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May 10, 2007
Litigation Intelligence
Patent
litigation can make or break a company.
VOIP vendor Vonage ate
Verizon's lunch until Verizon pounded back
with a patent lawsuit, putting Vonage's very existence on the line. On the other
side of the coin,
Burst.com snagged $62 million in
a settlement from Microsoft in 2005 for its patented streaming media technology,
and just garnered a favorable Markman ruling against Apple, setting the stage
for a payoff. The arcane ins and outs of courtroom patent battles require a
knowledgeable insider of the game to read the tea leaves early and accurately.
Hedge fund managers, always looking for an edge to lead what will become the
pack, are now hiring patent litigators as scouts, reporting back skirmish
results that could tip the balance, and move stock prices.
Ron Laurie of Inflexion Point Strategy, an IP investment bank: "I hear these stories of Markman hearings; the minute the ruling comes down, 15 guys jump up and run out of the room. These guys are texting the hedge fund, so they can short the stock." By the time the word hits the news services, hence moving the market, hedge fund managers are ready to reap the whirlwind.
More than just making a ripple in the market, a patent suit can signal a sea change. Barry Fiala had sued Stored Value Systems (SVS), a unit of Ceridian, for infringing 5,918,909, claiming an electronic card. Barry Fiala had already snagged more than a dozen licensees, but SVS fought it out, winning on obviousness and inequitable conduct.
Trading volume on parent company Ceridian peaked one day before the jury verdict. Soon after,William Ackman, head of the hedge fund Pershing Square Capital Management, let slip he had bought 11.3% of the company. Ackman is now angling for a spot on the board of directors, while Ceridian's stock has rocketed on rumor of spinning off SVS. Not owning a dime of Ceridian before the suit, Ackman got into the act during the trial, with progressive buying as the trial played out, peaking around the closing arguments and the days of the expected jury verdicts.
Taking a page from the same playbook, it's a safe bet there's some smart money riding on Burst.com [BRST, NASDAQ]. (Business week on Burst.com.)
Posted by Patent Hawk at May 10, 2007 5:32 PM | Patents In Business