Alcatel-Lucent (ALU) has recently agreed a transaction with US based NPE, Vringo Inc, in a move that can be seen as part of the company’s push to extract more value from IP as part of its on-going restructuring programme. In the following piece, IP investor David Hoff analyses what the as yet undisclosed deal could mean for both ALU and Vringo:
A review of the US patent assignment database reveals that six patents were transferred by ALU to a Vringo subsidiary, Vringo Infrastructure, on 30th October 2013. Vringo has yet to disclose the transaction in a press release or SEC filing. I am also speculating that ALU could have transferred patents to Vringo in other countries as part of a global agreement. The agreement is likely to have an upfront cash portion along with a backend payment from any recoveries. This would be similar to the NPE’s Nokia patent acquisition in 2012
The six patents cover navigation systems, social networking, broadcasting, display and multimedia database:
Vringo Inc is an excellent partner for ALU as it has already executed strong monetisation campaigns, utilising its search patents against Google in the US and telecom infrastructure patents (acquired from Nokia) against ZTE multi-nationally. The search patents scored a $30 million jury verdict last November and an ongoing royalty is still being decided; this could generate a nine figure return. The telecom patents are being asserted in the UK, France, Australia, Spain, Germany and India. Vringo has already secured a standards based injunction in India against ZTE, three weeks after filing its suit.
Vringo is well capitalised with over $40 million cash as of 30th September 2013. The firm is headed by CEO Andrew Perlman and CLO David Cohen, who previously served as senior litigation counsel at Nokia and has done a fantastic job securing new assets and putting together a strong monetisation plan for the NPE. Expect Vringo to begin monetising the new ALU asset in 2014, in assertions which could target some high profile companies. The firm has a fantastic investor presentation that can be viewed here.
It’s highly probable that we will see more transactions of this type from ALU as part of its restructuring. There are many entities that would be very interested in its high quality assets; and there seems to be no stopping the new companies being formed to acquire and monetise IP. High quality patents are being put into very strong hands across the US, with investors lining up to fuel the process. The ramifications of the recently introduced America Invents Act and new proposals to reform the litigation system are going to create large patent entities, as small investors continue to migrate to cash rich firms that can monetise their inventions. I expect fee shifting will not amount to anything, and will be welcomed by high quality patent owners as they can absorb the costs from a loss and will be awarded attorney fees when they win.
Disclosure: I am long ALU and VRNG.
David Hoff is a US-based writer, investor, and observer of the patent investment market. He can be reached at DavidHoffIP@gmail.com and followed on twitter @TheIPHawk.
UPDATE - It appears that Alcatel-Lucent's deal with Vringo was actually preceded by a bigger transfer of patents by the company to another NPE. In October, the USPTO recorded the assignment of a total of 48 rights to an entity called 8631654 Canada Inc, whose address in Ottawa, Canada, just so happens to be the same as WiLan's.
IP management, Licensing, IP litigation, Patents, IP business
Presumably the IP assignment is interesting primarily because none of the prospective targets of lawsuits would be able to counter-sue over their IP that Vringo is infringing.
Yet Alcatel-Lucent was potentially suable before the transfer — with these patents as prospective “defensive” counter-suit patents — and now any target can go ahead and sue ALU without any fear of a retaliatory lawsuit. So every dollar of potential lawsuit losses by companies infringing the Vringo patents, should be matched by a dollar of possible gains from suits against ALU, suits that cannot be matched.
Maybe this raises the economic opportunity from lawsuits each way, increasing the expense and distraction of IP lawsuits. But it's hard to get the math to work out why that would be.
Which calls into question the original premise. Why is this transfer noteworthy, other than simply ALU's intent to license its IP to others, using Vringo as a middleman?Walt French, Nuveen Asset Mgmt on 02 Dec 2013 @ 18:37
If you compare the name of the directors of the company from Ottawa which acquired the patents with certain employees names of another company in Ottawa, you may discover certain things. You may also look at the litigation database in relation certain litigation which was terminated at a date not far from the date of such recordation to the USPTO and you may speculate about the relationship between the two events.Stephane Le Garrec, France Brevets on 03 Dec 2013 @ 21:28