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Michael Sweeney is the Bitcoin Partner of Film Annex Networks the venture division of Film Annex, which has been ranked as one of the Top 100 web sites in America with over 25+ million unique visitors per month. Film Annex's business model includes: * Paying content providers through the Film... More
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  • Can CopyTeIe Inc. (OTCQB: COPY) Really Monetize Patents?

    In a prior life, I licensed a technology from the Cornell Research Foundation (now known as The Cornell Center for Technology Enterprise & Commercialization (CCTEC), and I did a Silicon Valley start-up that was know as Enuncia Communications. Well my wife reminds me twice a year or so about the money invested in that start-up, but I like to re-frame it as a "learning experience" :) A friend of mine from Cornell knew my experience in the patent field and he knew my belief that there are many wasted or undervalued assets out there in patents. I have always had a strong view that the patent protection market is a viable market, so I agreed to write this evaluation of "COPY".

    Overview

    CopyTele Inc. ("CTI") (OTCQB: COPY) specializes in patent monetization and patent assertion, which involves acquiring, licensing and enforcing patented technologies. CTI's monetization and patent acquisition efforts have rapidly expanded since their new management team was installed in late 2012, and they seem to expect profitability in the FY2014E timeframe. CTI currently has 35 active lawsuits across five patented technologies and has very diversified patent portfolios covering widely used technologies such as:

    • ePaper® Displays,
    • Key Based Web Conferencing Encryption,
    • Encrypted Cellular communications, and
    • Loyalty Conversion Systems.

    CTI management is rapidly expanding the patent pipeline for future monetization and assertion efforts and the elements for substantial long term revenue growth are firmly in place.

    New Management Team and Strategy

    CTI was previously in the business of technology development and bringing new products to market. Although CTI's business saw only limited success, the science behind the technologies and products was cutting edge, resulting in patents with significant monetization potential. It is not usual for unsuccessful businesses to mask patents that can be extremely valuable. Previous management had stockpiled patents in the areas of electrophoretics (commonly known as ePaper) key based encryption and encryption devices and Nano Field Emission Displays, among others. However, CTI was unsuccessful in developing sustainable revenues from products incorporating these technologies and the Board of Directors decided to move in a very different direction.

    Spearheading this new effort is President and Chief Executive Officer Robert Berman (pictured above), who formerly served as Chief Operating Officer and General Counsel of Acacia Research Corporation ("Acacia") and Senior Vice President of Engineering John Roop, who served as Vice President of Engineering at Acacia from 2001-2008. Mr. Roop is a highly experienced Silicon Valley electrical engineer, with over 20 years of patent experience. Having previously developed widely used technologies and having served as an expert witness in numerous patent trials, Mr. Roop brings tremendous experience in patent evaluation to CTI, which is a critical element in building a successful PAE. Complementing his skills is CEO Robert Berman, an entrepreneur, attorney and patent monetization expert, who has successfully taken on some of the world's largest technology companies on behalf of patent owners. Mr. Berman brings a robust network of vetted, litigation experts and his reputation and successful business development history have provided CTI with an unsolicited pipeline of future patent assertion opportunities. These gentlemen started and built a successful patent monetization and assertion business at Acacia and joined CTI because they determined that there was significant untapped value in the CTI patent portfolio.

    CTI's patent portfolios are wide ranging, and well positioned in very attractive end markets. Their ePaper® Electrophoretic Display ("ePaper") and Micro Electro Mechanical Systems Display ("MEMS") portfolios consist of a number of patents in the current and next generation eReader spaces. Devices such as the Nook and Kindle utilize this technology. Their Key Based Web Conferencing Encryption and Encrypted cellular portfolios cover areas of secure communication across audio/video, e-mail, text messaging, data, voice and fax applications. They have patents in the Nano Field Emission Display ("FED") area, an emerging technology which could play prominently in the next generation of flat panel displays. Their recent patent portfolio acquisitions are in the areas of Loyalty Conversion Systems, and Window Frame Construction, and Unified Communications.

    Competitive Landscape

    CTI has a variety of competitors, including numerous Patent Assertion Entities ("PAEs"). According to the U.S. Government Accountability Office ("GAO"), from 2000 to 2010, the number of patent infringement lawsuits in the federal courts fluctuated slightly, but from 2010 to 2011, the number of such lawsuits increased by about a third. GAO's detailed analysis of a representative sample of 500 lawsuits from 2007 to 2011 shows that the number of overall defendants in patent infringement lawsuits increased by about 129% over this period. These data also show that companies that make products brought most of the lawsuits and that PAEs brought about a fifth of all lawsuits. Publicly traded PAE's include:

    • Acacia Research Corporation,
    • Marathon Patent Group (OTCBB: MARA),
    • VirnetX Holding Corp (NYSE: VHC),
    • Vringo, Inc. (NASDAQ: VRNG) and
    • InterDigital, Inc. (NASDAQ: IDCC), among others.

    Less than 5% of the patent lawsuits that are filed ever make it to trial and a large percentage of those cases settle. CTI's management team have generated in excess of $150mn in patent licensing revenues and are very skilled in resolving patent infringement lawsuits. Most agreements are settled with undisclosed terms, making it difficult to assess the value of the final of the transaction. CTI's management team has an excellent track record of picking the right patent portfolios, aligning themselves with the best litigators, and extracting the maximum value from their portfolios. This is how they seek to differentiate themselves in a highly competitive space.

    CTI Continues to Acquire IP and Initiate Litigation

    CTI currently has 35 active lawsuits across six patented technologies, and management's reputation and previous success in the space has created a robust pipeline of new patent opportunities. CTI has proven to be quite active, with four patent portfolio acquisitions over the last year. There are a few gems in the CTI portfolio, including the ePaper display and Key Based Web Conferencing Encryption, which larger potential to settle. However, CTI management believes in a "singles and doubles" approach, and does not like to concentrate significant resources into any one patent case. CTI has stayed in the headlines with acquisitions, the initiation of litigation and the announcement of settlements. In recent weeks, CTI has agreed to settlements with Logitech International (NASDAQ: LOGI) around its Key Based Web Conferencing Encryption technology and YKK AP America Inc., in connection with its patented J-Channel Window Frame Construction technology. It has also filed a patent infringement lawsuit against AT&T, Inc. (NYSE: T), in connection with its patented Encrypted Cellular Communications technology. CEO Robert Berman philosophy can be summed up as "The more quality patents owned, the more litigation initiated, the more settlements reached, the greater the opportunity to keep expanding the business."

    Conclusion

    There is a general desire in the US court system to reward patent filers and innovation is a key driver of the US market. COPY is an interesting business model in a rapidly competitive international market. The success of COPY is good for the US economy as it potentially will attract other companies, immigrants and innovators to locate their companies in the USA in order to take advantage of the US court and patent systems.

    The article was reviewed by a third party for any factual errors and the information came from publicly disclosed documents of COPY and third parties. It is NOT a recommendation to buy or sell ANY stock listed here, and it is published as an information piece on the patent market.

    Disclosure: I have no positions in any stocks mentioned, and no plans to initiate any positions within the next 72 hours.

    Tags: ITUS
    May 28 5:33 AM | Link | Comment!
  • Over On Film Annex: Data From The Block Chain: Real Data, Real Time, Worldwide: #Bitcoin Spring 2014

    Bitcoin Spending

    Tim Swanson from CoinDesk wrote a very interesting article on "the latest block chain data in an attempt to draw new conclusions about how bitcoins are being spent, why they're being held and what this may mean for the burgeoning market." The article is titled:

    "What Block Chain Analysis Tells Us About Bitcoin."

    First things first, it is amazing to me how data can already be drawn from the Bitcoin Block Chain and private company CoinDesk, which is focused on the USA market. Try to pull this data from any combination of Central Banks! At best they give you guesstimates and then the assumptions between Central Banks vary country to country. The Block Chain has no bias and the assumptions can all be identified.

    See the full story @ Film Annex.

    Disclosure: I have no positions in any stocks mentioned, and no plans to initiate any positions within the next 72 hours.

    May 18 10:39 AM | Link | Comment!
  • Why Timothy Geithner Needs To Start Thinking About Bitcoin

    Treasury Secretary Timothy Geithner, President Barack Obama and Federal Reserve Chairman Ben Bernanke

    Tim Geithner is the former US Secretary of the Treasury who served President Barack Obama from 2009 to 2013. He was previously the president of the Federal Reserve Bank of New York from 2003 to 2009. He now serves as president of Warburg Pincus, a Wall Street private equity firm, and he is on a book tour for, "Stress Test: Reflections on Financial Crises". Andrew Ross Sorkin interviewed him to promote his new book in the New York Times article, "What Timothy Geithner Really Thinks."

    When I was reading the article, it dawned on me how much we need Bitcoin as a balance to/for Central Banks and "Fiat Currencies" such as the US Dollar, Euro, and Japanese Yen. There are many in the Bitcoin world that have strong Libertarian views, and they see Bitcoin as a way to topple governments. Well I take a more simplistic view and compare it to movies. When I was a kid, you went to a movie theatre to see a movie and a year or two later it came out on TV. Now there are 25 different ways to see a movie, and I still go to movie theatres to occasionally see a movie with my wife. Bitcoin and/or other digital currencies can work the same way. They are alternate forms of wealth distribution that keep Cental Banks in check in a non-political way. The best example of this is the work of our Women's Annex Foundation where we distribute Bitcoin to women in developing countries with our partners Roya Mahboob and Feresteh Forough. They are seen here with Twitter Founder Biz Stone:

    Fereshteh Forough, Biz Stone, and Roya Mahboob

    The most obvious example is the contrast of Geithner's view of "the other side of the cliff. The NY Times article states:

    Perhaps the main challenge that Geithner has found in selling his argument is that to believe that the bailout truly worked, you have to believe that the other side of the cliff would have been worse. This makes his argument something of a counterfactual one, a hypothesis that will always be open to interpretation. Elizabeth Warren, the Massachusetts senator and creator of the Consumer Financial Protection Bureau, has written in her new book, "A Fighting Chance," that Geithner "believed the government's most important job was to provide a soft landing for the tender fannies of the banks." It's an opinion shared by Neil Barofsky, the former special inspector general of TARP. He told me in an email that Geithner, Bernanke and Paulson "consistently put the interests of the banks over those who were supposed to be helped, like struggling homeowners." While Barofsky acknowledges that TARP "undoubtedly helped save the system," he also says, "it was supposed to do so much more."

    In the Bitcoin world, the counter to that is Mt. Gox, which was a Bitcoin exchange based in Tokyo, Japan. From Wikipedia:

    Mt Gox was launched in July 2010, and by 2013 Mt Gox was handling 70% of all Bitcoin transactions. In February 2014, the Mt. Gox company suspended trading, closed its website and exchange service, and filed for a form of bankruptcy protection from creditors called minji saisei, or civil rehabilitation, to allow courts to seek a buyer. In April 2014, the company began liquidation proceedings. It announced that around 850,000 bitcoins belonging to customers and the company were missing and likely stolen, an amount valued at more than $450 million at the time. Although 200,000 bitcoins have since been "found", the reason(s) for the disappearance-theft, fraud, mismanagement, or a combination of these-are unclear as of March 2014. There has been some speculation of hackers being responsible for the missing Bitcoins, but no case has been proven.

    Mt. Gox

    The reality is Bitcoin is in its infancy and it had an exchange with 70% of its trading fail, and yet the building blocks of Bitcoin continue to grow ever day with Bloomberg now quoting the terminal and the first US exchange being announced last week by Atlas ATS.

    Economist really need to start looking at the foundation of Bitcoin because this seems so 5 years ago when Geithner states:

    Geithner paused for a moment. "Can you design a system ever that allows you to be indifferent to the failure of any institution, in any state of the world?" he asked aloud before answering his own question. "You can design a system, and I think we have, that allows you to be indifferent in most states of the world: the five-year flood, the 15-year flood, the 30-year flood, maybe even the 50-year flood," he said. "But there are constellations of storms, of panics, of fires that are so bad that it's very hard to imagine that you could be indifferent to the failure of the financial system."

    Ben Bernanke is the former Chairman of the Federal Reserve who has been a constructibe critic/supporter of Bitcoin, and he seems much closer to reality when he states in the same article:

    "Ironically, the conventional wisdom now is that it was obvious that Lehman should be saved but that the Fed and the Treasury went ahead and made the big mistake of letting it go," he told me. "The truth is actually quite the opposite. Conventional wisdom at the time was overwhelmingly in favor of letting Lehman fail, but Tim (Geither), Hank (Paulson) and I were very much convinced that we should do everything possible not to let it fail. But then of course we ran out of options."

    Too big to fail is a concept that has not been executed by the Obama Administration as banks are bigger than ever. Google "Chase Fines" and there are dozens of stories about the Federal Reserve fining JP Morgan Chase. I too am guilty of supporting the system as I bank with Chase but it is clearly time to create an alternative system that keeps the banks and Central Banks in check. It can't be done in Washington DC with elected officials who are part of the system, it can only be done from the outside in perspective of Bitcoin and similar digital currencies.

    Disclosure: I have no positions in any stocks mentioned, and no plans to initiate any positions within the next 72 hours.

    May 09 5:34 AM | Link | 1 Comment
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