Erich Spangenberg knew full well that his critics would chortle and pounce over the appearance of weakness when he announced his decision to relinquish the role of CEO at privately held IP Navigation Group at the end of 2013 along with a downsizing.

Still, Spangenberg, who is one of the highest profile patent monetizers, said “it’s factually accurate that I’m downsizing but the question is why?”

Spangenberg said “I am transitioning out of operations which I dislike and am sick of after 10 years and handing that off to Deirdre Leane."

Leane previously was president of  Dallas-based IPNav, a position she has held since 2013. Before that, she was president of IPNav Europe since 2011.

“I am still on major transactions and strategy," Spangenberg said. "There are a couple of things I have plans to accomplish before I am too old to do them."

So, over the last seven months, Spangenberg said IPNav has cut its team from about 60 people to 25 people.

“My ego isn’t massaged by having a 100 people working for me.”

Part of that cut involved former co-chairman and co-CEO David Pridham taking a team of eight people to set up a licensing business called Dominion Harbor Group.

Pridham’s team at Dominion is planning to focus on licensing deals that bring in about $500,000 a piece. They were once a big part of what IPNav was all about, but no more.

“The landscape has changed," Spangenberg said. "What used to be economically feasible was doing $500,000 licensing agreements. But the margins aren’t there any more,” thanks to recent patent reforms and the general pushback against non-practicing entities.

Spangenberg said those $500,000 licensing fee deals used to take up 80% of the time of the team at IPNav, but still generate only about 40% of revenue and even less of profit.

As a result, Spangenberg said IPNav is currently looking at patent portfolios that will generate a much higher return on the investment.

“I’d much rather have 100 great patents than 10,000 mediocre ones,” he said.

To be sure, IPNav currently owns about 14,000 patents and out of those Spangenberg considers only a fraction to be great.

“If you don’t think something is going to generate north of $50 million you don’t bother,” he said.

Not surprisingly, Spangenberg said there are a lot fewer potential licensing opportunities at these significantly higher numbers.

Still, Spangenberg said the skill set IPNav needs for these much larger licensing opportunities is different than the skill set for what Pridham’s Dominion is doing.

“The skill set you need is different. You don’t need lawyers. You need PhDs in various fields of technology.”

Spangenberg said he can teach anyone all they need to know about patent law in a few days or weeks. “The tech part is harder to teach and learn.”

He likens the situation  to what his baseball coach once told him as a kid, which was “I can teach you a lot of things but I can’t teach you how not to be short.”

Spangenberg at 54 remains somewhat self conscious of his 5 foot six inch height.

In 2009, 80 percent of the licensing opportunities IP Nav generated on average $500,000 of licensing revenue. The remaining 20% came from licensing opportunities that were $5 million and above.

Such an operation was expensive to maintain because unfortunately the smaller opportunities also were often the most time intensive. “It’s expensive. It’s complicated. You have to feed it. It occupies your time. Occupying time is not where the margins are in licensing opportunities”

"Higher skilled opportunities have always appealed more to me," he said.

Spangenberg hopes these higher skilled opportunities "will be 80% of what we do and hopefully 100% within a few years."

The technology areas he sees the most opportunities in currently are cloud computing, medical devices, semiconductor chips and orthopedics.

"We have a much higher concentration on medical devices and no more e-commerce, which is currently less than 5% of what we do. We like high end chips and cloud enabled technologies. We’re divesting ourselves of smartphone technology.”

To be sure, patent infringement cases involving smartphone technology remain a huge focus of a number of patent assertion companies.

Spangenberg said IPNav still will actively consider new patent portfolios. "We had 30 plus offers this week alone," Spangenberg. "We’re continually upgrading our portfolio. For every 100 portfolios we consider, less than 5 do we analyze for more than a few weeks.”

To reach the reporter responsible for this story please contact Dan Lonkevich at 707 318-7899 or by email at dan@thepatentinvestor.com.