It was a transformative year for both myself and the patent investment space in 2014. The Federal Circuit along with SCOTUS continue to evolve patent litigation, which in my opinion has made it more difficult to anticipate and handicap outcomes. The PTAB continues to see a surge in IPR filings, which I expect to accelerate in 2015. It has become a key area I have focused on and I have been following developments at the PTAB more closely than at District Court. The lack of an automated system continues to make me expand considerable time following the dockets.
As for investments, the larger names had a great 2014. ACTG and RMBS were up 18% and 16%. IDCC and TSRA were up a whopping 80% and 81%.
The high risk / high reward names, PRKR, VHC, VRNG started off the year performing very well. Things started going wrong when VHC had their oral hearing in early March. PRKR then had their DC case reversed on infringement. VRNG then had their not-invalid finding at the CAFC in August. The trifecta was hit when the CAFC reversed VHC's damages and infringement finding. All three closed down over 70% for the year. All three face an important 2015.
WILN seemed to accelerate their patent acquisitions and assertions along with losing a case to Apple. Shares closed down almost 10% for the year. UPIP started the year off with a bang when they sold a portfolio of patents to Lenovo in a $100M agreement. Subsequently there have been a number of IPRs filed and a recent claims construction opinion issued in their case against Google that came out negative. Shares closed down almost 30% for the year. PCO closed down 27% for the year although I have not followed the company too closely.
STRP, MARA, and NTIP all had very good years closing up 127%, 171%, and 40%, which lead the small cap patent names. STRP saw most of its gains result from a handful of patent settlements and their spectrum potential. MARA evolved by acquiring a number of new portfolios and started to generate revenues/profits. NTIP quietly, scored a big win at the PTAB, which found their patent claims upheld, which should provide leverage in negotiating new deals.
The rest of the small/micro-cap names were crushed with most losing 40% for the year. CRDS was one of the only sub $100M name that ended the year higher. BCYP before year end received good news with their CBM reviews, which propelled the name into the green up 13%. The recurring problems in the small cap names that I keep seeing are:
- Continuing to raise capital.
- Merger with legacy shareholders wanting out or unfavorable cap structure.
- Convertible debt.
- Unfavorable court decisions.
- Little to zero monetization.
A 2014 performance review can be found here. (The formatting is broken)
I personally felt major growth and confidence in 2014. Starting the blog and being active on twitter has been a huge driver in traffic. I have slowed down my message board activity, which I believe was wasting too much of my time. My daily market wrap traffic has grown from around 30 views per day to almost 200 views per day during the year. When I do a write-up or comment on a development the views tend to be in the 500 - 4,000 range depending on the company and development.
The last three months I have been writing my own investment coverage, which I have been able to sell along with consulting work. I have realized there is a major lack of coverage for the companies in the patent space and the sell side research needs an upgrade. I am hoping to fill in that gap in 2015. I am close to finalizing three new reports, which I am hoping to make available within the next two weeks. I want to expand my coverage and hopefully get something written on every publicly traded patent company. I want to reiterate that I am not paid by any publicly traded patent company or their affiliates/subsidiaries.
I think 2015 will present a lot of opportunities both on the long and short side. There are a number of cases that will be having markman hearings/trials at District Court and institution/final decisions at the PTAB. There are a handful of cases that will have hearings/opinions issued at the Federal Circuit that will continue to be important.
I expect Congress to get patent reform back on the table and there is a good chance they will pass it this time. The pending TEVA SCOTUS opinion and the Cuozzo CAFC opinion could potentially be significant changes to the monetization processes. In recent years the pendulum has been swinging against the patent holders, but a reversal in either of these opinions could start the swing back into the PO's favor. We will see and I have no insight into the outcomes.
As far as patent companies, I see a few of the really beaten down names to come back to life. I also see a few of the beaten down names eventually dissolving from unfavorable legal decisions and running out of capital. I expect the larger names to continue their licensing and patent intake, which should lead to some major growth. I believe companies who do not diversify their patent holdings will continue to be volatile with most of the moves being to the downside.
Foreign litigation will continue to accelerate with Germany being the venue of choice. US litigation filings will continue to fall as we saw in Q4 2014. The PTAB will continue to be the new battleground, which will separate the wheat from the chaff.
I hope to attend more hearings/trials along with attending investor/industry conferences throughout the year. There is a NPE conference in New York City in March, NPE 2015 that looks very promising. If you are an active investor in the space I highly recommend attending. Hearing directly from the CEOs and the networking has proven to be very valuable.
Finally, I am hoping to move to a new website sometime in 2015. The blog has served its purpose and it is now time to upgrade to a more professional presentation. I was planning to start a subscription service, but made the decision to not proceed. The consulting and writing my own reports has been a very good avenue that I want to keep pursuing and growing for the foreseeable future.
Questions, comments, errors, opportunities please email at email@example.com. Continue to follow developments in real time @theiphawk on twitter.