Modavox Surges on Favorable Patent News

About a year ago, I wrote that Modavox (MDVX.OB) may become the next big patent licensor. That may happen soon. Modavox is surging on some favorable rulings in its patent case against Tacoda (a division of AOL), including a Markman ruling defining most of the patent claims broadly and another order transferring (slightly) related litigation to New York, which the company claims should speed things up.

That’s good for Modavox. As I wrote last year

Think of Tacoda as a test case. If Modavox prevails and its patents are upheld, Modavox could be the next big patent licensor - the Patriot Scientific (PTSC.OB) of internet advertising. And unlike Patriot Scientific, Modavox is actually practicing the technology so it shouldn’t be disadvantaged by last year’s Supreme Court ruling in KSR v. Teleflex.

I still subscribe to that view. If Modavox gets a good settlement or prevails against Tacoda [AOL], it will have a war chest to pursue other internet companies. The reader who first brought this stock to my attention believes that scores of internet companies are currently infringing Modavox’s patents, including a biggie that rhymes with “moogle.”

Investors are starting to see the upside as well. In just the past month, shares have approximately doubled. That’s a big move, but its a mistake to think it couldn’t move higher. At current levels its market cap. is $167M. That might seem cheap if its patent is upheld.

DISCLOSURE: No position.

Comments

[raytayzmd:]

...if you're talking about this patent:

patft.uspto.gov/netacg...

...then I don't see how Modavox could possibly prevail...the wording of it is so broad as to cover pretty much any hypertext coded into any website by anybody anywhere...somehow I don't think the entire internet will ever be expected to pay royalties to a dinky company like Modavox...to me it smells like just another patent scam being perpetrated by a deadend company with nothing else to offer...no doubt it will eventually end up like PTSC trading at a dime a share.

Apr 30 09:33 AM

[H.J. Huneycutt:]

Modavox looks like a pump-and-dump to me. Lots of dramatic promises using vague and useless terminology; lots of (rather suspicious) message board activity; lots of insanely optimistic press releases. Meanwhile, the financial statements seems to suggest that this company is worth pennies per share.

Also, there are some huge red flags in their financials --- including an 18% "Allowance for Doubtful Accounts". I know sub-prime lenders that had a higher degree of certainty regarding their receivables than that. I'm not even sure if one is allowed, under GAAP, to claim Accounts Receivable when doubt as to collectibility is that high.

I'd warn investors to keep away from this thing with a million-foot pole.

May 02 02:53 PM