Jack Ellis

PatentlyApple reports that ADAPTIX filed suit for infringement of two of its 4G wireless patents against Apple and AT&T in the Eastern District of Texas last Friday. The litigation comes almost exactly a year after ADAPTIX was acquired by Acacia Research for $160 million.

Acacia’s purchase represented the first clear instance of an operating company being bought outright by an NPE. Speaking in issue 54 of IAM magazine, the firm’s CEO Paul Ryan explained the reasons behind the move: “[The ADAPTIX patent portfolio] was largely unencumbered with existing licences and, importantly for our shareholders, it comprised 15 distinct patent families that could be licensed to three different industries”; those being handset manufacturers, base set manufacturers and network carriers. In addition to Apple and AT&T, Nokia Siemens Networks, LightSquared, HTC, Verizon and T-Mobile are some of the other companies that have been sued by ADAPTIX since Acacia took the reins.

While investors will have to wait for the outcome of the suits to find out whether the ADAPTIX purchase really was worth it, the range of technologies protected by the acquired portfolio, and the possibility of asserting patents across at least three different industry sectors, chime with the diversified model that has marked Acacia’s strategy thus far. By building up portfolios in an array of divergent technologies – including, for instance, its recent acquisitions of medical device patents – Acacia is able to spread risk for its investors.

The majority of IP pure plays are generally focused in a single area of technology, meaning that one negative development, such as an unfavourable decision in a court case or re-exam, can be disastrous. But for Acacia, an unanticipated judgment relating to, say, a software patent could be hedged by a lucrative licence deal for one of its automotive patents. In 2012, the risk diversification approach favoured by Acacia began to be adopted by newer players in the market, such as Vringo, which saw its stock price rise by 253% in 12 months. 

Another key to Acacia’s success has been its partnerships with a number of operating companies which have called upon the NPE to assist them in realising their own strategic IP goals. In some cases, Acacia has acted as a privateer, by monetising patents on behalf of product manufacturers that, for whatever reason, would rather steer clear of direct involvement in patent assertion activities. In other instances, the reasons driving Acacia’s alliances with operating companies are less clear. The fact that Microsoft and Samsung entered into licence agreements with ADAPTIX almost immediately after Acacia completed its acquisition has led to some speculation that the two had some hand in the buyout going through. Discussion surrounding that theory may be resurrected now that their major competitor Apple is on the receiving end of a lawsuit from the licensor.

On a related note, another operating company that has worked closely with NPEs is British Telecom. In addition to the ADAPTIX litigation, last Friday Apple – along with a whole host of other companies – found itself sued by an entity called Steelhead Licensing for allegedly infringing a patent that Steelhead had assigned to it by BT. The British company has reportedly denied that it will receive any licensing revenue collected. This suggests that, for whatever reason, it preferred to spin out the asset concerned in return for a one-off lump sum. Steelhead was clearly able to accommodate BT’s wishes in this regard; while, in the case of Suffolk Technologies, IPValue was able to offer BT a solution for patents that the company wanted to assert through a third party while maintaining an extensive level of control and a stake in any potential future revenues.

The fact is that whatever you think of them (and whatever you call them) NPEs in their various forms play a fundamental role in the patent marketplace and help to generate value for companies that have invested heavily in R&D and the innovation process, employ hundreds of thousands of people and generate significant tax income for governments around the world. When you think of it like that, are they really as wicked as some would like to claim?