Where do you keep your most valuable assets? In a bank vault, a safe-deposit box, or a cash stuffed mattress? Well, if you’re a Fortune 500 company, chances are you keep your most valuable assets within your intellectual property portfolio. Studies show that approximately 80 percent of the value of the companies listed on the S&P 500 index comes from intellectual capital. It is now more important than ever for companies to protect their proprietary assets.
Intellectual property represents some of the world’s most important resources. What was once considered a niche market within the vast technology space, now serves as one of the hottest industries on Wall Street. The sector itself has been previously viewed in a similar light with that of biotechnology corporations, or even mining companies. However, there are new breeds of companies that are bringing consistency and credibility to the emerging arena. Three companies that stand out as strong investment candidates include Finjan Holdings (OTC:FNJN), eOn Communications (NASDAQ:EONC), and Spherix Incorporated (NASDAQ:SPEX).
Finjan Holdings is an emerging growth company that has an IP portfolio of 40 pending and issued patents that have been built in-house and are focused on the cyber security industry. As of now, Finjan has received over $125 million in licensing agreements and settlements which include:
- A judgment against Secure Computing for $37.9 million
- A settlement with Microsoft in 2005 for $8 million
- A settlement with an undisclosed technology company for $85 million in November 2012
- A settlement with an undisclosed company for $11.3 million
- A licensing agreement with Trustwave
Finjan Holdings recently announced that it has filed a patent infringement lawsuit against Proofpoint, Inc., and its subsidiary, Armorize Technologies. The lawsuit alleges infringement of Finjan patents relating to endpoint, web, and network security technologies. The lawsuit also alleges that Proofpoint’s products and services infringe upon eight of Finjan’s patents. In the complaint, Finjan is seeking undisclosed damages from Proofpoint and Armorize.
Another exciting company is eOn Communications. On December 18, 2013, eOn Communications Corporation and Inventergy, Inc. announced that they had entered into a merger agreement. Inventergy is an intellectual property (IP) acquisition and licensing company dedicated to identifying, acquiring, and licensing for fair value the patented technologies of market-significant technology leaders. Led by IP industry pioneer and veteran Joe Beyers – former head of IP and global strategy at Hewlett-Packard (NYSE:HPQ) – the company leverages decades of experience, market, and technology expertise, as well as industry connections to assist Fortune 500 companies in leveraging the value of their world-changing innovations to achieve greater returns. The rest of the eOn/Inventergy team is also extremely impressive and includes:
- Wayne Sobon — General Counsel and current President of the American Intellectual Property Law Association. Mr. Sobon was the former Chief IP Counsel at Rambus and Accenture.
- Jon Rortveit — SVP of IP Acquisitions and Licensing. Mr. Rortveit was the former CEO of TYNAX.
- Paul Roberts — VP and Chief Patent Counsel. Mr. Roberts was the former VP of patent commercialization at Rovi.
- Charlie Bedard — Director of Technology. Mr. Bedard was the former director of engineering at Cisco Systems.
More than most small cap companies, this is a case where the jockey is more important the horse. This team, possessing more than 100 years of industry experience and managing more than $15 billion of IP assets, is clearly capable of steering the entire industry in a more progressive direction. That isn’t to say that the company doesn’t have some real assets at their disposal — Inventergy definitely does. The company recently announced that it had acquired approximately 500 patent assets from Panasonic Corporation, spanning key technologies in 3G and 4G communications, a field where Panasonic has been an early technology innovator. Investors looking for a small cap IP investment opportunity may wish to consider eOn/Inventergy.
Lastly, growth investors should be following Spherix Inc., an intellectual property development company committed to the fostering and monetization of IP. Spherix recently announced that they and defendants, VTech and Uniden, submitted agreed patent litigation schedules to the U.S. District Court for the Northern District of Texas. The parties proposed that the Markman Hearings for the two cases be consolidated and that the joint Markman Hearing be held on October 2, 2014.
Spherix also recently launched its Innovate21 division. Innovate21 is being formed by Spherix to lead the innovation of new technology and products through the utilization of the company’s intellectual property. The Innovate21 division will offer startups throughout the world licenses on selected patents that the company owns in exchange for equity positions in the startups.
These three emerging IP companies represent a new wave of strong management teams devoid of patent troll activity. With the IP sector being one of the hottest industries on Wall Street, these three stocks present a unique investment opportunity. An opportunity that has much higher upside than leaving your capital in your mattress.
Matt Levy is a research analyst with Onyx Research Associates based out of Charlotte, North Carolina. Matt spends most of his time researching micro-cap and small-cap equities that are severely undervalued by the market. After a careful look at both fundamentals and industrial changes, Matt is able to uncover promising investment opportunities.