Wednesday, September 14, 2011

Acacia Research ( Nasdaq - ACTG ) -- No Impact from New Patent Law

Acacia Research (ACTG $44.00) appears on track to produce excellent on target Q3 results.  Settlement activity remains vibrant.  New patents continue to be acquired, either outright for the company's own account or in partnership with the original inventors.  Acacia is believed to have several structured transactions in the pipeline.  Those deals tend to generate immediate windfalls by licensing Acacia's entire patent portfolio to large companies like Microsoft and Oracle, lifting income dramatically in the period the deals are done.  The intellectual property market has been heating up all year, though, so the company may hold off unless it receives top dollar.  Our estimates assume another two structured transactions will be consummated in 2011.

The latest rewrite of the U.S. patent laws probably won't affect Acacia for years to come.  The ultimate impact could be positive since the legislation cuts down on ownership disputes.  That clarity promises to help Acacia focus on the right patents and get moving faster on the enforcement side.  The new law applies only to patents issued in 2012 and beyond.  Most patents don't generate meaningful economic impacts for at least 5-10 years.  So the next generation probably won't bear on Acacia's business until late in the decade.

Meantime, the outlook remains bright.  Patent values keep rising.  And more companies are looking to intellectual property as a profit center.  A lot of those organizations plan to enforce those rights with their own employees.  But an expanding group view Acacia as a valuable partner.  Not only is the company efficient in terms of collecting money.  It hides the originating company's identity, as well, enabling them to keep doing business with litigation targets without creating hard feelings.

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