Spherix Inc. (SPEX), the patent licensing company run by CEO Anthony Hays, said it reached a licensing agreement with RPX Corp. (RPXC) in which the patent aggregator and provider of patent litigation and loss control services agreed to cancel a $5 million payment it was owed by Spherix in connection with preferred shares issued to the former Rockstar Consortium.
Bethesda, Maryland-based Spherix had owed San Francisco-based RPX the $5 million because of preferred shares issued to Rockstar for patents Spherix purchased in 2012 and 2013. RPX acquired the preferred shares last December when it acquired a portfolio of patents from Rockstar for $900 million.
Spherix said in a filing with the Securities and Exchange Commission that on Nov. 23, a little more than a month before the redemption was due, it entered into the licensing agreement with RPX.
RPX will now have the ability to sublicense various patent license rights to certain RPX members.
In return, RPX agreed to cancel the $5 million mandatory payment due from Spherix and transfer the remaining 29,940 shares of the Series I preferred stock. RPX also agreed to transfer 13%, or 57,076 shares, of the Series H convertible preferred stock currently held by RPX, having a total carrying amount of $4.77 million at the time the stock was issued to Rockstar Consortium US LP.
Spherix plans to cancel the shares being transferred from RPX.
RPX also agreed to cancel its outstanding security interest on 101 of Spherix’s patents and patent applications that originated at Nortel Networks. In addition, it agreed to pay $300,000 in cash to Spherix.
The agreement will allow RPX to grant to Juniper Networks Inc. a non-sublicensable, non-transferrable sublicense solely to use the six patents that had been asserted against Juniper by Spherix.
Spherix also granted RPX the right to grant to RPX members Apple, Blackberry, Cisco, Google, Huawei, Ericsson, Microsoft and Sony, to the extent those parties did not already have licenses to the company's patents, a non-sublicensable, non-transferrable sublicense to use Spherix's existing portfolio.
Prior to Spherix’s ownership of the patents originating at Nortel, Apple, Blackberry, Ericsson, Microsoft and Sony had previously been granted full licenses to those patents.
As previously disclosed, Spherix granted Huawei a license under a separate litigation agreement with respect to Huawei's network routers and switches.
Spherix also granted RPX the right to grant Cisco and Google a sublicense under patents transferred to Spherix during the next two years. Spherix said it will dismiss its existing litigations against Cisco and Juniper.
As part of the deal, Cisco has agreed to request dismissal of its two petitions for inter partes review of certain of Spherix’s patents at the Patent Trial and Appeal Board.
In addition, Spherix said it has agreed that for a period of six months from the date of the RPX license to engage in good faith negotiations with RPX for the grant of additional license rights to RPX's other members in exchange for additional consideration.
During that time, Spherix will not divest, transfer, or exclusively license any of the company's current patents and neither RPX nor any RPX affiliate will challenge, or knowingly and intentionally assist others in challenging, the validity, enforceability, or patentability of any Spherix patent in any court or administrative agency having jurisdiction to consider the issue. Spherix also agreed not to bring an action against current RPX members for patent infringement.
After the six month standstill period, and as a result of the release of the RPX security interest, Spherix will be able to leverage, divest, transfer, or exclusively license its patents.
The company said it retains its rights to bring claims under its patents at any time against other parties who are not licensees or beneficiaries under the RPX license. The company also retains its rights, following the standstill period, to bring claims under its patents against current RPX members who did not become licensees or beneficiaries during the standstill period and, with respect to Juniper, under all of the company's patents other than the six asserted patents.
“With our first major licensing agreement reached, Spherix is positioned to move forward, unencumbered, with licensing and monetization efforts against a large list of potential licensees," said Hayes in a statement.
Hayes said based on published reports, the total addressable market of the potential future licensees exceeds $50 billion.
“Spherix will seek to secure fair and reasonable licensing rates of this remaining market. We are in possession of a positive Markman order granted by the Eastern District of Texas court that is applicable to potential licensees, providing leverage and clarity in negotiations, and we believe the prior Nortel license agreements establish a good licensing history and reasonable royalty rates. We are excited about the opportunities in front of us. Moreover, efforts against V-Tech and Uniden continue unabated.”
The company added that the list of companies that are potential licensees of its patents include: service provider switch original equipment manufacturers; service provider router OEMs; optical network equipment OEMs; Internet service providers; and other network equipment OEMs and service providers.
"We have only begun to address the sizeable licensing and monetization opportunity," Hayes said.
With the $5 million owed to RPX behind it and with a favorable Markman Order on key patents, Hayes said Spherix is "now able to move forward aggressively on the remaining opportunity."
Representatives of RPX couldn’t be reached for comment.
Shares of Spherix gained 53% or 13 cents to 37 cents in trading. They have traded between 20 cents and $1.41 over the past year.
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