Last week, I gave IBM the nod pre earnings for a number of separate reasons.
One of the factors in our analysis was their rich patent pipeline. we noted:
Huge Patents: IBM Leads in U.S. Patents for Thirteenth Consecutive
Year; This is potentially a rich pipeline for the company in the
future. They currently garner about $1Billion a year in (high profit)
revenue from licensing their patents.
Well, that didn’t take long:
IBM now alleges that Amazon has knowingly infringed upon five patents, related to: customer recommendations, purchase systems, advertising, web site navigation and the way its stores data on its network.
This is not the first time we have brought up the issue of monetizing intellectual property. Back in January 2005, we mentioned the Rise of the Pure Patent Business Model:
litigation in the U.S. is substantial and rising. High-profile patent
suits will only accelerate in 2005. Why? The new business model: the
pure patent play. Consider VC Intellectual Ventures, which has been
creating and buying patents. The defunct Commerce One’s 39 Web services
patents were auctioned off in bankruptcy to the unknown JGR
Acquisitions for $15.5 million. I expect to see a slew of patent
litigation from these (and other) players in 2005.
This promises to be an intriguing area of investing.
Oneof our biggest winners in 2004 / 2005 was the small cap stock Ampex (AMPX). Understanding the legal intellectual property issues — and how they could create an investable thesis — was definitely an advantage in the marketplace . . .