Jack Ellis

Tessera Technologies recently selected its general counsel Barney Cassidy as president of Tessera Intellectual Property Corporation, the company’s patent licensing arm. The appointment is the latest move in a series of structural and strategic shifts taking place at Tessera. These changes may have been partially motivated by pressure from shareholders – one of which, Starboard Value, has announced that it will challenge for seats on the Tessera board at the company’s next annual general meeting.

According to a press release, Cassidy’s move to his new role comes as a result of his extensive patent monetisation experience and familiarity with the company’s IP portfolios. Quoted in the release, Tessera CEO Bob Young said: “We have just executed license agreements with SK hynix Inc. that validate our team’s ability to produce higher returns from our broader IP platform. We believe this recent success increases both the certainty and the magnitude of the company's revenue and profitability on a long term basis, and we look forward to growing the IP business under Barney’s leadership.”

Tessera announced a raft of strategic initiatives back in April 2011 aimed at increasing corporate value, including the potential spin-out of its R&D-intensive optics and imaging business. But the need to commit to such reorganisation became more urgent in January 2012, when shareholder Starboard first signalled its intention to nominate its own representatives to the company’s board.

Of course, Starboard Value, named by IAM as one of its IP personalities of 2012, has history when it comes to shareholder activism and IP. In February 2012, the firm wrote to the board of another one of its investments – AOL – criticising the company’s IP strategy and accusing it of failing to realise the monetisation potential of its patent assets. Starboard stated that it would be putting up its own candidates for election to AOL’s board at the company’s next AGM. Within two months, AOL had sold its patent portfolio to Microsoft for a handsome $1.05 billion.  Another Starboard investment is MIPS Technologies, which sold most of its patents to a consortium – put together by defensive patent aggregator Allied Security Trust and led by ARM Holdings – for $350 million in November.

Not long after it first made its stake known to Tessera last January, Starboard decided to give the company the benefit of the doubt and allow it time to implement its strategic initiatives. But it has clearly been unimpressed with what has happened thus far, and has again decided to target the company’s board.

Judging from what happened at AOL and MIPS, we know that Starboard expects companies it has invested in to be maximising the value of their IP. Patent licensing is already a crucial part of Tessera’s business model, and we’ll have to wait and see how the involvement of Starboard plays out. Will we see Tessera develop a more assertive, litigation-based strategy with regards to its patents or could we see yet another big-dollar sell-off? Whatever else, it is probably worth watching which companies Starboard decides to invest in from now on. It is clear that IP is now a major focus. Senior executives of any company in which Starboard is a known shareholder would be wise to take that on board and to act accordingly.