Source of Acacia’s Recent Patent Acquisition Revealed

March 21, 2020

Public records have identified Marconi as the source of at least some of the patents recently acquired by Acacia Research Corporation. The transacted portfolio, assigned in February to a newly created Acacia subsidiary, includes assets originating with Samsung as well as patents developed by Fusion-IO (which in 2014 was acquired by SanDisk for $1.1B).

The assignment from Marconi

Acacia (as Acacia Research Group LLC) acquired the portfolio on February 17, 2020 from FIO Semiconductor Technologies, LLC, an entity formed in Texas in September 2018. That state’s public records link FIO Semiconductor to Inception IP, LLC, another Texas entity under the Marconi umbrella (which also includes the patent licensing platform Avanci and the NPE Velos Media, LLC). Kenneth McClure, a vice president at Marconi, signed on behalf of FIO Semiconductor in its assignment agreement with Acacia Research Group.

The transacted portfolio comprises 56 US assets, including patents developed by Fusion-IO, a flash memory card maker that SanDisk acquired in 2014 for $1.1B. (SanDisk was subsequently acquired by Western Digital in 2016.) The portfolio, which also includes foreign counterparts in China, Germany, and elsewhere, also contains patents originating with Samsung.

The deal with Marconi appears to be one of two transactions to which Acacia’s CEO Clifford Press alluded in a March 12 earnings call covering the company’s Q4 earnings. During the call, Press stated that subsequent to the fourth quarter, Acacia had acquired multiple portfolios, including two groups of “flash disk drive patents”. While Press did not identify the assignee of those portfolios, he disclosed that they included former Fusion-IO and Samsung assets.

Press also indicated that Acacia had recently acquired a third portfolio—this one “related to speech recognition and voice control”—but did not provide any additional detail about its origin or assignee. According to Press, the company paid an aggregate $6M to acquire the three new patent portfolios, which he says contain patents with seven- to ten-year lifespans.

The portfolio looks ready for assertion

Within a week of having received the portfolio from FIO Semiconductor Technologies, Acacia Research Group transferred it to Unification Technologies LLC, an Acacia subsidiary formed in Texas on February 25—suggesting that some of the patents received from Marconi will soon appear in litigation.

In Acacia’s earnings call on March 12, CIO Al Tobia Jr. said that the company continues to make progress on “reinvigorating” its patent assertion business, and management is focusing Acacia’s business development efforts on “the void that exists between litigation finance and loan-to-own” lenders. “We are working to partner with businesses to unlock the value hidden in their IP portfolios,” said Tobia.

Acacia markedly ramped up its litigation activity in the wake of an activist investor-led transformation begun in 2018, and a similar acceleration has followed the late 2019 announcement of its partnership with hedge fund Starboard Value—which, now approved, gives Acacia access to up to $500M in new capital.

Last year, Acacia filed more than a dozen new lawsuits in the US and opened up its first new litigation campaigns since 2015 (see here for a rundown of Acacia’s 2019 litigation activities). So far this year, Acacia has launched three new campaigns: one targeting image sensors; another asserting a patent generally related to semiconductor fabrication; and a networking campaign embroiled in breach of contract claims that involve one of Acacia’s board members, a managing director at the prolific litigation funder Burford Capital.

This past week, Acacia (as Cellular Communications Equipment LLC) also revived one of its long-running mobile communications campaigns, hitting BBK Electronics (One Plus Technology) (2:20-cv-00079), HMD Global (2:20-cv-00078), and TCL (2:20-cv-00080) in separate suits filed in the Eastern District of Texas. While over its seven-year life, this campaign has seen more than 20 patents asserted, against nearly two dozen defendants, the current complaints assert a single patent, generally related to a mobile operating system with a software process that checks whether an application has permissions to perform a function. The defendants are alleged to infringe that patent through the provision of smartphones running Google’s Android 4.2 or higher, targeting the devices’ inclusion of the native Android Messaging app. See here for RPX coverage.

Acacia’s financials

Acacia reported Q4 2019 gross revenues of $688K, compared to $49.2M during the same period last year, and fiscal 2019 gross revenues of $11.2M, down from $131.5M in 2018. The company’s cash and short-term investments totaled $168.3M as of December 31, 2019, an increase from $165.5M as of December 31, 2018.

Press stated during the March 12 earnings call that Acacia continues to build out its investment team to increase its ability to “pursue a broad range of public and private transactions”. In August of last year, Acacia purchased a position in Immersion Corporation—which in early March 2020 announced that it had reached an agreement with hedge fund VIEX Capital Advisors (which holds an 11.5% stake in Immersion), under which it will appoint to its board three directors nominated by the activist investor. See “Immersion Announces Its Q4 Results, an Agreement with an Activist Investor, and a ‘Sex Tech’ Deal” (March 2020) for more details.

For additional background on changes to Acacia’s corporate governance and the NPE’s licensing activities in 2019, see “‘The New Acacia’ Releases Q4 Earnings, Discloses Recent Patent Acquisitions”, published by RPX earlier this month.