Spherix Inc. (SPEX), the patent licensing company pursuing enforcement actions against L3 Communications Inc., TW Telecommunications Inc., Fairpoint Communications Inc., with the financial backing of Dean Becker’s Equitable IP, is the latest patent assertion company to say it is pursuing revenue producing alternatives to patent monetization.
Bethesda, Maryland-based joins rivals including FORM Holdings Corp. (FH), which last year acquired Fli Charge and Group Mobile, which it expects to produce $50 million a year in revenue within two years. Finjan Holdings (FNJN) last year launched a cybersecurity mobile phone app, as wells as a cybersecurity advisory business. ITUS Corp. (ITUS) also last year shuttered its patent monetization business to develop a cancer screening product. None of these companies's product efforts have achieved enough revenue yet to make them profitable.
Spherix and other patent licensing companies have seen their ability to win licensing settlements and lawsuits severely restricted by the America Invents Act which created the inter partes review and covered business method review processes for challenging weak patents. The Court of Appeals for the Federal Circuit also has grown skeptical of large damages awards, especially to non-practicing entities. In addition, the U.S. Supreme Court has made it nearly impossible to win injunctions and its Mayo and Alice decisions set a much higher bar for patentable subject matter, relegating many software and business method innovations unpatentable,
Patent market observers including Rob Kramer, managing partner of investment manager Altitude Capital Partners, and Bill Marino, CEO of Pragmatus, an IP advisory fir, have expressed skepticism that such efforts will be successful.
Spherix said in a letter to shareholders on Wednesday, May 25 it “is actively exploring viable opportunities outside of the patent monetization space.”
The company said part of the use of proceeds from its $4.375 million license to RPX Corp. (RPXC) “may be used to acquire revenue generating opportunities where patent monetization is not the core business model.”
CEO Anthony Hayes said in the letter that Spherix has recently vetted several such ventures and is in discussions with “an exciting, early stage technology company that is already generating revenue.”
Hayes said Spherix expects to continue to review these types of opportunities throughout 2016 and to act opportunistically to acquire assets with immediate or near term revenues and significant opportunities for equity value creation for its shareholders.
Hayes said Spherix also all be looking for additional revenue streams within the patent monetization space.
“For example, within the patent monetization space, we have established a new program entitled ‘IP Monetization Support,’” Hayes said.
Under this program, Spherix will review a limited number of monetization opportunities and if it deems the opportunity worthwhile, will deploy a small amount of restricted stock to individual patent holders, in exchange for a percentage of that patent holder's current patent monetization efforts.
Hayes stressed that Spherix will not be buying or owning the patents at issue, and will not be responsible for paying patent maintenance costs, nor for any litigation expenses. Moreover, Spherix will not be a party to any monetization litigation or licensing discussions.
“Our management team will identify licensing opportunities that are near the revenue generating point and then use our resources to help those patent holders achieve short term liquidity,” he said.
Spherix expects the new program to limit its downside risk, while allowing it to potentially achieve large upside profits.
Hayes said initially, the program will be limited in scope and size.
—To reach the reporter responsible for this story please contact Dan Lonkevich at 707 318-7899 or at email@example.com