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Last December, InsWeb Corporation renamed itself Internet Patents Corporation (PTNT), after selling the majority of its assets to Bankrate (NYSE:RATE) for $65 M. While Bankrate would carry on as InsWeb, PTNT became a patent pure play, no doubt aspiring to reach the heights of companies, like Acacia Research (NASDAQ:ACTG), that derive the majority of their revenues through patent licensing. Quarterly reports explain that "IPC's business consists solely of plans to license or otherwise enforce its portfolio of e-commerce and online insurance distribution patents."

With more than a decade of experience in the insurance business, PTNT built up a portfolio including six issued patents. With a modest portfolio size, PTNT can focus on quality over quantity - an often cost-effective strategy that can easily show profitability with the right execution. However, through the first half of 2012, PTNT has yet to file a lawsuit or announce any licensing deals. The company claims to have made progress. In May, Chairman and CEO Hussein Enan told investors that:

We have made significant progress in identifying the initial entities to pursue in our efforts to license our strong portfolio of e-commerce patents and expect to begin to take action against companies that we believe are infringing our IP by the end of the second quarter.

As June 30 draws near, action in the public arena has yet to materialize. However, it would be premature to equate silence with inaction. One important hallmark of a quality, low-volume patent licensing play is a portfolio that reaches across various industries, touching as many different companies as possible. However, such horizontally oriented technology often slows down the advanced planning stages of a patent licensing campaign as strategists consider endless combinations and progressions for licensing candidates.

While many of PTNT's patents, by their own description, relate to the insurance industry - hardly a surprise given the company's history-one of PTNT's more interesting patents, US Patent No. 6,898,597, exhibits this horizontally oriented characteristic, broadly describing a process for keeping a network access log. The patented invention, filed in 1999, describes:

An event logging system for capturing event information associated with activity occurring in an application running on a server computer system configured to provide information to at least one client computer system, the event logging system comprising: an event identification routine operable to identify the occurrence of an event during the execution of the application and to transmit context information associated with the event; a database operable to receive and store the context information, wherein the database is a relational database utilizing a structured query language (SQL) and a database interface operable to transmit and receive the context information.

The system claimed in the '597 Patent likely applies to a wide variety of Internet-based products and services, from banking and brokering to e-commerce, content management and more. Many modern web-based systems likely recognize events and capture context information associated with it in order to provide the level of sophistication today's web consumers expect.

PTNT has, at times, traded for less than its cash balance, but after distributing an amount roughly equivalent to half of the $65 M received from Bankrate to shareholders, the amount of cash on its books-$33 M - reportedly holds steady (reporting operating expenses of less than $1 M and a net first quarter operating loss of $0.10 per share) as does a $30 M market cap. However, the patent portfolio, if paired with a soundly executed licensing strategy, should generate returns significantly in excess of PTNT's current valuation.

The '597 Patent alone could likely be licensed to several hundred companies all relying on-or at the very least using - networks and network event logs in their daily business operations. Conservatively, assume PTNT arbitrarily chose to stop counting the number of relevant companies at one hundred. To generate $30 M in revenue by licensing this one patent alone, PTNT would only need to generate, on average, $300,000 per license. Are there at least 100 companies in business today that would place a value on the use of network event logs at $300,000 or more? Before answering, consider that $300,000 amounts to less than 2 years average salary for a Director of IT, and that the '597 patent will not expire for another seven years.

Source: Internet Patents Corp.: A Patent Pure Play Poised To Make A Big Splash