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Is the Great Patent Boom over? Wireless patent troll InterDigital’s bid to sell itself seems to be failing.
Google’s $12.5 billion bid for Motorola Mobility, following on the $4.5 billion sale of Nortel’s patents, and the $9 billion valuation put on the value of Alcatel’-Lucent’s 18,800 patents got the board of InterDigital all excited about the prospects of cashing in on its 1,300 patents.
Before any bid for InterDigital was made, the company’s share price shot up to give it a market cap of over $3 billion – a figure which has little to do with InterDigital’s revenue generating abilities of under $70 million in Q2.
However, waning interest has seen a fall in InterDigital’s share price leading to market cap of $2.6 billion at the end of last week and $2.3 billion yesterday.
Reports say that bidders are offering $1-2 billion for InterDigital. A ‘large Asian mobile device company’ (Samsung locked in lethal legal battle with Apple?) is said to be a bidder.
The problem with the high values being put on patent banks is that no one expects the buyers of these patents to use them in productive ways to create new products.
They are simply being bought as a defensive ploy in the increasingly bitter mobile industry lawsuits.
Many good ideas encapsulated in these patent banks are likely to be left unexploited, and the huge sums spent to buy the patent banks will leave companies with less to spend on improving their products.
So if the perceived value of these patent banks falls, it will be a good thing for the wireless industry.
You could say that the perceived need of companies to aquire strong patent portfolios as a defence against litigation threats shows that the established operators are acting as ogres, trying to prevent new entrants to the market through undue licence royalty demands.
In my experience, the more intemperate the comments the closer to the mark the story is. When people start to accuse you of having a financial interest in misreporting the story, you can pretty well print it out and frame it as a bulls-eye.
Thank you anon, much appreciated
It seems to me that there is a lot of talk about the word troll, but the valuations of these companies is based on the troll concept, not on the value of the products or innovations for royalties or licenses, but on the use of the patent portfolio in a troll like manner or defense in patent litigation. So David I think you are spot on in your commentary and the acusers are actually the acused – pumping up the story.
I don’t know enough about this current discussion to comment but the reference to Rambus caught my eye. I was somewhat involved in the Rambus discussions/flamewars on Usenet at the time and I’m quite sure that the aggressiveness of some posters was more than could be attributed to the holding of stock. It was at that time that I became familiar with the term “pump n dump”.
It’s sad just how biased individual stockholders tend to be. You’d expect someone who researches a company to come out with a fairly balanced viewpoint including both risks and opportunities. But money makes even the best of us blind to what we don’t want to see, and react in ways we wouldn’t otherwise.
I agree the term ‘patent troll’ is wrong though: there’s a very important distinction between a company that submits its technology to an existing standard body (e.g. GSMA) and one which ‘invents’ technology that is necessary or extremely desirable to implement an existing standard which was independently developed. The GSMA standards would likely be slightly less efficient and/or flexible if InterDigital did not exist, so even though they don’t make their own products anymore, their technology does add a bit of value to other products and IP.
Only under a broken legal system and in an overly litigious Industry could a market capitalisation of more than a billion dollars be justified though, and I very much doubt there’s any way to justify $3B no matter what. Some fool might still buy them for an insane price, and I wish the best of luck to our angry friends above, but it’s far from certain.
BTW, 20x data compression? That’s an exaggeration if I’ve ever seen one. From what I could find, it’s video-only and likely just recompressing to a more computationally expensive standard (e.g. the next-gen H.265) at a lower quality. Nice if the device supports it and the user can still get the full quality if he wants, but hardly revolutionary unless I’m missing something.
> Funnily enough, The Baron, some of the IDCC comments
> were reminiscent of the comments on Rambus in that they
> were quite rude which I attributed to the fact the
> commenters had stock in the company and were fixated on
> the great day when Rambus would win all its court cases
> and the stock would go to $100.
David, I am far too polite to suggest such a thing (directly)!
Regardless of any factual rights and wrongs in your article, I found its attraction of prompt, aggressive responses interesting. City “analysts” who spout rubbish (and I’ve seen some right old bollocks said about companies I’ve worked for) don’t get such public flogging.
The Baron
I suppose microsoft is a great patent troll also?
Idcc has created the network of networks software
and compression technology that compresses compressed data files 20 fold to help solve the bandwidth crunch so that in the future should you decide to do due diligence you may do so without delays.
It makes them worthy people, Richard, but if a troll is to be defined as a developer who does not produce, then it’s a troll. It’s semantics really. We need a better definition of troll.
I would have thought that a patent from the USPO was worth the paper it was written on and no more as I believe at one time they issued a patent for boiling an egg
David,the problem with using the term “Troll” is that this has particular connotations in the US. Because of the costs of litigation, very often a settlement is much cheaper than defending an action, whatever its merits. As a consequence, many owners of clearly invalid patents are able to extort money from industry.
Interdigital clearly does not belong to the same fold. The company developed a FD/TDMA phone system well in advance of GSM. Indeed, they probably had one of the first digital radio phone systems on the market. A further product line was the B-CDMA phone system followed by contract development work for Nokia and others. A further “product” line was the HSDPA protocol stack incorporated into Infineon CDMA chips.
Does that make them a troll in your books?
Thanks Robert, Yes I was surprised by the tone of some of the comments which made me surmise that they came from people with a personal interest in IDCC’s fortunes. When I used to question the sanity of Rambus’ strategy of suing its customers, I used to get similarly personally directed comments which I took to be from Rambus share-holders looking for their payday.
Funnily enough, The Baron, some of the IDCC comments were reminiscent of the comments on Rambus in that they were quite rude which I attributed to the fact the commenters had stock in the company and were fixated on the great day when Rambus would win all its court cases and the stock would go to $100.
Well it looks like DM is in deeper do-do than even Ed could manage to muster in a single day.
He started the day with an innocent Blog post and ends it, lucky he wasn’t raided by the FIB for stock market manipulation.
I haven’t seen such rabid behavior attacking innocent Blogs, since someone I know also innocently questioned what was the real value of ParkerVision’s RF portfolio.
Fascinating bun-fight here. Are any contributors holding/shorting IDCC stock/options or related to IDCC (employee, contractor, employee’s nephew’s pet etc.)?
Since I am now a contributor in addition to being a curious bystander, I should state “no” and “no”, or risk vanishing up my own self-inconsistency.
The Baron
Well, personally,Ii wouldn’t call Intel clowns but they’ve certainly made a hash of getting into comms, johnnyg135. I have to go to bed now – it’s after 11pm here – but I’ve enjoyed this exchange of views, thank you.
David, the computer crowd is now trying to control the wireless communications sector because of the innovations of companies like IDCC. Without the efforts of the wireless sector, these clowns in the computer crowd would still be plugged into a wall outlet.
jmho.
john
Well Yes, johnnyg135, revenues of $70m a quarter suggests that people are finding InterDigital’s innovations worth licensing. And there’s nothing wrong about doing what they do unless patent values are blown up to such absurd values, $4.5 bn for Nortel, $10bn for Motorola Mob, $9bn at Alcatel-Lucent – that this acts as a brake on the industry’s progress.
Sonto, that is why the word, “almost” was used.
David, IDCC has helped to make it possible for these innovative products to be made in the first place. IDCC was in on the ground floor of 2G, they have been instrumental with 3G and they will be just as important with 4G/LTE as is being proved as we write these posts.
The last thing I will add is that IDCC has never been one to demand out of line percentages for its license agreements. Trust me on this … you may be able to say that about some innovators, but IDCC is not one of them. They have been MORE than fair.
jmho,
John
Getting linked to Slashdot, Berto, is a possiblity that had never crossed my mind.
I do not own, nor have I ever owned InterDigital shares, johnnyg135, the article seemed worth writing if it reflected a trend that the high water mark of patent valuation, and that patent values are now on the decline. High patent values suck money out of the wireless industry which could be better spent on innovation. And I mean innovative products – not piling up patents so as to be able to sue people who do produce innovative products.
ARM designs processors, Anonymous, therefore it produces products, therefore it falls outside the defintion of patent troll
The entire total employees are less than 300 and IDCC can not have 300 engineers.
johnnyg135 said exactly what I was thinking. Right on the money. David, in your article you echo the misinformation that caused the huge drop in the stock price the other day, namely that there was a ~$2 billion bid for the entire company (as you put it, “for InterDigital”). The problem with this is that there was a ~$2 billion bid for *part* of the company. Big difference. And people (like yourself) assumed that this was somehow an accurate valuation of the company, and that no one would bid much higher.
Regardless of your definition of “patent troll,” (I think it’s a stretch here), you should never open with “X-industry patent troll, Company-Y,” if you want to keep credibility. Maybe you were hoping to get linked to from Slashdot. The problem is you’re being linked to from google finance. I don’t know how those links are chosen, but this article does not belong there.
There is a British Company which will fall into the ‘Patent Troll’ definition of yours, is called ARM Holding. ARM Holding patent trolls a lot of companies around the world by licensing.
vtem
David, I am just curious, but why did you write this article? Are you long or short the stock?
You are probably already aware that the shorts attacked the stock to a low of $44.01 and approximately 6 million shares traded hands. The average vol. has been averaging 2.4 million per day. Today it has recovered to a current level of $54.68 …
What was the real purpose of your article?
Thanks in advance for your answer,
John
That’s generous of you, johnnyg135, and I am happy to apologise for my lack of due diligence. In this age of instant news and PRs whose phones are permanently on voicemail, it’s difficult to check everything out in a timely fashion.
perhaps you are right David, I give you my apology for being offensive … now I would hope you would offer an apology for your articles lack of due diligence …
Your comment wuld be more effective, fish21049, if you were to tell us what the new info is. In my post I said there was more than one bidder – so that’s not new. If you have something new to say – please say it.
With the greatest respect, johnnyg135, I would suggest that offering an alternative definition of patent troll would be a more effective argument, and a less lazy one, than seeking to be personally offensive.
well, David, I beg to differ with you and will go as far as to say that that definition must have been written by a “lazy” writer of blogs that avoids doing any due diligence …
jmho
Why don’t you get ‘up-to-speed’ in reading AND POSTING INFORMATION. The company that released the ‘original’ information is now saying that there are more than 1 bidder(s) in more than 1 consortium that are pulling thier resources to put in a bid.
Also, check Reuters, Barrons, and the OTHER RELIABLE MAJOR SERVICES who are putting out what appears to be more accurate, precise, and current detailed information.
Well, johnnyg135, my understanding of the phrase patent troll is that it describes a company which has patents (whether self-created or bought) but doesn’t use those patents to make any products. InterDigital’s modus operandi appears to match that description.
1. Calling IDCC a patent troll tells the readers that you do not understand what a “patent troll” is. IDCC creates/invents its technology through the employment of almost 300 engineers and then signs license agreements for the use of their patents. A “patent troll, buys the patents from the creators/inventors of those patents and then sign agreements for the use of the patents that they BOUGHT. Patent Trolls do NOT create or invent anything.
2. IDCC has approximately 8,000 issued patents from the USPO and from international patents issued through various countries patent issuing entities. In addition to this IDCC has approximately 10,000 patents pending with the USPO.
3. IDCC has approximately 441 declared essential 4G/LTE patents and their patents are considered more valuable than Nortels by Ocean Tomo’s CEO. Misek, who is a recognized analyst for Jeffrey’s feels that IDCC’s 4G/LTE patent portfolio is valued at approximately 3.3 billion, alone.
4. The bids that you speak of were ‘rumored’ to be for “part” of the bids, NOT for the entire company.
I could go on, but since you chose to “create” a fantasy article to begin with and you did not do your own diligence, you do not care about getting any of your facts straight anyway …
jmho