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IP, IP Asset, Patent, Risk Mangement

Return of The Privateer: Did Microsoft & Samsung Finance Acacia’s Recent Patent Splurge?

Acacia recently pulled of a mammoth purchase–$160 MM for 4G technology company ADAPTIX and it’s portfolio of 30+ confirmed US assets (in the form of issued patents) and numerous other potential assets (in the form of pending applications).  By the numbers, this is a several-million dollar per patent purchase, rivaling the recent Nortel auction in comparative value.  Joff Wild and the folks at IAM Magazine chalked this acquisition–which exceeds Acacia’s entire valuation of three years ago–up to Acacia’s recent growth, but there is an alternative theory worth considering.

After all, Acacia’s new-found growth began in earnest in October 2010, when it passed $20/share for the first time.  The same company also watched hundreds of millions of dollars evaporate from its valuation between August and November of last year. Coincidentally, during the same month Acacia began its meteoric rise, one of its subsidiaries inked a major license agreement with Microsoft–a company the very litigious Acacia tends to neglect in the courtroom.  At the time, suggestions were swirling that Microsoft, intent on licensing its own IP portfolio to adopters of the Android platform, may have simply been arming IP privateer Acacia with the cash it needed to further engage the mobile computing patent space.

Getting back to the ADAPTIX purchase, consider the following events.  Simultaneous with its acquisition, ADAPTIX immediately enforces patents against Alcatel-Lucent–over 4G LTE infrastructure products sold by Alcatel to wireless carriers like AT&T–and smart phone makers LG, HTC and Motorola–over, you guessed it, Android-based mobile phones.  By the end of the week, Acacia filed statements with the SEC disclosing new license agreements with both Samsung and Microsoft over the recently acquired ADAPTIX portfolio.  These deals happened entirely too quickly to be the product of post-closing license negotiations. More than likely, Acacia had these deals in place (at least in part) with Microsoft and Samsung well prior to handing over their $160MM.  The only real question is, how much before, and how much was actually paid for the licenses?

Examining the litigation strategy just reinforces the likelihood that Microsoft and Samsung, at minimum, encouraged these deals.  The Alcatel lawsuit accuses the company’s End-to-End 4G LTE Solution, which competes directly with Samsung’s own telecommunications products.  The remaining lawsuits really have less to do with 4G, and instead involve wireless handsets made by LG, HTC and Motorola, and sold by the major wireless carriers.  Specifically named handsets include the LG Nitro, HTC Jetstream and Vivd, and various Motorola DROID models.  Notably, all happen to be Android-based smartphones.

Some would suggest that Microsoft used this strategy in the past, becoming SCO’s biggest licensee, and helping it obtain financing, just as SCO’s copyright litigation with IBM began.  Even the managing partner of BayStar Capital (one of SCO’s investors) later publicly claimed that “Microsoft had an agenda.”  Whether Microsoft has an agenda this time around–and whether Samsung, coincidentally or not joined them–remains to be seen.  But one thing is clear– both companies will likely benefit from being early licensees, and Acacia will be able to use the licenses and data points in its negotiations, furthering its aggressive monetization effort.

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