Acacia’s Revenue Soars, and WiLAN’s Slumps, in Q3 2016

November 10, 2016

In the third quarter of last year, Wi-LAN, Inc. joined Acacia Research Corporation to become one of the two most active publicly traded NPEs in patent litigation (among the over 20 publicly traded NPEs that RPX monitors). But while Acacia and WiLAN have continued to share that distinction over the past year, according to the NPEs’ recent earnings reports, they ended Q3 2016 with markedly different overall results.

Acacia announced its Q3 2016 earnings on October 23, reporting revenue of $64.7M, up from $12.9M during the same quarter last year. Net income for the third quarter was $7.9M, compared to a loss of $27.3M in Q3 2015, and cash and cash equivalents totaled $160.3M as of September 30, 2016.

During the third quarter, Acacia disclosed patent license and settlement agreements with ASUS and ZTE, and according to the NPE’s October 23 earnings call, the quarter also included “a series of licensing transactions involving patent portfolios” from Nokia, Renesas, Silicon Image, ST Micro, and VoiceAge. CEO Marvin Key also discussed what he called a “soft license”, or a license reached “with no litigation of any kind”, with SK Hynix. While the terms of the Q3 licenses were not disclosed, Acacia reported that two licensees individually accounted for 50% and 27% of revenue in the quarter.

Acacia also reported acquiring two patent portfolios in the third quarter: one from Renesas, described as relating to power management, system-on-chip system architecture, and device manufacturing processes; and one from an undisclosed “major Japanese semiconductor company”, which Acacia says includes patents related to DRAM and flash memory circuits and manufacturing processes.

Acacia’s litigation and licensing expenses decreased in Q3 2016, down $9.6M compared to the $10.9M it spent in 2015. The NPE did not launch any new litigation campaigns in the third quarter, and only one of its subsidiaries—Innovative Display Technologies LLC (IDT)—initiated new patent litigation. Acacia currently has several trials on calendar in its IDT campaign (asserting patents acquired from Solid State Opto), including one against LG Electronics in December, and two in the first quarter of 2017 against Lenovo and VIZIO (in February and March, respectively). Also in March 2017, in its Saint Lawrence Communications LLC campaign (involving patents received from VoiceAge), trials against Motorola Mobility and ZTE have been set. In its Parthenon Unified Memory Architecture LLC campaign (asserting former STMicroelectronics patents), a trial against Apple had been scheduled to begin on November 7, but appears to have been stayed.

In September, in a trial against Apple, a jury in the Eastern District of Texas awarded Acacia’s Cellular Communications Equipment LLC subsidiary $22M in damages. (See here for details.) However, the NPE’s revenue recognized in Q3 did not include that award.

WiLAN announced its Q3 2016 earnings on November 3, reporting revenue of $16.6M, down from $21.4M in the same quarter last year. Net income for the quarter was $0.7M, compared to $0.8M in Q3 2015, and cash and cash equivalents totaled $103.2M as of September 30, 2016.

While CEO Jim Skippen reported “progress on both acquisitions and licensing” during the third quarter, the NPE did not close any licenses that materially affected revenue, according to WiLAN’s November 3 press release. In his call with investors, Skippen emphasized the NPE’s refusal to “take deals simply to bolster a quarter if a deal does not represent fair value to WiLAN”. In comparison, in Q3 2015, WiLAN disclosed 11 new licenses.

Like Acacia, WiLAN’s litigation expenses decreased in Q3, totaling $0.7M compared to $1.7M last year. In contrast to Acacia, however, WiLAN steadily filed litigation through the third quarter, initiating a new litigation campaign (see here for details) and filing over a dozen new infringement suits through its North Star Innovations Inc., Improved Search LLC, and Smart Wearable Technologies, Inc. subsidiaries.

Since November 2015, WiLAN’s North Star Innovations has sued more than 20 companies over patents acquired from Freescale—a deal that, according to the NPE, included over 3,300 patents. Active defendants in North Star’s multiple litigation campaigns include Amazon, Fujitsu, GoPro, HP, HTC, Microsoft, Polycom, Nanya, Sharp, Sony, Texas Instruments, and Toshiba.

WiLAN’s executives did not indicate in its November 3 earnings call whether the NPE anticipates any trials to take place in the coming quarters.

RPX periodically reports on the performance and activities of publicly traded NPEs, including Acacia and WiLAN. The company’s most recent Public PAE Report, covering Q2 2016, can be accessed here.