has little incentive to do this unless it can force renewals or add new members, so if you just signed up with RPX, you’re basically relying on dumb luck to protect you. Further, this strategy does nothing to support their claim to “significantly reduce patent assertions directed at our client network,” nor does it match their proposed strategy of buying patents before they end up with NPEs.
- RPX IPO: Patent Aggregation, Terrorists and Goldilocks (gametimeip.com)
- Free Rides, Acquisitions And Sustainability After The RPX IPO (gametimeip.com)
- Why Is RPX Going Public? Ask Willie Sutton (gametimeip.com)