Acacia Research Corp. (ACTG) said CEO Matthew Vella has resigned, effective December 21, and that the company has begun a search for his successor and will engage an independent executive search firm to assist in the process.

Shares of Acacia fell 10.26% or 45 cents to $3.94 in early trading.

Two people familiar with the matter said Vella was not fired and decided to depart by mutual consent with the board. His resignation comes a week after Newport Beach, Calif.-based Acacia was handed a huge defeat in the U.S. District Court in Tyler, Texas when a jury returned a verdict of invalidity and non-infringement in its Adaptix unit’s infringement action against Alcatel-Lucent USA, AT&T Mobility LLC, Cellco Partnership and Sprint Spectrum L.P.

Adaptix was one of Acacia’s so-called marquee portfolios, which each was said to be worth more than $100 million to the company. Acacia acquired Adaptix for $160 million in 2012.

"Vella took over at Acacia in August 2013 when the company had a market cap of $1.1B and now its market cap is around $220M," said Mark Gober, a director at 3LP Advisors in Silicon Valley. "Shareholders are frustrated and have hoped for better results. The recent Adaptix loss certainly didn’t help things.

Gober noted however that these struggles are not unique to Acacia or to Vella. "The entire sector has gotten hammered. Vella took over as the market began to tank and the conditions have made it more difficult for any publicly traded licensing company to succeed. It’s been challenging for all licensing executives, not just Vella."

Such troubles raise questions about whether companies like Acacia should be publicly traded in the first place, h said. "Their business models do not cater to the arbitrary quarterly reporting structure mandated by the SEC. Licensees play the delay game, drive up costs with IPRs, and roll the dice in court. Succeeding as a licensing company in this era is expensive and takes time, and that kind of time doesn’t work for shareholders who want fast results."

Gober said "whoever takes over at Acacia is going to have the daunting task of trying to right this ship in some very rocky waters."

Vella's departure may allow Acacia to chart a new direction because he was the architect of its marquee portfolio strategy, which focused on Adaptix and other portfolios that were thought to be worth more than $100 million in potential value.

It's "not clear there is a new direction to change to," said Rob Kramer, managing partner at Altitude Capital Partners in New York. "Matt seems to be a casualty of the IP environment."

Marvin Key, senior vice president of Acacia Research Corp. and CEO of Acacia Research Group LLC, will lead the company as interim CEO.

Key joined Acacia in 2005 and was appointed CEO of Acacia Research Group LLC in January 2013.

Key, with more than 20 years of Wall Street experience, has a finance background and extensive experience in capital markets. He was previously affiliated with Thomas Weisel Partners, LLC, a San Francisco investment bank. Prior to that, over a ten year period, Mr. Key held various positions with New York Investment banks, Salomon Brothers and Lehman Brothers. Mr. Key is a Chartered Financial Analyst, attended Clemson University and holds an MBA from Southern Methodist University.

Key couldn't be reached immediately for comment.

Acacia said its board has created a new Office of the Chairman which will be comprised of Edward W. Frykman, Robert L. ("Chip") Harris, and G. Louis Graziadio. The Office of the Chairman will also actively participate in the search for a permanent Chief Executive Officer.

Another industry veteran who requested anonymity, asked “Why would anyone go to work for ACTG?"

Chip Harris "supported replacing the former CEO with Matt Vella. Matt instituted exactly the wrong strategy at exactly the wrong time at the urging of Chip and Marvin [Key]. When Chip and Marvin go — you might find someone qualified to take the job. My bet is they will pick another former IP executive from some big company.”

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