On January 26, 2016 Limelight Networks Inc. filed a petition with the Supreme Court to fend a portion of its long-running dispute against Akamai Technologies Inc. Limelight is seeking review of the federal court's decision to reinstate the 2008 jury verdict holding it liable for direct infringement. The legal battle has been ongoing since 2006, when Akamai and the Massachusetts Institute of Technology (MIT) filed a lawsuit against Limelight alleging infringement of U.S. Patent No. 6,108,703. The '703 patent is assigned to MIT and exclusively licensed by MIT to Akamai.
On November 30, 2015, Limelight returned fire, filing a patent infringement lawsuit against Akamai with six of its own patents. If patent infringement is upheld, Limelight may have more to gain than Akamai in asserting its patent rights given that Akamai's annual revenue is significantly larger than Limelight's. In the USA, a patent provides an owner the 'right to exclude' others from making, using or selling the claimed invention/s for 20 years. Is Limelight poised for another defeat or will it emerge victorious in a classic David versus Goliath style?
As Limelight's counter assertion will ultimately depend on the value of its patents, it is worthwhile to take a closer look at Limelight's patent portfolio. Limelight has a reasonably sized portfolio of patents, approximately 202 worldwide granted patents and applications, including 132 US granted patents and 36 US applications. We focused our analysis on the 132 granted patents, since only granted patents provides owners the right to exclude others.
Within the patent industry it is widely accepted that a minority of patents are valuable, typically 3-5% in any given portfolio. We define valuable patents as patents that provide substantial economic benefit to their owners. Hence the value of any given portfolio of patents cannot be measured by the quantity of patents alone - rather the quantity of valuable patents within the portfolio determines its value. Therefore the determination of the value of a patent portfolio requires that each patent be valued accordingly.
The Limelight analysis was done using Pelent's Portfolio Analyzer (pelent.com), the analyzer evaluates and rates each patent in the portfolio. Patents are rated using a scale "A" through "D"; with A-rated patents representing patents with the highest economic value, B-rated patents having medium value, C-rated patents having low value and D-rated patents as unlikely to have value.
The Portfolio Analyzer further highlights technology areas, where valuable patents are located and the distribution of valuable patents. The analyzer allows one to quickly assess the overall value of the portfolio, and hone into the technology areas where the highest concentration of valuable patents reside. Limelight's results are illustrated in the layout representation shown below.
Limelight's portfolio valuation looks rather promising. A-rated and B-rated patents account for 45.5% of the portfolio, including 25 A-rated patents and 35 B-rated patents. Although the patent infringement lawsuit against Akamai includes six of their patents, it appears that Limelight has several more potentially valuable patents in its arsenal. Further information on the portfolio and a complete listing of Limelight's patent ratings can be obtained by downloading the report from http://pelent.com/portfolio-item/limelight-networks/.
Summary
In the biblical account David and Goliath confront each other, David the smaller and weaker opponent unexpectedly triumphs over a bigger and stronger adversary. Limelight Networks is arguably a modern day underdog in the CDN market battlefront. While Limelight's $96M market cap pales in comparison to Akamai's Goliath market cap of $7.10B, its ultimate strength may lie in its patent portfolio. Limelight's share price has been severely battered over the past several months, a favorable settlement with Akamai could significantly reverse the trend and boost the stock to its previous $3.00-$4.00 range.