The winds of change are blowing within the patent-enforcement world. If you don't believe it, just ask Google Inc. (NASDAQ:GOOG), Akamai Technologies, Inc. (NASDAQ:AKAM), and Soverain Software LLC. All three companies recently found themselves on the losing end of a court decision - the appeals court, to be specific - that likely could have come out very differently were we in the patent-enforcement environment from just a couple of years ago. Things are a bit tougher for patent owners now. That change, however, may be a very good thing for patent-protection company Endeavor IP Inc. (OTCBB:ENIP) and ENIP shareholders.
For Google, the shift in the way the justice system looks at and handles patent infringement claims meant its subsidiary, Motorola Mobility, unsuccessfully bid to convince U.S. courts that Apple Inc. (NASDAQ:AAPL) was illegally using Google's/Motorola's approach for sending data to a mobile device. For Akamai Technologies, it means that the technology company will need to re-explain - and ultimately re-prove - to an appellate court that Limelight Networks, Inc. (NASDAQ:LLNW) infringed on an Akamai patent even though a lower court had already ruled in favor of AKAM. And for Soverain Software, the legal system's new attitude meant it wouldn't even bother hearing its appeal for a case it lost against Newegg last year... a case it's tried against several companies, losing every time.
It's interesting, and telling, because Google, Akamai Technologies, and Soverain Software may have all found different outcomes were their issued raised a couple of years earlier. A justice system that's tired of fielding confusing (and sometimes downright silly) intellectual property cases, however - and a justice system that's unable to deny that the practice of IP protection has become a joke - is now finally willing and able to take an intelligent and reasonable approach to patent infringement claims. Translation: The nonsense that held water in 2011 and 2012 isn't going to stand up in courtrooms anymore.
So how, pray tell, is any of this good news for patent protection company Endeavor IP Inc.? It's a politically and socially unpopular term, but the truth is still the truth - the justice system is growing weary of patent trolls who own thousands and thousands of patents, most just to see how much money they can milk from other companies; sometimes an IP company doesn't even know the nature of each patent it owns. The court system is also growing weary of companies that use patent law to harass other entities into submission, as many of these patents used as a basis for a court claim are ambiguous, at best. From this point forward, the patent protection framework is one that will reward legitimate claims, and one that isn't going to look favorably on entities that are proverbially throwing spaghetti on a wall... just to see what sticks.
And, Endeavor IP is the embodiment of "quality over quantity" when it comes to patent portfolios. The proof: Whereas other technology companies and IP companies may own thousands and thousands of patents, ENIP owns three. Not three thousand, but three, as in "you can count 'em on one hand" three.
No, it's not a lot, but that's the point - Endeavor IP is sticking with patents it knows are the real deal, and can be successfully monetized before a court case is necessary, or successfully argued should a trial be required.
It's not just a pipedream either. Endeavor's flagship patent, the '981 patent (covering "Wireless Communication Enabled Meter and Network" technology) has already led to four licensing agreements, with four more companies opting to contest the claim in court. Considering that four organizations didn't even put up a fight when ENIP made the claim though, the four litigants are apt to be facing an uphill battle in their respective courtrooms.
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It was only recently that Endeavor IP Inc. sought to enforce another of its patents - patent no. 7,366,201 (the '201 patent), covering a "Remote Access Energy Meter System and Method." It's filing suit against a utility company, though there is certainly more than one organization out there using the smartmeter technology covered in '201. Regardless, ENIP is well-positioned heading into the litigation effort, as it's made a point of scrutinizing the enforceability of its IP before ever even acquiring those patents.
Bottom line? While the IP landscape is changing for the worse for most patent owners like Google, Akamai Technologies, or Soverain Software, the court system's evolving attitudes about patent law are playing right into Endeavor IP's hand. Investors who like the prospects of licensing and patent enforcement as a business model may want to refocus their attention to a quality patent play like ENIP.
For more on Endeavor IP, visit the SCN research page here.
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