The Patent Troll Club Gains Another Member

One of my least favorite business models just gained another disciple. Say hello to Unwired Planet (NASDAQ: UPIP  ) , the latest pure patent troll.

The company formerly known as Openwave Systems just shared two major news items. First, the company has acquired more than 2,000 wireless patents from Swedish mobility veteran Ericsson (NASDAQ: ERIC  ) . It's a two-way transaction that effectively turns Unwired Planet into Ericsson's patent enforcement agency, returning some of its licensing and litigation income to the Swedes.

For Ericsson, the deal puts some distance between the industry giant and the distasteful business of twisting the arms of its own competitors, customers, and suppliers. Leave that dirty work to Unwired Planet and count the risk-free winnings later!

A job well done?
Having completed this transformation from mobile software and services provider to a pure intellectual property wrangler, CEO Mike Mulica also announced that he's leaving the company.

Mulica had nothing to do with Openwave's drastic plunge in 2006 to 2008, having taken the CEO spot in 2011. That disaster, which left longtime shareholders with just 10% of investments made in 2006, happened because true smartphones started showing up and making the company's innovations obsolete in a hurry. Hold that thought.

"Unwired Planet is now ready to emerge as the leader in the mobile IP licensing space," he said. "We have arrived at our strategic destination."

The journey involved landing the Ericsson contract, coming up with the IP licensing (read: litigation) strategy, replacing the entire staff, and getting rid of "legacy product businesses." That last part is important, because litigation targets can hit you back if you actually make or sell something. That risk is totally unacceptable, especially when you're targeting much larger and richer companies with patent portfolios of their own.

Indeed, Mulica launched lawsuits against mobile titans Apple and Google (NASDAQ: GOOGL  ) last September, accusing both companies of patent infringement. Big G is on the hook for atrocities like putting location markers on digital maps and including ad links in mobile messages. Apple should pay up for having an App Store, and for receiving online data when you turn your iPhone on.

If these infringement claims seem ridiculously broad to you, then welcome to the club. Also, get ready for a whole lot more of it as Unwired Planet's lawyers sort through their brand-new Ericsson toys.

Join the club!
So Unwired Planet has become a carbon copy of product-free patent litigators VirnetX (NYSEMKT: VHC  ) and Vringo (NASDAQ: VRNG  ) . This company does have a base of patents developed in-house, mostly in the field of push notifications. VirnetX's homemade claims focus on data security, and Vringo's domestic innovations are an aging set of search and advertising claims.

To my experienced but admittedly non-lawyerly eyes, all three of these stooges want to capitalize on the mobile revolution without actually contributing anything to it. Many of these so-called inventions are obvious to regular Joes today, and have been self-evident to mobile technology experts for ages. I mean, seriously -- placing markers on a map? The Patent Office should never have approved these flimsy applications to begin with, and I believe that judges and juries have enough brains to throw most of them out with the bathwater.

It's one thing to file lawsuits to protect real innovation, but a totally different thing to fire a patent blunderbuss at anything that moves. It's a crapshoot, not a business strategy. You shouldn't be surprised to find out that two of these companies are headquartered in gambling haven Nevada, and the third has an easy two-hour drive to the casinos in Atlantic City.

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Read/Post Comments (12) | Recommend This Article (5)

Comments from our Foolish Readers

Help us keep this a respectfully Foolish area! This is a place for our readers to discuss, debate, and learn more about the Foolish investing topic you read about above. Help us keep it clean and safe. If you believe a comment is abusive or otherwise violates our Fool's Rules, please report it via the Report this Comment Report this Comment icon found on every comment.

  • Report this Comment On February 20, 2013, at 9:39 PM, tjavatarici wrote:

    Wow, what an uneducated and ill-informed piece. This should have been proofed for accuracy--it lacks a great deal. Do some research, man, then write. Really stupic on the surface--as in you do not get it. These companies hav ereal IP and products. You just are to shallow to understand them. Wow. Invent something and have it stolen and maybe you will get a clue. Bad journalism.

  • Report this Comment On February 20, 2013, at 11:16 PM, PityNoFooL wrote:

    Bylud joins the lame wanna-be-journalists over at Seeking Alpha, founded by SpecK/ValueBulldog and the others in the little weenie dogs club by writing a mish-mash hack piece with THE MOST unscholarly, non-lawyerly biased opinion on IP simply founded on his years of research and experience watching The Three Stooges and trolling Casinos

    Cross-eyed from being poked in eyes too many times playing his Stooges games, or dizzy from staring at the roulette wheel, Bylud misdirected this statement which is self-evident to all experts in Patent Litigation as Apple's own modus operandi for years now: "..., to fire a patent blunderbuss at anything that moves."

    For the editors at MF to post such a 'flimsy' piece

    is telling.

  • Report this Comment On February 20, 2013, at 11:36 PM, waterworksjeff wrote:

    Just when you think your local TV weatherman can't tell a raindrop from a dust storm, Anders Bylund rears his ugly head, opens his mouth, and makes them look like the local MENSA chapter.

    My favorites:

    1) "VirnetX's homemade claims focus on data security".-- The concepts behind these patents were conceived at SAIC (a fortune 500 Company), under contract by the CIA, and already survived TWO courtroom trials and one patent re-exam. I bet there are lots of patent holders that wish their inventions were this "home spun".

    2) "Many of these so-called inventions are obvious to regular Joes today". Really? Bylund fully understands secure SIP and no-click/one-click VPN initiation? Where was he during the initial deployments of Global Hawk "drones"? Keeping "the bad guys" from intercepting/hijacking the drones became such a problem that the CIA approached SAIC with a contract to develop what eventually became the VirnetX patents. Mr. Bylund (if he is a regular Joe) could have saved our government MILLIONS of dollars by contributing his "obvious" secure communications knowledge and made himself enough money to keep from having to pander himself to the powers that be with articles like this.

    I'll save the best of Anders Bylund's ignorance for last... 3) "To my experienced but admittedly non-lawyerly eyes...I believe that judges and juries have enough brains to throw most of them [the infringement lawsuits] out with the bathwater." Mr. Bylund's eyes may be experienced, but I have to question what they are connected to. VirnetX won a $105MM jury verdict vs. MSFT. MSFT later settled for $200MM. In Nov. of 2012 APPL lost a jury verdict of $368MM and will soon find out how much more they will be paying in interest and sunset royalties. APPL could very easily find themselves on the wrong end of a permanent injunction as well. If only they had employed Mr. Bylund's eyes. Both MSFT and AAPL could have saved millions and paid Mr. Bylund enough money to keep from having to pander himself to the powers that be with articles like this (MY experienced eyes see a recurring theme here!).

    Although he doesn't appear in the popular movies of the Lord of The Rings trilogy, there was a character in Tolkien's work that simply called himself "The Mouthpiece of Sauron". He was a bit player in a vastly larger conflict. I believe it is time to call Mr. Bylund "The Mouthpiece of Patent Pirates Everywhere". Sad.

  • Report this Comment On February 21, 2013, at 12:53 AM, FraudByBylund wrote:

    Anders,

    As amusing as the comments about your articles always are, I find it troubling that you're still allowed to post such obviously self-serving nonsense about the securities you're shorting. I also notice that you never retort your lack of accuracy or due diligence when called out on these matters by commenters, which make your motives all the more clear.

    Not that the SEC has anything better to do, but it would be interesting to investigate such dubious characters as Anders Bylund, Herb Greenberg of CNBC fame, ValueBulldog aka Special K over on Seeking Alpo, and see if there's any coordinated efforts going on...

    Editors of the Motley Fool (if there is such a job title):

    Please explain why Mr. Bylund is a contributor. It simply cannot be because of his expertise -- expertise on what? I could speculate and muse on legal matters and technology that I have not the vaguest understanding of as well. So do I get to post articles too? Each time I read one of these posts by bylund, I find myself more disillusioned with your site. In fact, I signed up to comment for the first time just to ask:

    Why is Anders Bylund an MF contributor?

  • Report this Comment On February 21, 2013, at 1:42 AM, waterworksjeff wrote:

    Come now FraudByBylund, it says right at the bottom of the article, "Fool contributor Anders Bylund owns shares of Google, but he holds no other position in any company mentioned.". You can't be implying that somebody here is being dishonest, can you? Surely Anders Bylund spends this myriad of hours investigating and thoroughly documenting his opinions solely for the good of the MF readers and never for a moment considers personal gain! Why that would be dishonest. And illegal. And might even lead one to lay awake at night wondering about the existance of God and the ultimate end point to one's eternal soul. Imagine the horror!

    And even though the MF disclaimer might as well (actually very much does) read very much like Madame Toussard's Fortune Telling For Five Bucks website, I'm sure they care very much about their reader's best interest.

  • Report this Comment On February 21, 2013, at 8:11 AM, TMFZahrim wrote:

    @Fraud,

    The last time I shorted a stock (or sold naked calls, bought puts, or any other negative trade) was TNH in the summer of 2005 for a small profit. I've never shorted a patent troll, because irrational markets make that a very risky bet and our trading and disclosure policies wouldn't allow me to get out in case the trade turns bad. So there's that.

    As for your collusion claims, I often take Greenberg's opinions as a contrary indicator and rarely read anything on SA. Their articles rarely qualify as reliable source material to my editors, after all.

    I write these "patent trolling" stories because the business model rests on a badly broken system. These stocks will crash hard if (and I hope, when) patent granting standards and legal reviews square up with reality.

    As it stands, patents generally don't protect inventors. Instead, they help line the pockets of many undeserving parties with access to high-powered and expensive legal teams. Apple is a borderline offender here, too. Always on the offensive, often wielding obvious weapons like that design patent for a rectangle with rounded corners. I'm not a fan.

    To find examples of playing the patent game the right way, consider Universal Display (PANL) which chooses to license rather than litigate, or Google (GOOG) which is never the original attacker -- only launches countersuits to defend against frivolous suits. Disclosure: I own both of these stocks.

    Patent suits can and should be used to defend your inventions against unauthorized use, but not as a bludgeon or blunderbuss to force money out of targets that did nothing wrong.

    Thanks for reading, guys. I just hope you're not setting yourselves up for massive losses when the trolling scams fall apart. It might take a Supreme Court decision or a Title 17 amendment to get there, but it'll happen one day.

    Anders

  • Report this Comment On February 21, 2013, at 10:25 AM, PityNoFooL wrote:

    Were you DRUNK when you wrote this? Are YOU on CRACK ? Submitting this 'piece' while intoxicated or under the influence is unbecoming here.

    This a 'classic' of your 'experience', no-transition or lead into another entire new topic: "..., and the third has an easy two-hour drive to the casinos in Atlantic City.

    As one of the most dominant Internet companies ever, Google has made a habit of..."

    This is no CRAP-SHOOT, it's three or four odd topics piled into one big load of CRAP.

  • Report this Comment On February 21, 2013, at 10:53 AM, tjsimone wrote:

    "Patent suits can and should be used to defend your inventions against unauthorized use, but not as a bludgeon or blunderbuss to force money out of targets that did nothing wrong."

    So you think companies like Apple just "mistakingly" use others technologies, and say "oops". They have R & D teams, and Top notch lawyers, who knowingly research the technology they use, then make the decision to use/not use based on projections of costs, and litigation....cost versus benefit approach. They may even beleive they are not infringing on a patent at all, thats why we have a court system to decide.

    Full disclosure to all new investors: Anders has been wrong on VHC for over 2 years now; at the very mininum, he has missed VHC double from 17 to 35+, going back to September 2011. Anders if you need help understanding what VHC does, they is tons of free avaiable information out there, and many would not only help you find it, but explain it to you so you understand; The VHC community of investors are some of the most helpful I have seen, and will guide you through the technology, and its application...

  • Report this Comment On February 21, 2013, at 11:00 AM, tppena530 wrote:

    This article while interesting is highly illogical. The majority of large companies that infringe on patents do so knowingly. When sued they have the funds to drag out a long court term that many small companies cannot afford and thus win because the smaller companies do not have enough money to fight them. Imagine going against goog, apple or microsft which has billions to your millions. Not really a fair fight but legal. As far as the patent trol term you may want to use it with apple they basicaly have sued company that has made a cell phone becaues they believe they are the only company that has that patent, ex samsung which has a entirely different system! but still had to pay apple millions in royaltys and court fees! These people are just protecting what is theirs and trying to get compensation for their work, much like a musician that writes the songs.

  • Report this Comment On February 21, 2013, at 11:44 AM, cavalaire wrote:

    Isn’t it ironic that at the same time it is being revealed that the Chinese are waging cyber attacks on the U.S. and stealing countless trade secrets, Anders Bylund dumps another one of his mindless, demented rambling rants on Motley Fool declaring that Apple has the right to steal VHC’s IP which the very thing which will help protect us from such attacks?

  • Report this Comment On February 21, 2013, at 12:42 PM, itzscott1 wrote:

    These so-called "Patent Trolls" exist because either the original patent holders don't have the financial resources to litigate against the Googles of the world or some of the patent holders (Ericson, Nokia, etc) would jeopardize existing business relationships they have by litigating against their existing customers.... better for them to monitize their patents, try to add to their revenue streams and get a piece of it than let them sit.

    Sometimes the logic of business evades these MF authors and simplistic emotion compels them to write things they know nothing about.

  • Report this Comment On March 02, 2013, at 10:16 PM, AnonPatent wrote:

    I usually don't respond to these articles, but my view is a bit different. I worked for Openwave Systems from 1999-2006 and built their entire patent portfolio. They were highly innovative and solved many problems related to how to efficiently transfer data between different networks in situations in which latency and bandwidth were problems. They provided the ability to obtain email and web pages on mass market mobile phones. They were truly innovative and perhaps 5 years ahead of the curve. But, they fell victim to really poor management that didn't appreciate the company. Now they want to be a patent licensing entity but are trying to do it with people who really don't know what they are doing. Another failure by management.

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9/19/2014 3:59 PM
UPIP $1.89 Down -0.06 -3.08%
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