Marathon Patent Group: The Grand Plan

Nov.18.13 | About: Marathon Patent (MARA)

Marathon Patent Group (NASDAQ:MARA) is a burgeoning player in the patent monetization industry. Different from virtually every other smaller patent play, Marathon has the opportunity to quickly build a very substantial portfolio of monetizable patents by leveraging its strategic relationship with industry behemoth IPNav.

The Industry

According to the PricewaterhouseCoopers' 2013 Patent Litigation Study, 2012 was a "banner year for patent infringement litigation." The PwC report cited some 5,189 patent litigation filings in 2012, a 29 percent increase from 2011 and that overall the intellectual property protection market has grown significantly over the past 5 years.

Public Company Patent Plays

There have been a growing number of public company patent plays over the past five years. A number of these companies have seen substantial stock price and market capitalization appreciation come about rather swiftly.

Many may consider Acacia Research (NYSE: ACTG) to be the granddaddy of the public patent companies. Between 2009 and 2011, shares of ACTG went from around $5 per share to north of $45 per share, resulting in its market value going from about $95 million to approximately $2 billion. ACTG has pulled back since its 2011 high, but still sports a market cap of about $700 million.

Below is a table illustrating the growth in Acacia's share price as well as stock prices of three other patent companies: VirnetX Holding Corp. (NYSE: VHC); Vringo, Inc. (NASDAQ: VRNG); and, Parkervision (NASDAQ: PRKR), each having seen similar explosive growth after being discovered by investors.


Earlier price

High price

Peak Valuation

Current Val.




$2 Billion

$700 Million




$1.98 Billion

$1.1 Billion




$350 Million

$250 Million




$700 Million

$280 Million

Click to enlarge

So what makes Marathon so special?

"What is a friend? A single soul dwelling in two bodies." ― Aristotle

We believe investors should pay strong, particular attention to the strategic relationship between Marathon and IPNav, the "world's leading full-service patent monetization firm". And further, explore the long-standing relationship between Marathon's CEO, Doug Croxall and IPNav's founder and CEO, Erich Spangenberg, who is now among the largest shareholders of Marathon. In fact, a very recent filing with the SEC showed Spangenberg's beneficial share ownership in Marathon has increased to 813,463 shares, or 13.76%. We firmly believe that after reviewing these relationships, one can reach a reasonable conclusion that these two "friends" have set out to build one of the largest, most successful publicly traded patent monetization companies in the world. If true, the question becomes, what are chances they actually succeed in doing so?

The Croxall / Spangenberg Connection

In Marathon's corporate presentation, it states that "Marathon's CEO has a 14-year working history with the founder of IPNav". And further, that "IPNav's first patent portfolio (Firepond), was previously owned by the CEO of Marathon." In fact, Croxall was Firepond's CEO from 2003 until 2008. And what became of the Firepond patents? As a result of the enforcement and licensing campaign by IPNav, the Firepond patents yielded nearly $100 million in revenue over a six-year period. Now we know why Croxall and Spangenberg are such good friends!!!

So who is IPNav and its CEO Erich Spangenberg?

In July 2013, The New York Times published a feature article in its business section titled "Has Patent, Will Sue: An Alert to Corporate America". The four page expose is almost exclusively on IPNav and Spangenberg, and lauds his prowess in patent monetization. It sites that IPNav has sued 1,638 companies, currently manages about 10,000 patents, and notes that Spangenberg personally makes about $25 million per year.

And IPNav's website states, "That since 2003, it has negotiated over 600 licensing transactions producing over $500 million in revenue and settlements." It is also very interesting to note on that website that "IPNav itself does not own patents and will never own any patents."

The "Grand Plan" Scenario

It is no overstatement to say that IPNav is among the most powerful and successful IP monetization firms in the world. Given its prowess, one can only imagine the flow of available patents that IPNav must see on a continuous basis. And as for Croxall, he has been acquiring and monetizing patents himself for nearly a decade.

Above I outlined the enormous valuations that several publicly traded patent companies have achieved in a relatively short time frame - two of which reached valuations of $2 billion. Couldn't one conclude that private company patent players like Croxall and Spangenberg are also very - maybe even painfully - aware of these public company valuations and very well may want to create a public company to take of advantage of investors' interest?

So I put forth the likely scenario that Croxall and Spangenberg are in the early stages of building a publicly-traded patent company with the aspiration of one day being mentioned in the same breath as Acacia Research and VirnetX. In fact, in a recent MARA press release, Croxall was quoted saying, "Roughly a year ago, we set out to build one of the preeminent IP monetization companies". So wouldn't it stand to reason that Marathon's current market valuation of approximately $30 million may ultimately prove to be an incredibly attractive entry point for investors?

Marathon - A deeper look

One can argue that the two essential components to any successful IP monetization company are: 1.) The ability to source, identify and favorably acquire valuable, monetizable patent assets; and, 2.) To have the expertise and resources to actually monetize those patent assets. I strongly contend that Marathon, with and through its strategic relationship with IPNav and Erich Spangenberg, has both!!!

Unlike IPNav, which doesn't own patent assets (but rather provides monetization services to patent owners), Marathon seeks to have ownership and full control of patents. In fact, over the past 7 weeks, Marathon acquired three additional patent portfolios bringing its total to seven. Investors should keep a keen eye on Marathon's patent acquisition activity as its portfolio of patents are the ultimate feedstock for future revenue and earnings.

Unlike many of the other publicly traded patent companies, Marathon's patent monetization business model is not binary, and consequently far less risky. While most patent companies must be prepared to go years waiting for a judicial outcome, Marathon has shown the ability to begin revenue-generation on patent infringement campaigns in as little as three months. How? Because whereas Marathon often files suit against alleged infringers of its patents, its plan of monetization is to rely upon the evident strength of its patents which, in theory, enables it to successfully negotiate a settlement and licensing agreement with its litigants. Marathon has shown a consistent ability to quickly produce patent revenue without having to wait on the judicial process. While Marathon's business model does focus on layering multiple smaller settlements in a quarter to create a steady stream of revenue, it doesn't mean that they won't take on larger lawsuits with homerun potential given the opportunity.

At this point, Marathon now owns seven patent portfolios and has 51 active lawsuits, (a 55% growth from the 33 lawsuits as of just two months ago), against 57 different defendants, many of which are household names like Microsoft, Samsung, Qualcomm, and As with patent acquisition activity, investors should keep a keen eye on the number of active patent lawsuits Marathon has ongoing. As that number grows, it likely increases the frequency of future settlements as well as the level of diversification regarding outcomes of its patent campaigns. Once that number is large enough, it should start to result in a smoothing effect on quarterly revenue and EBITDA. However, this will take some time, so one should expect quarterly results to be choppy over the next year or so.

Marathon's Revenue: Off and Running

Whereas in the most recent two quarterly reports, MARA's revenue has been modest, a quote from MARA's CEO, Doug Croxall taken from the recent MARA Q3 earnings release is especially worth noting: "During this past quarter, our main objective was to acquire high quality patent assets that could set the stage for larger enforcement campaigns, where damage amounts have the potential to significantly increase when compared to that of the existing producing portfolios. We believe we were very successful toward that goal having seen our patent asset base grow from 55 to 99 assets".

If one overlays Croxall's quote with the fact that company maintains a very low overhead of about $500K per quarter, the earnings leverage of MARA's business model will pretty much punch you right in the nose.

The balance sheet is also solid with the company having about $6 million of cash and no long term debt. The cash provides MARA with the ability to acquire more patent assets.

Marathon: The time to buy is now

We believe Marathon is an undiscovered gem. They are in an industry that has seen companies' stock prices rise 20x or more once discovered by investors. While this is impressive, bear in mind that none of these peer companies had a strategic relationship with arguably one of the top patent monetization firms in the world-IPNav. There has been a flurry of recent news including the acquisition of 3 patent portfolios, 22 new filed lawsuits and two settlement agreements - yet the stock hasn't moved. The Focused Trader and our subscribers have "found" Marathon Patent Group….let's not wait for others to do so as well.

Small Share Count and Public Float

One of the compelling things about Marathon is the attractive market value and price leverage due to its low share count of about 5.5 million shares. It also means the company has a relatively small public trading float and its trading volume is thin at about 30K shares per day. So it is important to use whatever means an investor deems appropriate, like price limits, to deal with the small float.

Disclosure: I have no positions in any stocks mentioned, and no plans to initiate any positions within the next 72 hours. I wrote this article myself, and it expresses my own opinions. I am not receiving compensation for it. I have no business relationship with any company whose stock is mentioned in this article.