Marathon Patent Group (NASDAQ:MARA) announced on May 5th, 2014 they acquired certain assets from IP Navigation, which I believe could yield very lucrative results. I believe the market is completely unaware of the following developments, which presents a unique opportunity for investors. The assets are as follows:
IP Liquidity Ventures:
- 3 Life Sciences patents and 1 patent application
- 3 Search & Network Intrusion patents
- 3 Tire Pressure patents
- 4 Patents that cover arterial stenosis, semiconductor wafer processing, natural language interface, and a method that tracks eye movement.
- 1 US patent and 4 Foreign Patents &Applications that relate to microsurgery methods.
Last week had a series of events that could yield excellent results for their monetization of the natural language asset. First some back story. The patent was developed at Rensselaer Polytechnic Institute. The patent covers and is titled Natural language interface using constrained intermediate dictionary of results. The patent was filed for in May 2001, with a priority date of April 2000. It was finally granted at the USPTO on February 13, 2007 as patent number 7177798 ('798).
The '798 patent was asserted against Apple (NASDAQ:AAPL) in October 2012 , the original case was jointly dismissed and refiled on June 3rd, 2013. The complaint alleges that iPhone 4S, iPhone 5, iPad with Retina Display, iPad Mini, and iPod Touch infringe on the patent through its use of Siri. It further alleges willful infringement through the citation of the '798 patent in no fewer than 3 Apple patent applications. Lastly, the complaint alleges that Siri is a significant selling feature in the accused devices and cites the Apple v Samsung case No 2012-1507, slip op. at 8 (Fed. Cir. Oct 11, 2012.
Dynamic filed for an ex partes reexamination to invalidate one Apple patent and potentially to press Apple to make admissions regarding claim construction. Apple's '283 patent cited the Dynamic '798 during prosecution. The ex parte reexamination currently stands at a second non-final rejection at the patent office.
Apple filed for Inter Partes Review (IPR) at the Patent Trial and Appeal Board (PTAB) on 10/21/2013 to review the '798 patent. The PTAB decided on 4/15/2014 to not institute review. Apple further filed an additional two IPRs on 1/3/2014. Both of these reviews were decided to not be instituted last week on 6/12/2014 (Link 1 / Link 2).
The second development last week in regards to the '798 patent was the issuance of the Markman order in the New York Northern District Court (the venue of the case against Apple). The court construed nine disputed terms. One term was neutral, one term was determined no construction was necessary, six terms agreed with Marathon's proposed construction, and two terms agreed with Apple's construction.
The rest of the schedule so far is the following:
Advice of Counsel Disclosure by 7/12/2014
Fact Discovery by 7/27/2014
Initial Expert Reports by 8/11/2014
Responsive Expert Reports by 9/10/2014
Close of Expert Discovery is 10/10/2014
Dispositive Motions by 11/9/2014
A trial date has not been set but I believe it will be sometime in mid 2015.
With a favorable Markman order and IPR result both now on the record, I believe that MARA's position is very strong. I also believe damages could be quite significant in the $100M-$300M range if not higher if the case proceeds to trial. The '798 patent does not expire until 2020, which could yield a significant reasonable royalty if infringement is proved and an injunction is not issued as relief. The terms of the patent purchase split of recoveries also support my opinions:
|Total Net Recoveries||Applicable Percentage|
|$0 - $10.0 million||0%|
|$10.0 million - $40.0 million||40%|
|Over $40.0 million||50%|
There are always risks with patent litigation that need to be considered, such as delays and unfavorable decisions that is often very difficult to forecast and I am unqualified to do so. I suggest seeking out an expert legal opinion from a patent lawyer for further analysis.
The company is also monetizing nearly a dozen additional licensing campaigns, which I intend to cover in more detail over the next few weeks. I am tracking 27 settlements in Q2 2014 so far. Estimating the revenue has proven to be very difficult in prior quarters. MARA reported $2.78M in revenue during Q1 2014. I am anticipating a range of $3.5-$4.5M for Q2 2014.
I believe there is a very favorable risk/reward opportunity in Marathon Patent Group through management's monetization efforts. Trying to determine price targets and valuations in patent investments is extremely difficult. The '798 represents a very large opportunity for the company and shareholders that is largely unknown to mainstream patent investors. MARA only has 5.6M shares outstanding and a $50M valuation with significant insider holdings and an excellent partner in IP Navigation. Additionally, MARA needs to secure an uplisting to a senior exchange in order to unlock further value for shareholders.
Disclaimer: I am long Marathon Patent Group common stock and I have no intention to buy/sell in the next 72 hours. I was not compensated for this blog entry and have no business relationships with Marathon Patent Group or any company discussed. All opinions are my own based on the factual record. Any errors can be reported to firstname.lastname@example.org for immediate correction. Do not make investment decisions based on this blog post. I am not an investment advisor. I am not responsible for your investment decisions.
Disclosure: The author is long MARA. The author wrote this article themselves, and it expresses their own opinions. The author is not receiving compensation for it. The author has no business relationship with any company whose stock is mentioned in this article.
Additional disclosure: I am long Marathon Patent Group (MARA) common stock and I have no intention to buy/sell in the next 72 hours. I was not compensated for this article and have no business relationships with Marathon Patent Group or any company discussed. This article was released on my blog on June 18, 2014 at 1:30PM EST. All opinions are my own based on the factual record. Any errors can be reported to email@example.com for immediate correction. Do not make investment decisions based on this blog post. I am not an investment advisor. I am not responsible for your investment decisions.
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