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Expect Favorable Findings From The Markman Hearing
Many of us have been waiting, and waiting, and... for the Markman findings. With the delays and other events, some have lost patience. Worlds' stock price has taken a hit, from $0.54 (Apr 16, 2013) to basically a 5-year low (Jun 1, 2015). It's been a rough couple of years. Perhaps I should have used the name "MarkmanRundown" :)
But, the good news is: Worlds' lawsuit against Activision is moving forward. There will be findings—eventually—from the Markman hearing. And, Worlds is in a strong position. As I wrote back in December on Seeking Alpha:
Expect Favorable Findings From The Markman Hearing
I'm "Patent Parsing" over there, but perhaps I should change my name to "Patent Patience" :) If you haven't already read my Markman analysis, check it out.
Worlds' rough times are just about over.
Worlds v Activision Markman Analysis
For an analysis of the Markman hearing, please see my new document:
Worlds v Activision Markman Analysis.
I think you will find Worlds' arguments much more persuasive than Activision's and that Worlds should receive favorable results, moving their case forward.
A Little History and Precedent
@IPobserver,
You may find this post useful.
I posted it before the MSJ ruling was made. It shows how Worlds complied with the rules at the time, and how Worlds tried to have the USPTO correct their clerical error over 14 years ago.
8 Publishers that Could Bring Worlds $500,000,000+
Once a favorable Markman ruling is issued (which I believe will happen), the doors open to many targets. Check out my latest presentation of game publishers with over $18 billion (yes, billion) in potentially infringing revenue:
8 Publishers that Could Bring Worlds $500,000,000+
Unfounded Fear has Created a Huge Opportunity
After the Motion for Summary Judgment, are Worlds' patents still valid? Aren't the damages limited? What about the delays? Is Worlds going to go through dilution or a reverse split?
Not knowing the answer to these questions creates fear. Check out:
Unfounded Fear has Created a Huge Opportunity
Knowledge destroys fear.
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.
Being on just the OTCQB is great
As described in OTCBB Delistings and Rule 15c2-11: What Happened?:
07:55 WDDD Worlds Inc. Common Stock 7/16/2014 100 Ineligible for quotation on OTCBB due to quoting inactivity under SEC Rule 15c2-11
07:55 WORX Worlds Online Inc Common Stock 7/16/2014 100 Ineligible for quotation on OTCBB due to quoting inactivity under SEC Rule 15c2-11
Infringing Targets
Worlds' patents obviously don't just apply to Activision. Once Worlds has a favorable Markman hearing (which I believe they will), the door opens to a new set of targets.
Using the latest revenue data on 64 infringing games (not including future releases), here's what the targets look like:
Publisher Infringing Rev*
Activision $6,381,000,000
T--------- $3,002,000,000
M--------- $2,861,000,000
E--------- $1,766,000,000
T--------- $1,433,000,000
W--------- $1,167,000,000
U--------- $993,000,000
V--------- $816,000,000
N--------- $481,000,000
B--------- $469,000,000
S--------- $449,000,000
J--------- $422,000,000
S--------- $354,000,000
L--------- $310,000,000
K--------- $267,000,000
C--------- $228,000,000
W--------- $190,000,000
D--------- $120,000,000
N--------- $119,000,000
T--------- $115,000,000
D--------- $113,000,000
---------------
Grand Total $22,056,000,000
Motion for Markman Hearing - GRANTED
The following order has just been filed:
Judge Denise J. Casper: ELECTRONIC ORDER entered granting [118] Motion for Markman Hearing. Counsel to file a joint statement with a proposed schedule for the filing of pre-hearing briefs and a proposed hearing date. (Hourihan, Lisa)
Worlds' patents died briefly, but were resurrected!
The MSJ fog has lifted. Yes, it didn't go exactly the way Worlds wanted, but it also didn't go the way Activision wanted either. Activision wanted Worlds' patents thrown in the trash and the case dismissed. The court, following precedent, recognized that once the certificates of correction were issued by the USPTO, Worlds' patents were resurrected and became alive again.
We now have more clarity than we've had in a long time. Worlds can seek damages from Activision and the many other infringers of their patents. How much value do Worlds' patents have going forward these next several years? Check out my updated analysis of Worlds' intrinsic value in:
How WDDD is Massively Undervalued
As of now, the intrinsic value of WDDD is $2.99 ± $1.11 / share!
Preparing for the MSJ Ruling
There are 3 ways the MSJ ruling could go:
1) Denied - Worlds can fully enforce their patents
2) Partially granted - Worlds can enforce their patents for ~3 years
3) Granted - World's patents are unenforceable
For the MSJ to be granted (#3), the court would have to break precedent. That is not going to happen as shown in Why Nothing Will Stop Worlds Going to Markman.
Since the patents will be found enforceable, Worlds will be able to target additional game publishers beyond Activision. Based on a deeper analysis of these publishers and the results of the Vringo royalty rate, I've updated my valuation analysis of WDDD.
If the MSJ is denied (#1), then Worlds will have the opportunity to go after not just future infringing revenue, but up to 6 years of previous infringing revenue. This scenario values WDDD at:
Notice that WDDD's intrinsic value is about $12.45 ± $4.39 / share!
If the MSJ is partially granted (#2), then Worlds can still go after over 3 years of infringing revenue from each publisher. This values WDDD at:
WDDD's intrinsic value is about $4.35 ± $1.50 / share!
In light of this, WDDD's current stock price looks ridiculous.
Noreika, thanks for the kind words.
The facts and the law eventually prevail over misinformation and unfounded fear, and in my opinion, WDDD is going to perform quite well for long-term investors.
Judge Casper is Quite Active
Judge Casper has made 25 orders in the past 2 days. That doesn't sound like she is taking the rest of the year off to me.
A motion for summary judgment is like a mini-trial. It requires time to carefully consider the relevant law.
By the way, in this case, there is precedent that is favorable to Worlds. See DuPont v. MacDermid and my previous analysis.
How Unfounded Fear has Created a Huge Opportunity
We've all seen it: Worlds' stock price has been crushed over the last 7 months. I argue in the following presentation, that unfounded fear is the primary reason and this has created a huge opportunity for investors that understand what can and can't happen to Worlds in the future...
How Unfounded Fear has Created a Huge Opportunity
9 Reasons WDDD is a Great Investment
Past
How Unfounded Fear has Created a Huge Opportunity
A Little History and Precedent
Present
Why a Decision is Imminent
Why Nothing Will Stop Worlds Going to Markman
How WDDD is Massively Undervalued
Future
7 Companies That Could Bring Worlds $500,000,000
4 Reasons Worlds’ Attorneys Win
Worlds’ Patents are Enforceable for Many Years
Worlds’ Patent Term may be Extended
Bulger to be sentenced tomorrow
Judge Denise Casper (the Worlds v. Activision judge) will be somewhat occupied tomorrow with the sentencing of Whitey Bulger...
How WDDD Can Make You Incredibly Rich
Past
A Little History and Precedent
Watch the MSJ Hearing
Present
Why a Decision is Imminent
Why Nothing Will Stop Worlds Going to Markman
How WDDD is Massively Undervalued
Future
7 Companies That Might Bring Worlds $500,000,000
4 Reasons Worlds’ Attorneys Win
Worlds’ Patents are Enforceable for Many Years
Worlds’ Patent Term may be Extended
Worlds' Attorneys Win
Check out this new presentation.
MSJ Decision is Imminent
Check out the latest presentation.
There are Many Potential Infringers of Worlds’ Technology
Check out the latest presentation.
Prepare Now for WDDD to Pop (Updated)
Check out the latest presentation with adjusted (down) average royalty rate and enhanced damages.
Worlds' Patents are Alive and Well
Check out the latest presentation.
Get up to Speed on WDDD...
You may find it helpful to view some of these discussions, videos, and presentations:
A Little History and Precedent (discussion)
Motion for Summary Judgement Hearing (video)
Can Worlds' Patents Survive an Unfavorable MSJ? (presentation)
How Long Till the Judge Renders a Decision on the MSJ? (discussion)
Top 10 Reasons I Like WDDD (slide presentation)
When does Worlds' Patent Chain Expire? (discussion)
Can the Patent Chain Term be Extended? (discussion)
Can Worlds' Patents Survive an Unfavorable MSJ?
For an analysis, please read Can Worlds' Patents Survive an Unfavorable MSJ?.
Enjoy!
A Little History and Precedent
When Worlds filed for their first patent on Nov 12, 1996, the concept of an Application Data Sheet did not even exist. So Worlds followed the law as it existed at that time under 37 CFR 1.53 and 37 CFR 1.57: They paid their fees. They included drawings, a specification, claims, and an abstract. They also filed the following transmittal letter (since an ADS didn’t exist as previous stated):
Notice in their transmittal letter, they explicitly disclosed:
MSJ hearing video is now available
Click on District of Mass section and scroll down to the Worlds v. Activision channel (lower left)
A 50-50 MSJ looks like this:
Thanks. I started using a decision tree analysis for this, but the tree got out of control pretty quickly. This Monte Carlo method does make it considerably easier to add whatever you want into the mix.
Here's what the valuation does if Worlds only has a 50-50 chance of getting the MSJ denied:
Min $0.23 (was $0.32); Avg $2.43 (was $2.74); Max $9.61 (was $9.70)
Looks like the high-probability stock valuations skew more to the left ($1-$4 range), because if Activision is granted the MSJ (and the judge doesn't allow Worlds to go after the 6-years of past damages), both the past damages and the potential for willful patent infringement damages goes out the window, making it hard to a get a huge win. But yet, Worlds still can make out nicely, with a reduced Activision award along with full awards (past and future), on future lawsuits.
Monte Carlo methods are often used in finance
Present value calculations are ubiquitous in finance. But the average of stochastic inputs cannot be used to calculate the average present value because the formula is non-linear. This is due to the so-called Jensen inequality. We need to know the the probability distribution of the inputs in order to calculate the mean present value. Monte Carlo simulation allows us to simulate numerous outcomes of a mathematical model so as to estimate that probability distribution.
In finance, the Monte Carlo method is used to simulate the various sources of uncertainty that affect the value of an investment, and to then calculate a representative value given these possible values of the underlying inputs. ("Covering all conceivable real world contingencies in proportion to their likelihood.") In terms of financial theory, this, essentially, is an application of risk neutral valuation. The method of risk-neutral pricing should be considered as many other useful computational tools — convenient and powerful, even if seemingly artificial.
You stated: "you never factored in the risk of a loss in the trial". If you are referring to the new Activision v. Worlds lawsuit, yes, you are correct. I believe that new lawsuit will not harm Worlds' stock price in any way. If you are referring to the Worlds v. Activision lawsuit, I do consider the risk of a loss, as Worlds receives $0 if they lose that case.
You also stated: "The company only has 5mil in liabilities from what I see." It's my understanding, that according to Worlds' financial statements (in the footnotes), the equivalent of $40M NOL is on the books. In either case ($5M or $40M), it only effects the tax calculation on gains, and is relatively insignificant in the big picture of trying to value WDDD.
Bottom line:
Monte Carlo methods are just another tool. A "convenient and powerful" tool at that.
I used the $40M NOLs as a write-off for Worlds' taxes. A positive for Worlds.
Also, if you think some of my probabilities and/or assumptions could use some tweaking, I'd like to hear your thoughts.
Thanks.
Reason #6 - Valuation
I've posted an analysis of Worlds' valuation using the Monte Carlo method as reason #6 why I like WDDD. I think you might be surprised how massively undervalued WDDD currently is.
View the latest presentation (Jump to slide 33 for the new analysis)
Judge Denise Casper's Summary Judgment Advisements
I've examined the last 10 cases where a motion for summary judgment was heard by Judge Denise Casper and she took the matter under advisement. Here's the time each case was under advisement:
Her quickest decision came in about a month, and the longest took over 7 months.
Heard Decided Months
Apr 10, 2013 Sep 26, 2013 5.6
Feb 11, 2013 Sep 20, 2013 7.3
May 15, 2013 Sep 16, 2013 4.1
Oct 10, 2012 Mar 26, 2013 5.5
Nov 20, 2012 Dec 18, 2012 0.9
Jun 7, 2012 Sep 20, 2012 3.4
Jul 19, 2012 Sep 17, 2012 2.0
May 31, 2012 Sep 13, 2012 3.4
Jul 2, 2012 Sep 10, 2012 2.3
Jun 25, 2012 Aug 1, 2012 1.2
---
Average 3.6
Might take a while for video
Just out of curiosity, I took a look at the delay between the time a video was recorded and the time it was made available for public viewing.
In the District of Massachusetts, the most recent two "Cameras in Courts" videos took about 25 and 20 hours to be made available.
So, if they follow a similar schedule, we should be able to view them sometime tomorrow afternoon (EDT).
Latest PACER #109
ELECTRONIC Clerk's Notes for proceedings held before Judge Denise J. Casper:
Motion Hearing held on 10/17/2013 re 83 MOTION for Summary Judgment of Invalidity filed by Blizzard Entertainment, Inc., Activision Blizzard, Inc., Activision Publishing, Inc.
Arguments.
Court takes under advisement 83 Motion for Summary Judgment;
(Court Reporter: Debra Joyce at joycedebra@gmail.com.)
Attorneys present: Max Tribble and Ryan Caughey for the plaintiff. Gene Lee, Jesse Jenner, Blake Greene and Matthew Moffa for the defendants.
This hearing has been video recorded as part of the Cameras in the Courtroom pilot project hosted at http://www.uscourts.gov
(Hourihan, Lisa)
(Entered: 10/17/2013)
Activision's time for delays is running out
It's clear that Activision doesn't want this case to make it to a Markman hearing, let alone a jury trial. Activision has succeeded in getting the Markman hearing originally scheduled for June 27, to not even being on the schedule.
During these delays, Worlds' stock price has gone from $0.54 to as low as $0.17.
But, the case can only be delayed so long. Eventually Worlds gets to present their case against Activision in court. That time is coming soon. Remember, the case against Activision hasn't changed. Either Activision is infringing on Worlds' patents or they aren't.
If you're like me, and you think the facts are in Worlds' favor, the stock at this price is an opportunity that won't ever be seen again.
The Art of Anticipation
In the words of Carly Simon:
We can never know about the days to come
But we think about them anyway, yay
And I wonder if I'm really with you now
Or just chasin' after some finer day
Anticipation, anticipation
Is makin' me late
Is keepin' me waitin'
And tomorrow we might not be together
I'm no prophet and I don't know nature's ways
So I'll try and see into your eyes right now
And stay right here 'cause these are the good old days
(These are the good old days)
And stay right here 'cause these are the good old days
(These are the good old days)
(These are the good old days)
(These are the good old days)
(These are.....the good old days)
Watching Thursday's Hearing
It is my understanding that both Worlds and Activision have agreed to cameras in the court for Thursday's 2PM EDT motion for summary judgment hearing.
According to the recording guidelines rule 3(a)(5):
Watch MSJ hearings before Judge Denise Casper
Just for curiosity's sake:
Take a look at this MSJ hearing and this MSJ hearing (where the MSJ was denied at about 27 mins into video).
While these cases have nothing to do with Worlds' case against Activision, it'll give you an idea how MSJs are heard by the judge.
Federal Courts to remain open through Oct 17
A statement from the United States Courts was just released:
Short-term stock price? No idea
I try to provide the facts about WDDD. Worlds hasn't even been heard in court yet, because of all the delays. What do I think will happen next?
Once the motion for summary judgment is heard (and who knows if the government shutdown might delay this too), I think the evidence is in Worlds' favor, and the judge will adjust Worlds' first 2 patents to reflect the proper priority date, allowing the case to proceed to a Markman hearing.
Once the Markman is heard, I believe most of the claim construction offered by Worlds will prevail. If you look carefully at what Activision is trying to do with their claim construction, they are arbitrarily inserting words into the patent claims that just aren't there.
Once a ruling on the Markman hearing is made, I believe Activision will be more in the mood for a settlement, as they will begin to face enormous damages.
Oh, and by the way, I've looked at the facts in Activision's new lawsuit v. Worlds. Either Worlds is practicing what is claimed in the 2 asserted patents, or Worlds isn't practicing those claims.
If they aren't practicing those claims, then Activision has no case. If they are practicing those claims, then since Worlds' products predate those patents by 2 years, Worlds' products are prior art, therefore invalidating those patents. Either way, Activision has no case!
I believe the facts are favorable to Worlds in the long-term. If that proves to be the case, then the stock should rise considerably in the long-term.
Extending patent term due to USPTO delays
It's also interesting to note, that Worlds has the option to extend their patent term even further as provided by 35 USC 154(b), where a patent’s issuance is delayed because of delay at the USPTO.
On Nov 12, 1996, Worlds filed for their first non-provisional patent. That patent wasn't issued until Apr 17, 2001 (some 1,617 days in prosecution). According to PatentlyO, the extension term is correlated with the length of time in prosecution:
In Worlds' case, they are at the right of the chart, indicating that they might be able to get up to 1,000+ days of term extension on their entire patent portfolio.