Disclosure: The author is long ACTG. (More...)
Summary
- Acacia Research received a ruling that no infringement was found on its method claims regarding cases filed against LTE industry giants.
- The share price immediately tumbled losing as much as 30% and settling the day at a 16% loss.
- The context of the cases and the impact of the misunderstood news grants the savvy investor an attractive opportunity.
Acacia Research (NASDAQ:ACTG) partners with patent owners to license and enforce patents. On January 21, 2015, Acacia held an investor call to discuss a ruling issued on January 20th regarding one of its portfolios. The case involves Acacia's Adaptix portfolio and was filed against Apple (NASDAQ:AAPL), AT&T (NYSE:T), Verizon (NYSE:VZ) and HTC (OTC:HTCXF). The court granted a motion that the defendants had not infringed on method claims. Acacia's stock price fell as much as 30% in reaction to the news. It settled the day at a 16% loss from the previous day.
The first and primary takeaway from the ruling should be that this only delays trial dates. Originally expected in 2015, this ruling will likely push the date to 2016. Acacia management stated the company will appeal the ruling and the cases will be refiled to include indirect infringement claims. Indirect infringement is either infringement by inducement or contributory infringement. Infringement by inducement is defined as:
"any activity by a third party that causes another person to directly infringe on a patent."
A "process" or "method" patent protects others from using a method or process regardless of the machine or tools used. In this case, the steps of the process are practiced by LTE (long term evolution) phones. Apple itself does not initiate the steps of the method but the method is built into its phones. The operators of the phone initiate the performance of those steps. On the investor call, Matthew Vella, Acacia's CEO described the situation:
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see:https://seekingalpha.com/article/2839746-acacia-research-a-misunderstood-minimal-setback-not-a-loss-equals-attractive-opportunity