Fractus proves the power of patents to deliver sustained, game-changing success to tech start-ups 13 Mar 17
Fractus is one of those very rare stories – a European SME that gets the importance of IP and has prospered on the back of that understanding. What makes the company even rarer is that it is based in Barcelona; the second city of Spain, a country in which patents get very little look-in.
A designer, manufacturer and licensor of optimised antennas, Fractus was spun out of the Universitat Politécnica de Catalunya in 1999 and now has a portfolio of over 200 rights. “From the very start we were clear that we wanted to put entry barriers up to competitors,” CEO Rubén Bonet explains. “We understood that speed to market and quality would be a part of this, but we discussed it with our investors and concluded that patents would be essential if we were to capture all the value of a technology that had the potential to transform the antenna industry. We did not want to be a small company servicing a few clients; we wanted to be a big one that could change the world.”
Bonet explains that Fractus pursued what he describes as “a typical Silicon Valley business model” and raised a total of €20 million in venture capital investment. This allowed the company to expand overseas and begin to develop revenue streams based principally on product sales. By 2007, it was enjoying a good level of success, but had reached a point where big decisions had to be made about its future; namely: to seek more investment to build more factories and/or to acquire other antenna businesses in order to take over their production facilities; or to begin to focus on licensing so that more money could be put back into the company and its R&D efforts. It was a choice that was only available, Bonet points out, because of the early-stage patent focus.
After both options were explored in detail, the licensing and royalties one was selected and Fractus began to develop a list of big name licensees, including Motorola, its first publicly disclosable one, in 2010. The year before, the company embarked upon a litigation campaign against a group of mobile phone manufacturers - including the likes of LG, HTC, Samsung, Sharp and Blackberry (RIM as was) – eventually settling with all of them except Samsung. That case did end up being heard in court and the Korean company had to pay a total of $41 million after being found to have wilfully infringed Fractus’s rights. In total their assertion campaign netted the Catalans cumulative payments of well over $100 million.
Its early engagement with IP, a sophisticated understanding of the operational flexibility this can bring and the quantifiable results that the strategy has delivered marks Fractus out as a company whose story should be told by everyone who believes that patents are a business asset of pivotal significance. This is something that it demonstrated most recently as the recipient of the first-ever ex parte injunctions granted by Barcelona’s commercial court, applying protocols specially established for the Mobile World Congress.
Working in partnership with technology and licensing business Vectis, with whom it signed a cooperation deal in 2016, Fractus had been expanding its operation into new territories and as it did so it became aware of products being manufactured by French and Chinese companies that seemed to infringe on its patents. Both were contacted and provided with reports highlighting the relevant infractions, as well as requests to discuss deals, but nothing happened. When Fractus learned that the pair were to be exhibitors at Mobile World, the company made use of the newly-developed protocols to request seizures and preliminary injunctions, both of which were granted and enforced on the opening day of the event.
“The court was very receptive,” states Jordi Ilario, vice-president of licensing at Fractus. “It was available after hours and in the weeks prior to the Congress starting. Two judges went to the relevant booths before the exhibition opened to the public to enforce the order, along with other court officials, technical experts and Fractus attorneys.” During the event itself, Fractus became aware of another Chinese company whose products were potentially infringing and obtained an order from the court to seize samples for analysis. Once this was done and possible issues were identified, another injunction was granted on the second day of the event. “We were very pleased with the court’s whole approach,” says Ilario. These measures formed just part of the activities undertaken by the court in the run-up to and during Mobile World Congress – a full report of what it dealt with can be found here.
For Vectis founder and CEO Giustino de Sanctis enforcement is always the last option any company should consider when developing a licensing programme; but, nevertheless, an option it has to be: “It is important to be reasonable and to deal with reality – taking a licence should never reduce anyone’s chances of success; but you must be prepared to be assertive, not only for your own sake, but also for the sake of your licensees.” It is incumbent on the licensor to ensure a level playing field, he continues: “Licensees have to see that their interests are being protected. If the licensor does not enforce against infringers, then they get an unfair market advantage.”
Being seen to take action at an event such as Mobile World, where so many companies gather, is particularly helpful. “This kind of show is where competitors meet. They have booths next to each other,” says de Sanctis’s colleague and Vectis licensing director Sandro Spina. “Licensees appreciate being able to see that companies which choose not to respect IP do not profit from their actions.”
All too often, IP owners are viewed as aggressors and those that they pursue for licensing payments as victims. But the Fractus story tells a different tale. It is one in which patents have helped a small business in Barcelona take on the world to deliver a leap forward in a pivotal area of mobile communications, and where the legal rights patents bring have ensured that it gets just reward for a strong commitment to invention and R&D. Fractus should offer inspiration to all other technology start-ups, as well as assurance to licensees that it really is in their inerests to pay up to get access to top class technology. Efficient infringers do not always have to win. Sometimes the good guys come out on top.
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