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WDDD owns 18% of WORX so as WORX sp rises it effects the value of WDDD
Traffic was light in the morning and heavy after 3:00
The Moakly courthouse is down from Atlantic Ave. across the channel from The Intercontinental and the Tea Party Museum and Barking crab restaurant is across the street, there is construction going on around it.
Hearing was in Courtroom 11 on the 5 th floor.
Started at 9:00 - 10 minute rest at 11:10 and 50 min lunch break at 1:10
I was there alright
I was at the Markman and it went well for Worlds.
The judge asked some very insightful questions of Activisions lawyers on their interpretation of the claims and some conflict in the meanings they asked the court to adopt.
Susman's lawyers were very well prepared and made strong points on the pain language of the claims and the presumption of validity the USPTO granted in issuing the patents and specific claims. They were quite happy with the hearing and the questions the Court asked.
Great opportunity to average down early on Monday
As this will bounce back. WDDD is heading to trial.
Stay tuned for a positive ruling IMO
What I meant was it is going much higher than that, wait and see.
Gluck with that, never gonna happen.
I'll wager you 100,000 shares of WDDD on that.
The SA article 2 weeks ago suggested selling prior to Markman
Based on flawed logic attempting to scare shareholders and pickup cheap stock knowing the odds of Activision knocking out 55 claims is slim to non existent. Susman Godfrey are one of the best patent litigation firms in the country and would not have taken the case on a contingency without a strong level of confidence in an ultimate victory. They have beaten Activision before and only take on cases that are likely to be home runs
Not singles or doubles, check out their track record.
You are wrong, Judge Casper ruled the patents valid based on the certificates of Correction. If they were invalid there would not be any Markman. Read her opinion carefully
Industry Update
October 1, 2014
IP Monetization
INDUSTRY NOTE
JAMES McILREE, CFA, Senior Analyst, 646-465-9034
jmcilree@chardancm.com
Sales and trading, 7 a.m. to 7 p.m. ET (646) 465-9090
Sales and trading, 7 p.m. to 7 a.m. ET (646) 465-9063
IP Monetization: September 2014 Update. Focus on Marathon Patent Group
Our universe of IP-related stocks is down 5.0% (market weighted) year-to-date, however there is a wide performance disparity with the best performing stock, Marathon Patent Group, up over 125% and the worst performing stock, Spherix, down 80%. There is also a wide disparity between the four categories (see our taxonomy of IP stocks below) of IP stocks, with companies with active R&D programs up 15%, and non-practicing entities down 40%. Other big winners, year-to-date, include Straight Path, Worlds Inc. Unwired Planet, Tessera, InterDigital, Rambus, ITUS and 22nd Century. Big losers for the year are Spherix, ParkerVision, Vringo, VirnetX, MGT Gaming, Neonode, DSS, Paid and Finjan.
For the month, big winners included Straight Path, Marathon and Worlds Inc. Straight Path rose on news of complaints filed against Apple, Avaya, Cisco Systems and Verizon claiming infringement of the company’s VoIP patents. Marathon was up after the USPTO denied ARM’s petition for inter partes review (IPR) of Marathon subsidiary Vantage Point Technology's U.S. Patent No. 5,463,750 ('750 patent).” Vantage Point claims Acer America, Amazon.com, ASUS Computer, Barnes & Noble, Broadcom, Freescale Semiconductor, Hisense, HTC America, Huawei Device USA, Kyocera, Lenovo, LG Electronics, Microsoft, NEC, NVIDIA, Pantech Wireless, Qualcomm, Renesas Electronics, Samsung, Texas Instruments, ViewSonic, Wacom Technology, Apple, Inc., LSI Corp., MediaTek USA, Panasonic Corp. of North America, Sharp Electronics infringe the ‘750 patent by using ARMS’ technology. Worlds Inc. was up probably due to the scheduled Markman hearing next month.
Big losers for the month include VirnetX, MGT Gaming, Neonode, Document Security Systems, Finjan, and MMRGlobal. VirnetX fell after a Court of Appeals vacated a jury’s damages award of $368 million against Apple. However, the court did confirm the validity of VirnetX’s patents and confirmed the jury’s findings of infringement. Part of Document Security Systems’ decline relates to a finding by PTAB that VirtualAgility’s patent is invalid under the Alice Corp. standard. PTAB found the patent as an abstract idea and lacked an inventive concept, or “claims of the ’413 patent do not add any inventive concept to the abstract idea of managing collaborative activity”. DSS will take a $7 million write-down on its investment in VirtualAgility. MMRGlobal decline came despite a favorable Markman hearing order that adopted 6 of 8 claim terms proposed by MMR in its suits against Quest Diagnostics, Inc., Jardogs, LLC, Allscripts Healthcare Solutions, Inc., and WebMD Health Corp. and WebMD Health Services Group. Trial is scheduled for May of 2015.
On page 2 we highlight Marathon Patent Group, the best performing stock in our universe year-to-date. Marathon is up over 125% year-to-date. The company has over 120 patents and complaints filed against over 100 defendants. Its patent portfolio is broad, ranging from automotive, to communications to biotechnology. Marathon also has a special relationship with IPNav to source and evaluate new patent portfolios.
Our taxonomy of intellectual property companies begins on page 6. We have segmented the investment universe into five categories: 1) Active R&D/Licensing 2) NPE-Organic 3) NPE-Acquired 4) Agent 5) Fully integrated. Clearly companies can span more than one category as an NPE (non-practicing entity) that starts out with IP developed internally, can then purse acquired IP and supplement it with active R&D to advance the technology and increase its value. We will focus mostly on companies in the technology markets, but clearly IP monetization strategies are active in bio-tech, medical devices, and life sciences as well.
This note includes an index showing the performance of this universe of IP monetization names over the past 21 months. One index, weighted by market capitalization is down 6% since the beginning of the year after posting a 0.4% increase in 2013. This index is driven mostly by the performance of the five largest cap names (InterDigital, Rambus, Tessera, Acacia, RPX) which comprise 71% of the $8.3 billion market cap of the group. The second index is equal weighted, and is much more volatile given large movements in penny stocks will have a large impact on the overall performance of the index. Since the beginning of the year, our equal-weighted index is down 12% and in 2013 was up 6.4%.
Important Research Disclosures
Distribution of Ratings/IB Services
Chardan Capital Markets
IB Serv./Past 12 Mos.
Rating
Count
Percent
Count
Percent
BUY [BUY]
32
72.73
10
31.25
HOLD [NEUTRAL]
9
20.45
1
11.11
SELL [SELL]
2
4.55
1
50.00
NOT RATED [NR]
1
2.27
0
0.00
Regulation Analyst Certification ("Reg AC") — JAMES McILREE, CFA
ANALYST(s) CERTIFICATION: The analyst(s) responsible for covering the securities in this report certify that the views expressed in this research report accurately reflect their personal views about “Company” and its securities. The analyst(s) responsible for covering the securities in this report certify that no part of their compensation was, is, or will be directly or indirectly related to the specific recommendation or view contained in this research report.
DISCLOSURES
Chardan Capital Markets expects to receive or intends to seek compensation for investment banking services from all companies under research coverage within the next three months. Chardan Capital Markets or its officers, employees or affiliates may execute transactions in securities mentioned in this report that may not be consistent with the report’s conclusions.
RATINGS
Buy: Expected to materially outperform sector average over 12 months and indicates total return of at least 10% over the next 12 months.
Neutral: Returns expected to be in line with sector average over 12 months and indicates total return between negative 10% and 10% over the next 12 months.
Sell: Returns expected to be materially below sector average over 12 months and indicates total price decline of at least 10% over the next 12 months.
FORWARD-LOOKING STATEMENTS: This Report contains forward-looking statements, which involve risks and uncertainties. Actual results may differ significantly from such forward-looking statements. Factors that might cause such a difference include, but are not limited to, those discussed in the “Risk Factors” section in the SEC filings available in electronic format through SEC Edgar filings at www.SEC.gov on the Internet.
GENERAL: Chardan Capital Markets (“Chardan”) a FINRA member firm with offices in New York City NY, Palo Alto, CA and Beijing, China is an investment banking and institutional brokerage firm providing corporate finance, merger and acquisitions, brokerage, and investment opportunities for institutional, corporate, and private clients. The analyst(s) are employed by Chardan. Our research professionals provide important input into our investment banking and other business selection processes. Our proprietary trading and investing businesses may make investment decisions that are inconsistent with the recommendations expressed herein. Chardan may from time to time perform corporate finance or other services for some companies described herein and may occasionally possess material, nonpublic information regarding such companies. This information is not used in preparation of the opinions and estimates herein. While the information contained in this report and the opinions contained herein are based on sources believed to be reliable, Chardan has not independently verified the facts, assumptions and estimates contained in this report. Accordingly, no representation or warranty, express or implied, is made as to, and no reliance should be placed on, the fairness, accuracy, completeness or correctness of the information and opinions contained in this report. The information contained herein is not a complete analysis of every material fact in respect to any company, industry or security. This material should not be construed as an offer to sell or the solicitation of an offer to buy any security in any jurisdiction where such an offer or solicitation would be illegal. We are not soliciting any action based on this material. It is for the general information of clients of Chardan. It does not take into account the particular investment objectives, financial situations, or needs of individual clients. Before acting on any advice or recommendation in this material, clients should consider whether it is suitable for their particular circumstances and, if necessary, seek professional advice. Certain transactions - including those involving futures, options, and other derivatives as well as non-investment-grade securities - give rise to substantial risk and are not suitable for all investors. The material is based on information that we consider reliable, but we do not represent that it is accurate or complete, and it should not be relied on as such. The information contained in this report is subject to change without notice and Chardan assumes no responsibility to update the report. In addition, regulatory, compliance, or other reasons may prevent us from providing updates.
COMPENSATION OR SECURITIES OWNERSHIP: The analyst(s) responsible for covering the securities in this report receives compensation based upon, among other factors, the overall profitability of Chardan Capital Markets including profits derived from investment banking revenue and securities trading and market making revenue. The analyst(s) that prepared the research report did not receive any compensation from the Company or any other companies mentioned in this report in connection with the preparation of this report. The analysts responsible for covering the securities in this report currently do not own common stock in the Company, but in the future may from time to time engage in transactions with respect to the Company or other companies mentioned in the report. Chardan expects to receive, or intends to seek, compensation for investment banking services from the Company in the next three months.
Marimed was the front page story on this marijuana news website yesterday.
http://420newswire.com/massachusetts-marimed-advisors-acquires-medical-marijuana-consulting-company-sigal/
http://www.weedbay.net/20136-worlds-online-closes-acquisition-of-sigal-consulting-initial-2-million-in-working-c
http://boston.citybizlist.com/article/209694/worlds-online-closes-acquisition-of-sigal-consulting-initial-2-million-in-working-capital
http://hemp.org/news/node/4061
MariMed funding announced
http://www2.marketwire.com/mw/release_html_b1?release_id=1145637
What your comments seem to overlook is that a successful Markman and or trial precipitates additional litigation and likely settlements. Activision is the opening act and getting favorable rulings opens up large upside potential
Silly little boy
IMO short sellers trying to scare investors based on the biased SA article last week so they can scoop up cheap shares.
Total BS article just a justification for shorting and trying to create a bear run. Any intelligent analysis would mention that there are 55 claims asserted in the litigation. To knock all of them out would be comparable to striking out 55 batters in a row. It's unheard of. This is not a binary event just another step towards a trial.
Remember only one claim is needed for going to trial and all of the claims are fundamental to operating MMORGs.
Seeking Alpha article
Summary
Worlds has a Markman hearing coming up against Activision Blizzard.
Markman hearings represent significant catalyst events for investors.
Through trading before the October 3rd hearing, investors could be set up for substantial gains with limited downside.
One of my favorite ways to invest is to invest in market moving events. In regards to market moving events, I usually focus on pharmaceutical stocks, however, I believe that I have found another opportunity for investors that should be very interesting. Markman hearings are make or break moments in patent litigation. It is where the judge rules on whose claim construction is going to be used in the upcoming trial. Needless to say, the plaintiff wants a broad claim construction, which would increase the chances of a finding of infringement. The defense wants the exact opposite and would like to see the patents defined as narrowly as possible, which would help to mitigate the chances of the plaintiff being able to prove infringement.
In regards to Markman hearings, if you are interested in how Markman hearings impact stocks please click here to view a previous article that I wrote on the matter. In this case there is only one company that I want to profile, Worlds Inc (OTCQB:WDDD). Worlds is locked in a patent infringement battle with gaming juggernaut Activision Blizzard (NASDAQ:ATVI). Worlds holds patents regarding the interaction of players in massively multiplayer online games. These patents cover the development and interaction of three dimensional environments in Massively Multiplayer Online Role Playing Games (Abbreviated: MMORPG), and Worlds believes that Activision's popular Call of Duty and World of Warcraft games infringe upon these patents. Worlds has asked the court for a jury trial and unspecified damages. Needless to say, the cost to Activision could be very large should Worlds ultimately prevail in its litigation, as Call of Duty and World of Warcraft are two of the top selling video game franchises of all time. Worlds could also then go after other video game makers who are using similar techniques as Activision, which would be extremely profitable for Worlds' shareholders.
Worlds has a Markman hearing set for October 3rd. This Markman hearing will be crucial to Worlds shareholders, and a negative opinion could crush the stock and be a serious blow to investor confidence in the ability of Worlds to execute its patent litigation strategy. With the importance of a Markman hearing in patent litigation, it is likely that Worlds will see an increase in investor attention and also an increase in shareprice heading into the catalytic event.
Additional Information on the Dispute
Worlds has fought hard to get up to this point. The case was delayed, as the judge had to make a ruling finding the patents valid. There was a question regarding some of the continuation patents under litigation, as they did not exactly meet the standards of the US Patent and Trademark Office. After being issued a certificate of correction, and the judge finding for Worlds, the case was able to move forward towards a Markman hearing. As I mentioned above, Worlds is facing a giant company in Activision Blizzard, claiming that two of Activision Blizzard's games infringe on its patents. Worlds is being represented in the lawsuit by one of the best firms in the patent industry Susman Godfrey LLP, which agreed to take some of the case on commission. The company is solely focused on this litigation, and with this in mind, lets turn towards the Markman hearing, and why this hearing is going to be so important for the case.
Strategy For Trading Markman Hearing
I have a rather simple strategy for investors to capitalize on the momentum that Worlds is likely to see ahead of the Markman event. We know that the hearing is to take place on October third, so any investor attempting to capitalize on the catalytic event should be out of their position by October second, as it is not clear if World's stock will be halted on October 3rd for the Markman hearing. As an investor I like to plan for the worst which is why I would be out well in advance of the Markman hearing. Why do we sell ahead of the hearing? We are limiting downside. Should this hearing be negative for Worlds, it is very likely that the stock will drop substantially in share price. While investors are also losing on any upside should the hearing be positive, we are able to mitigate risk. The increase in share price and attention ahead of the Markman hearing will help to provide shareholders with a substantial return while limiting the downside in the stock.
Risks
Trading based solely on catalysts has a number of risks that investors should be aware of. The main risk would be that it is possible that other events will affect the stock that are not related to the catalyst. I do not see this being an issue going into the Markman hearing, as Worlds is almost completely focused on the patent litigation versus Activision.
Worlds itself comes with risks. The stock is a penny stock and is thinly traded. This could present liquidity concerns for investors, so investors trying to capitalize on this catalyst will want to be careful to make sure that they do not buy so much that they are caught holding onto the stock heading into the catalytic event. Furthermore, Worlds has a history of net losses and should they lose this patent litigation will likely be worth very little money. The company has no other assets than these patents, and will does not have enough revenue to sustain itself for the long term. The company also does not have any other litigation that it is currently pursuing, so a loss to Activision could have a profoundly negative impact on the stock. Investors should note that I am not advocating a long term position in Worlds stock, I am just advocating taking a position with regards to this specific catalyst.
World's Operations
Worlds came to its current form when in 2011, it spun off all of its operational assets and decided to focus solely on patent litigation. The company currently since its inception has faced large periods of losses, and the shift to patent litigation has not yet driven substantial revenue for the company. While investors might believe that Worlds has the potential to generate substantial revenues from Activision, so far it has been unable to generate any revenues.
Conclusion
Investors could stand to profit off of Worlds' Markman hearing. With the additional hype surrounding Worlds, it is likely that investors will see an increase in share price heading into the Markman hearing. Through selling before the actual catalyst event though, investors should also be able to limit their downside, as they will not be holding for the long term.
Disclosure: The author has no positions in any stocks mentioned, and no plans to initiate any positions within the next 72 hours. The author wrote this article themselves, and it expresses their own opinions. The author is not receiving compensation for it (other than from Seeking Alpha). The author has no business relationship with any company whose stock is mentioned in this article.
As the WDDD has repeatedly stated, no reverse will occur until after a successful Markman and trial or settlement occur
EDVA posted these last year prior to the original Markman, the issues remain the same.
The Markman hearing is the opportunity for both sides to tell their side to the judge, and to get her to decide what the disputed words in the WDDD patents mean.
The attorneys will proceed as follows:
Defendant's counsel will argue for interpretation of the patent claims that makes those claims appear to be nothing more than what was revealed in the prior art. For example: An electric refrigerator is not novel because we already know about the technology of an icebox, and both are just insulated containers that keep things cold. The defendant will also argue that the plaintiff's claims are indefinite ("I don't know what these claims mean") because, by statute, indefinite claims are void. Lastly, the defendant will argue for a claim to be interpreted in a way that makes it inapplicable to what his/her invention does.
Plaintiff's counsel will argue for an interpretation that permits a jury (the finder of fact if the case proceeds to trial) to determine that the prior art does not reveal the invention claimed by the plaintiff's patent. The plaintiff will say that its claims are definite and that the specifications of the patent can be used to interpret the claims so that they are clear in scope and practice. Lastly, plaintiff's counsel will argue for an interpretation of the patent claims that makes them applicable to what the defendant's invention does, so that a finding of infringement is possible.
The Markman hearing will result in a determination of the meaning of the disputed claim terms, which are the terms that will make the difference in the lawsuit. This determination will tip the scales significantly in one party's favor. This is why many cases settle after the Markman but before trial. In our view, Worlds is in a very strong position for this Markman hearing. But let's take a look at how it sets up.
There are 11 disputed "constructions" to be decided in this hearing. They are listed in order of importance as submitted by the parties in their "joint claim construction statement" of May 17, 2013. (For the complete 12-page analysis of the disputed terms, please click here). For simplicity, we refer to the last three numbers to identify each patent subject to this litigation. We also note which claims of those patents are affected by each disputed term.
1. "position of less than all of the other users' avatars" ('690 1-5, 11-14, 19)
2. "determining, from the received positions, [a/the] set of the other users' avatars that are to be displayed." ('690 1-5, 11-14, 19)
3. "condition" ('998 1-3, 7-8, 11-18, 20-21)
4. "participant condition" ('501 1-8, 10, 12, 14-16)
5. "programmed to limit the number of remote user avatars shown on the graphic display" ('998 11-15)
6. "avatar" ('690 1-16, 18; '558 4-9; '856 1; '501 1-6, 8, 10, 12, 14, 15; '998 1-3, 11-15, 18-20)
7. "client process" ('690 1-20; '558 4-9; '856 1)
8. "server process" ('690 1-20; '558 4-7; '856 1; '501 1-8, 10, 14-16)
9. "synchronously disseminating" ('690 9, 18, 20)
10. "third user perspective" ('998 2)
11. "switch between a rendering in which all of a perspective view of a local user avatar is displayed and a rendering in which less than all of the perspective view is displayed" ('998 19)
Readers are reminded that it takes only one claim to be infringed for a finding of infringement. There are 55 claims at issue in this case. Lets take a look at the first four disputed terms.
In disputed terms one and two, Activision seeks to impose the words "set maximum" and "selecting" in order to narrow the claim language sufficiently enough so that the prior art would exclude it. The claims and specifications of the '690 patent reveal that there is no "set maximum requirement," and in fact the specifications clearly discuss a "variable." In one embodiment a set maximum is described but there is a presumption in patent law that wording in an original claim is distinct from an embodiment found in a dependent claim. Activision wants to use "selecting" to show that a sequence is preordained by the user. Worlds holds that these sequences are not preordained because of the variables involved, and therefore a determination is made after variable sequencing. We find support for Worlds interpretation in the ordinary meanings of the words they use in the claims as well as in the written specification.
In disputed terms three and four, "condition" and "participant condition," Worlds says that no construction is needed or in the alternative (for condition), that it is "an expression in a software program that affects the status or display of an avatar" or (for participant condition) "a condition imposed on an avatar, its controlling user, or its associated client device that affects the status or display of an avatar." Activision contends (and there is a theme here) that these conditions are either "set by the client" (or user) or that they are indefinite under 35 U.S.C. § 112, ¶ 2.
We do not agree that any of the disputed terms will be deemed invalid as indefinite. It is the duty of the judge to construct these terms and to render a claim as having meaning. For a term to be "insolubly ambiguous," as is a requirement for indefiniteness, the bar is high. The term "set" comes up often in Activision's arguments because it seems clear that if there are variables at work that yield results that the user does not control in the Worlds invention, it is likely that the system Activision is using infringes.
The specification of the '501 Worlds patent clearly states "CPU 100, or a specific motion control process, limits the motion of an avatar, notwithstanding commands from input devices 116 to do so, to obey the constraints indicated in rooms database 70. A user may direct his or her avatar through a doorway between two rooms, and if provided in the virtual world, may teleport from one room to another." It would appear that in the virtual world described herein we have several databases such as a "rooms" database or an "objects" database. The specification talks about constraints on the Avatar that are part of a database not controlled by a user but stored essentially as "game memory." This is one example of what may be considered a condition or participant condition that is not set by the user. While the court may favor some alternative construction, it is unlikely to include any condition or participant condition "set" by the client or user (which is what would help Activision's case) nor will it find these terms indefinite.
Our more lengthy examination (which we linked to earlier in this article) yields a result where we felt that Worlds would receive favorable if not unchanged constructions in 10 of the 11 disputed terms. For example, disputed term No. 5 might find the judge agreeing to replace the term "limit" with "restrict." We do not, however, see her agreeing to add the set maximum number limitation at the end as Activision would also like. Therefore, a partial change only still benefits Worlds.
Disputed term No. 10 held perhaps the best opportunity for Activision to construe it in a way that may have been more beneficial to its cause. Instead, it chose only to argue that it could not be construed and was therefore indefinite. We feel that this was a mistake because it is forcing the judge to either find some meaning (Worlds wins because Activision provides no alternative) or invalidate the claim (high bar and option of last resort for the judge). The judge is going to err on the side of finding meaning and the defense knows this, so the only conclusion we can draw here is that Activision either had no viable alternative response or felt it did not infringe the claim anyway. The absence of an Activision alternative means the judge is most likely to go with the original construction or Worlds' alternative construction.
It would be naïve to say that Worlds is going to sweep this event, as the perceptions and understanding of the judge cannot be divined at this point. It may be instructive in this case to look back on the Vringo (VRNG) claim construction hearing against Google (GOOG), where the final score was 4-2 Vringo. Vringo spiked to a new high of over $5 on news of the Markman Order last June. As most readers know, those were something of the glory days for Vringo as the outcome of that case has been and remains in doubt even though Vringo won a jury verdict in the Norfolk District Court on Nov. 6, 2012. Judge Jackson's Laches ruling in the case became the skunk at the dance for Vringo, and it may be argued that his one decision created a negative chain reaction that has left the stock floundering in the low $3 range for most of the time since.
I underestimated Google's determination to go to the mat in the case as there seemed many logical points where a settlement would have seemed preferable. Today we await Judge Jackson's opinion on an ongoing royalty rate, but regardless, Google has essentially appealed everything and any payday for Vringo seems distant. Vringo's '420 Patent has been invalidated (for now) and the '664 Patent could be, which would be disastrous for Vringo. Many have speculated that if Judge Jackson were to grant a 5% or 7% running royalty that might trigger a settlement with Google. I'm not sure most road weary VRNGers would believe anything short of a signed agreement. I am still hoping for the VRNG revival that seems is their/our due, but like many, I remain cautious in part because it is very hard to gauge Judge Jackson's next move.
By contrast and with benefit of hindsight, there are several factors that make the Worlds vs. Activision case a significantly different opportunity than the Vringo suit against Google et al. Given our study of the Worlds/Activision claim construction briefs, we see a final tally that well exceeds the margin of victory that Vringo enjoyed in its Markman hearing. What follows are other significant differences that investors should be aware of and in our view take advantage of:
• Because of the '690 grant date with respect to the date of the complaint against Activision there will be no Laches defense.
• Activision (unlike Google) does not have unlimited funds to litigate this case if (as we expect) it loses the Markman hearing.
• Worlds, unlike Vringo, is suing Activision for Willful Infringement, which could result in a 3x damages multiple if it succeeded.
• The patent's shelf life is considerably longer than the Lang-Kosak patents, which is not only better for Worlds than it was for Vringo, it is better for anyone contemplating a buyout of Worlds.
• The United States Patent and Trademark Office (USPTO) has repeatedly affirmed the Worlds technology by continuing to grant continuation patents to the '690 patent.
For these reasons (which are not exhaustive), we feel that the real opportunity in Worlds is not post-Markman but right now. We cannot state with any certainty where Worlds' market cap will sit on the eve of the Markman hearing, but we will not be surprised to see a positive outcome quickly yield a $250 million market cap and quite possibly more.
What Worlds possesses is essentially a blocking patent. There isn't a massively multiplayer online role-playing game (MMORPG) that we know of that does not use the Worlds technology. Like Vringo vs. Google, Worlds decided to play "conquer the market share giant." Unlike Vringo's case, however, this giant has limited staying power, and the expense involved in getting Worlds out of its way will be a lot less than a finding of infringement or of willful infringement.
Worlds Inc. litigation:
There are 55 claims at issue in the Worlds Inc. vs. Activision Blizzard Inc. (ATVI) case covering five patents. In light of what happened to Vringo, must investors worry about a successful
laches defense in the Worlds case? Nope. Worlds does not face the prospect of a laches defense as laches requires a longer period between the earliest date of constructive notice and the filing of an infringement suit. Anything greater than six years may be considered an unreasonable delay.
In Vringo’s case the Lang-Kosak ‘420 Patent was issued ten years prior to the filing of the complaint and the Lang-Kosak ‘664 Patent was issued seven years prior to the complaint. The date of constructive knowledge for Google cited by Vringo was in 2004, still over six years from when the complaint was filed. While time is only one of the elements that factor into a judge’s decision, it is considered something of a prerequisite for even attempting a laches defense. The earliest constructive notice cited by Worlds of the patents in suit is February 20, 2007, the day the ‘690 patent was granted. The original complaint against Activision was filed on March 30, 2012. We can check that fire-breathing dragon off the “unwelcome surprise” list. The patent statute states "no recovery shall be had for any infringement committed more than six years prior to the filing of the complaint or counterclaim for infringement in the action" (35 USC section 286). A successful laches defense, by way of differentiation, means that no damages will be awarded prior to the date of complaint.
Another difference between the Worlds and Vringo cases is that unlike Vringo, Worlds has claimed that the infringement by Activision has been willful. Under 35 USC section 284, if a jury
finds that infringement has been willful, the judge may offer enhanced damages of up to 3X any jury award. Worlds CEO Thom Kidrin stated in a February interview that he had past discussions on a joint venture with Activision CEO Robert Kotick but that Mr. Kotick decided instead to willfully infringe.
Games in suit: World of Warcraft launched in November 2004. Call of Duty launched in November 2006. Since we know the earliest date of constructive knowledge being asserted by Worlds is the grant date of the ‘690 patent, we need only review revenues from February 2007 forward. Activision released three expansion packs after the first World of Warcraft and revenues from these expansions are all subject to this suit:
• WOW “The Burning Crusade” first available 1/2007
• WOW “Wrath of the Lich King” first available 11/2008
• WOW “Cataclysm” first available 12/2010
• WOW “Mists of Pandaria” first available 10/2012
Estimated damages (what Worlds is likely to seek):
Chart methodology:
World of Warcraft: Consolidated net revenues
2007-$1.1B X 97%=$1.07B
2008-$1.34B X 97%=$1.30B
2009-$1.19B X 98%=$1.17B
(source: March 1, 2010 10-K pages 11 & 42)
2010-$1.65B X 89%=$1.47B
2011-$1.24B X 90%=$1.12B
2012-$1.6B X 61%=$976M
(source: February 27, 2013 Amended 10-K pages 11 & 46) $7.1 billion 2007-2012
Call of Duty “over $8 billion life-to-date sales.” (p. 8) Activison’s amended 10-K filing of February 27, 2013 $8 billion 2007-2012
The two Activision game franchises in suit have accounted for $15.1b in revenue for Activision between 2007-2012, an average of about $2.5b a year. Should this case make it to trial it is likely to be scheduled sometime during the first half of 2014. We assume too, a final order by the court at the end of 2014. Each franchise released a new update toward the end of 2012. We
postulate that $3b is a reasonable total addition for these two games in 2013 and we leave 2014 flat (no growth). There is a bit of guesswork in trying to divine trial dates and final orders but the substantive points remain valid. To that end over 90% of patent suits settle before trial (Georgetown law journal v. 99 p. 667) and we have some confidence in saying that Activision,
should they lose this Markman, can ill afford to play the scorched earth game that Google has played with Vringo.
A damages expert will need to decide to what portion of Activision's revenue a royalty number should be ascribed. After observing the VRNG trial firsthand I am reasonably convinced
that Dr. Becker, Vringo’s damages expert, could have settled on the high end of his apportionment range (40%) and that is the number we would be discussing today rather than 20.9%. His apportionment went “unanswered” by Google other than to simply deride it as fantastical by utilizing “experts” who were exposed on the stand as something short of experts by the litigation team from Dickstein Shapiro (plaintiff counsel). Quinn Emanuel, counsel for Google, seemed to fear that 1) offering their own number would be seen as a tacit admission of
infringement and 2) if the number they offered departed too much to the downside from the norm, they would be viewed unfavorably.
45% Apportionment: We believe Worlds will seek an apportionment (the percent of Activision’s U.S. revenue that they feel may be attributable to the patented invention) in the 40- 55% range if its argument for implementation of the Entire Market Value Rule (EMVR) proves fruitless. Because the nature of the infringing element(s) are such in the Worlds case that they could be considered a central reason for game participation and subscription, if not “the” central reason, absent EMVR (explained in detail here), we see an apportionment argument for 45% or better. The reason for this, and the reason we think too that an EMVR argument may prevail, is that the Worlds invention may well be compared to a 3D theme park ride in which one feels like an active participant in the experience. While the themes of the rides may change just as games do, we think any well-crafted survey would reveal that the "active participant" sentiment is the
primary reason for participation.
What royalty would a damages expert for Worlds suggest to a jury? It seems logical that a royalty might land anywhere from 3- 10%, perhaps more due to the commercial success of these particular games and/or any relevant contract for royalties. A look at Activision’s operating margins and an application of the 25% rule supports a 7% royalty. Using this data point we get
$332M in past damages. If Susman Godfrey makes a convincing case for willful infringement the award may be trebled which our chart assumes leaving $997M. We do not see how infringement would be separated in this case from willful-infringement; therefore if there is infringement at all, we argue it will be willful.
What about a future royalty? The ‘690 patent does not expire until August 2020. Using $3b per year in revenues (with a conservative 3% annual growth rate) for the two games, a 45% apportionment and a 7% royalty we get another $296M. Collectively, total damages would be approximately $1.293b.
Project 35% for Susman Godfrey ($452.5M) and Worlds is left with $840.5M of which another 35% goes to pay taxes leaving them with $546M. But wait, Worlds has approximately $41.5M in
net operating losses currently and we project $43M by end 2014. So only $797.5M will be taxed. The net-yield with an after tax add back of the $43M then becomes $561M (this calculation may
be performed in more than one way). What about other infringers? The MMORPG Market is expected to grow to $17.5 billion in 2015 (source: Superdata Research & Newzoo 2012) from about $13.8 billion in 2013. We expect that Worlds will aggressively pursue license agreements in the event of successful litigation. In fact we believe they will aggressively pursue licensing after a successful Markman order. If Worlds successfully licenses to companies producing half of these revenues (beginning in 2014 until the patents expire), they will profit from nearly six years of such licenses. Following the same apportionment and royalty formula from the Activision case, this would yield another $126M annually on average. We calculate another $319M to Worlds after legal and taxes, which would add roughly $4 to Worlds share price given current outstanding shares. We suggest that this is the calculus that Activision should be focused on if they lose the Markman. They could offer Worlds $250-275M to purchase the patents in suit, and any other of the continuation patents to the ‘690, and have a fairly strong likelihood of recouping that money through licenses instead of facing prolonged and potentially costly litigation. For Worlds and its longtime investors it would offer a clean exit at an attractive multiple.
Should Worlds win the Markman and be forced to play this out we see the potential for a $10 stock based solely on awards in the Activision case. A prevailing Worlds' motion for application of the EMVR would have us looking at $10.55b x 7%, yielding $738.5M in past damages. Treble that per the willful argument above and we have $2.215b in past damages alone and another
$658M in future royalties. We are not suggesting that this is going to happen; on the contrary we take a fairly conservative line in our calculations. We suggest only that there is a path to such a number. But is a billion dollar award achievable in this case? It certainly appears so, in no small part because Worlds has prosecuted its patents carefully and we think has strengthened its hand through what it learned from its previous litigation with NCsoft. As such we view Worlds as the preferred high growth investment in this space and we suggest, at minimum, that investors take a strong look here.
Caveats:
-The sensitivity analysis at the bottom of our damage chart reflects the percentage likelihood that the litigation does not support our case for Worlds. It also reflects our thinking between
a 45% apportionment (more likely) and the EMVR (less likely). -There is some question, which we continue to explore, regarding Activision revenues from Europe and Asia and whether some
percentage of those revenues may be subject to a damage award in this case. We believe that Susman Godfrey is likely examining this very issue. It is our thinking, given some number of overseas players of WOW & COD connecting through U.S. servers, that this infringement occurs in the U.S. and as such would be subject to damages should Activision be found to infringe. Any discovery request where this is concerned is likely to be uncomfortable for Activision. Here is a quote from the FAQ page of a service called Smoothping, which offers a “faster way to play multiplayer online games like World of Warcraft.” The internet is rife with
international players discussing connecting through U.S. servers for these games.
http://www.callofduty.com/thread/200614771
“For International players, your best option might be where your traffic first enters the USA. For example, if you are from Australia and play on a WoW Server located in Chicago, you might find you have better in-game latency connecting to a Smoothping Los Angeles server, rather than our Chicago servers. If you are from Brazil and play on a WoW Server located in Chicago, you might find you have better in-game ping when connected to a Smoothping New York server, rather than our Chicago servers.”
-We include several links to documents, one which is commentary on the royalty arrangement struck between Activision and NetEase (based in China) for rights to host and distribute the World of Warcraft game, the other a contract made public during legal proceedings between the founders of Infinity Ward and Activision. The contract is between Bungie and Activision Publishing (Call of Duty). Each provides insights into how Activision values its games. In the Bungie deal (summarized here) we see significant revenue sharing and incentives to create
games, which they can only hope will be as popular as World of Warcraft and Call of Duty. In the NetEase deal it is reported that Activision was granted a 55% royalty, giving us a sense of what licensing the games rights is worth to them. We feel certain that Susman Godfrey will use these and/or other examples like them to draw comparisons between how they are valued and how the architecture central to the operation of these games should be valued.
http://www.develop-online.net/features/1644/Revealed-Thehuge-promises-and-secret-stipulations-behind-the-Bungie-Activision-deal
http://documents.latimes.com/bungie-activision-contract/
http://www.strategyinformer.com/news/3990/blizzard-signedwith-netease-for-bundles-more-cash-says-pachter
From Markman Runup
WDDD is Massively Undervalued
Looking at Activision's Markman arguments, in my opinion, they are trying to change the wording of Worlds' patents into something different from what is written in the patents. I believe Worlds' patents will be found to read, not as Activision wants, but as they were actually written. Once that happens, the door will open for serious settlement talks and additional patent infringement lawsuits.
Based on reasonable probabilities and assumptions, Worlds' intrinsic value can be estimated. Check out this short presentation to see for yourself how:
WDDD is Massively Undervalued
Bottom line: WDDD's intrinsic value is about $3/share! When this will be reflected in WDDD's stock price is anybody's guess, but one thing is for sure, WDDD is currently massively undervalued.
Report TOS
Anyone that is selling WDDD on the VRNG news should get out and stay out. They clearly have no idea what the difference in WDDD's over 50 claims asserted in the suit and to be heard at Markman mean. There is nothing general or overly broad about them, they are specific and precise in defining various methods to filer in a 3D virtual world and were implemented by Worlds in 1995. I say good riddance to garbage.
Smart money will move from VRNG to WDDD.
The focus of these comments all seem to be about people getting high on MJ and bad consequences. What's clearly being missed or purposely overlooked is the medical value that cannabis offers and is the sole focus of MariMed.
Check out the link below for a credible presentation by one of the worlds leading experts hosted by one of the premier hospitals in the US.
Marimedia is an advisory service to dispensary and cultivation applicants in states where legislation has been passed or is pending. It is not in the dispensary or cultivation business. They have over 35 applicant clients who pay between $35k to $60k to prepare and process the applications. If they win a license MariMed will fund the real estate and facility build out for lease payments and % rent based on revenue. This structure insulates WORX from being in the MJ business directly and has proven the model with the Thomas Slayter Compassion Center in RI the only licensee in RI.
This is a win win for shareholders and a structure that prevents dilution that this board is constantly crying about as a possibility. With WDDD having an 18% equity interest in WORX there is a structure in place to provide shareholder value and capital access, apparently there are many that don't understand the value this offers WDDD shareholders.
This analysis is on point. WORX offers WDDD the opportunity to capitalize on the Medical Marijuana sectors which is rapidly expanding through one of its board members, Robert Firemen has been involved in for the past few years as CEO of Sigal to leverage a public company's access to capital markets.
WDDDs equity appreciates and provides opportunity to capital without dilution which is good for shareholders.
Regarding busting WDDD shares and not liking the MJ market, I'd suggest selling WORX shares since they were a bonus dividend that cost nothing to WDDD shareholders of record on the distribution date so it was free money, take it and leave if your principals are in conflict with the new business opportunity.
Btw anyone that has issues with this market should watch cnn's Weeds 2 by Sanjay Gupta. It will change your minds entirely on the medical benefits of MJ.
Once again you are disseminating incorrect information.
Marimed the subsidiary of WDDD has no relation to Marimedia on the London ATM that you posted
I called OTCmarkets.com and they told me it was an internal technical glitch
WDDD is in full compliance
WORX is up to $.21 any rumors of delisting or halt trading is false and inaccurate
WORX has a license to WDDDs patents the company is still pursuing 3d development the venture with MariMed is thru a subsidiary and only brings value to shareholders in WDDD and WORX evidenced by the sp. rise from $.06 to $ .21. A lack of understanding creates confusion and false information which only hurts shareholders,
Don't post comments that are inaccurate and false, shareholders in WDDD and WORX have increased their value
That is false information WDDD has not been delisted
Worlds never said they would reverse split or dilute after Markman, what they did was renew the authority to reverse split in their last proxy which is what they have had for many years. The only reason that would be utilized was to qualify for a senior exchange if their were a favorable Markmam ruling and the stock price climbed close to the $2 requirement. That is why they filed an S1 to be prepared to take advantage of market conditions and escape the orbit of the flippers and shorts as well as be able to attract long term institutional investors and analysts
Markman Hearing set for 10/3/2014 09:00 AM in Courtroom 11 before Judge Denise J. Casper.
Precisely, if anyone does some critical DD they know this can easily be a 10x return or more.
Let the day readers who are in this for pennies play with themselves, they will never get the big picture thinking that paying commissions and short term gains is worth the pennies they make flipping.
What liabilities are you talking about? Robert Fireman is a director of WORX and WDDD, I don't think he would do this deal if there were liabilities.
As for Sigal they built and developed The Thomas C. Slater Compassionate Care Center, a state of the art, regulatory compliant and fully operational cultivation and Medical Marijuana Dispensary in Providence, Rhode Island. They designed this facility and its operations as a replicable model for other medical marijuana centers being developed in the line of new states approving these facilities around the country.
Sigal/Marimed (WORX) has a national strategy to offer a comprehensive suite of products to current license holders and to thousands of new applicants in the states newly passing medical marijuana regulations for licenses and permits. The services will include fee-based consultations, education and training to qualify applicants to successfully apply for these valuable licenses. For the license winners, Marimed will have the ability to provide support and or turn-key services for all aspects of the development, cultivation, and ongoing operations including funding through the public vehicle of WORX.
What many don't realize is that WDDD owns 18% of WORX and that is up 30% today. There is a direct correlation in increased SP besides the potential for a Markman date..
Your math is wrong,a block of 225,000 is not 25% of the float or outstanding shares.
Obviously that is a mute issue now and that date could be used for a Markman imo
UNITED STATES DISTRICT COURT
CENTRAL DISTRICT OF CALIFORNIA
ACTIVISION PUBLISHING, INC.,
?Plaintiff,
vs.
WORLDS INC. and WORLDS ONLINE INC.,
?Defendants.
Case No. CV 13-07380 CBM (PLAx)
STIPULATED MOTION FOR DISMISSAL WITH PREJUDICE
Case No. CV 13-07380 CBM (PLAx)
STIPULATED DISMISSAL
Plaintiff Activision Publishing, Inc. (“Plaintiff” or “Activision”), and Defendants Worlds, Inc. and Worlds Online, Inc. (collectively, Worlds, Inc. and Worlds Online, Inc. shall be referred to as “Defendants”), pursuant to Fed. R. Civ. P. 41(a)(2) and (c), hereby move for an order dismissing all claims asserted by Plaintiff and all counterclaims asserted by Defendants WITH PREJUDICE with each party to bear its own costs, expenses and attorneys’ fees.
IT IS SO STIPULATED.
Activision dismisses case against Worlds - WITH PREJUDICE
Case No. CV 13-07380 CBM (PLAx) STIPULATED DISMISSAL
Why don't you do some research on what the company does and has done. The company pioneered MMORG technology with patents filed in 1995. In your world it's ok for other companies to make $ billions and not pay licensing fees, right? Even though all those same game companies do pay fees to other patent holders. Go back to your XBOX.
You haven't checked Pacer today, there is a motion to transfer filed
You are incorrect, the ruling states:
"Indeed, nothing about the Court’s order prevents Worlds from asserting infringement from the date of the certificate going forward. E.I. Du Pont De Nemours & Co. v. MacDermid Printing Solutions, L.L.C., 525 F.3d 1353, 1362 (Fed. Cir. 2008) (noting that “each act of infringement gives rise to a separate cause of action” and concluding that, while a certificate of correction will not apply if it issues after the “cause of action arose,” it can apply to future infringing conduct).