Japanese consortium takes VirnetX stake in latest PIPCO diversification play 02 Jun 17
VirnetX Holding Corp has announced a $20 million investment from a Japanese private equity consortium that will see the PIPCO try to find an Asian market for the suite of secure communications technologies it calls Gabriel. Tokyo-based Public Intelligence Technology Associates (PITA), backed by an unknown group of Japanese corporates and banks, will own about 10% of the US-based company, which is still embroiled in a long-running litigation struggle with Apple.
PITA appears to be a new entity with almost no online footprint aside from a company address in Tokyo’s Yomiuri Shimbun building. It is said to be a strategic partnership between “a consortium of Japanese corporations and financial institutions”, as well as the European IT services major Atos and a strategic consulting group backed by law firm Dentons. PITA and VirnetX will share revenues from the Japanese market as they seek to provide secure communications technology to corporate and government customers in Japan.
Information is similarly sparse on PITA’s executive director Eriya Unten. But, interestingly, one of the few online mentions of that name indicates a background in the patent business. An SEC filing from February 2017 names one Eriya Unten, a resident of Japan, as the sole buyer of a patent portfolio owned by Onstream Media Corporation of Florida in a $40 million transaction. The disclosure adds that the deal could be worth up to $80 million depending on revenue generated by the patents, which deal with audio and video live streaming. Whether this is the same Eriya Unten and what party, if any, will ultimately be trying to monetise those patents are both open questions.
The deal is the second this year that involves a Japanese investor taking on a business that’s engaged in patent monetisation through litigation – though it is on a much smaller scale than Softbank’s February takeover of Fortress Investment Group. This blog on Tuesday confirmed that Fortress is pressing on with its assertions of former Inventergy patents against Apple and HTC amid the transition to Japanese management. But while IP finance is just one element of Fortress' massive fund management business, VirnetX is very much an IP company, and it has pursued a style of patent monetisation that has traditionally been anathema to Japanese corporates. We don’t know which Japanese companies are behind PITA, but this tie-up could be a further indication that those attitudes have softened in some quarters.
Of course it helps that VirnetX, which has litigated only with Apple, Microsoft and Mitel Networks, is expanding into Japan with an operating business. CEO Kendall Larsen said the PIPA investment marks the company’s first significant strategic alliance outside the US. We’ll likely to continue to see PIPCOs attempt to diversify in terms of both business model and geography, and you can be sure that plenty of these initiatives will have an Asia focus of some kind.
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