Marathon Digital Holdings Inc (MARA)

[onewhoknows2much]

Update: Marathon Patent Group Exceeds Q1 Estimates

http://seekingalpha.com/article/3195506-update-marathon-patent-group-exceeds-q1-estimates

May. 19, 2015 10:41 AM ET | About: Marathon Patent Group, Inc. (MARA), Includes: ST

Summary

•Marathon Patent reported Q1 revenues of $4.1M vs. estimates of $3.5-4M showing growth of 47% for the quarter.

•Marathon also announced the acquisition of 43 International patents in the automobile area.

•Marathon’s new 460 patent has already been granted Final Judgment and Marathon will file an Injunction in Germany to stop Schrader from continuing to manufacture this type of equipment.

•A major US trial is set to start June 1st against Schrader and the new IP provides additional leverage against them.

•The additional acquisition of IP and imminent trial against Schrader furthers my belief that this is going to be a huge year for Marathons shareholders.

I recently wrote an article Did The German Courts Unlock Hidden Value In Two Patent Plays? that discussed two of the best IP plays around the market today, Acacia Research (NASDAQ:ACTG) and Marathon Patent Group (NASDAQ:MARA). In it I mentioned that many investors have yet to realize the significance of the German courts in terms of IP monetization. These courts which operate at a much faster pace than many of the US courts also allow the plaintiff the ability to seek injunctive relief if the judge rules that there is likely patent infringement going on. This is very significant and can be a highly motivating factor in terms of settling prior to actual court litigation.

On May 14th Marathon Patent filed Q1 numbers and revenues grew 47% from last year's first quarter. The Seeking Alpha transcript can be found here. Along with this solid growth came the announcement of the acquisition of 43 international patents of which the most significant one at this time is patent EP1309460 (DE 60142907.9). This patent is involved in a pending lawsuit in Germany against Schrader that already had a final judgment against it in the German courts on June 12th, 2014.

What this means is that Marathon now has the right to enforce injunctive relief against Schrader in Germany that will prevent them from making or selling any tire pressure monitoring system covered by this patent. To understand the significance of just this one patent let's take a closer look at the 460 patent. This patent was developed by Bridgestone and has a priority date of July 26th, 2000. It took over 10 years to actually get it published on August 25th, 2010.

Looking at the claims it is for an Electronic Tire Management System that has become ubiquitous in almost every line of car that exists today and the priority date sets from when it can be enforced from. That's 15 years of potential infringement and the patent has already made it through the first hurdle in Germany and Marathon stated they will be seeking an injunction against Schrader just like they did against Stryker (NYSE:SYK) in another German case. Keep in mind this is in addition to the US case that will start against Schrader in the US in only two weeks on June 1st.

Schrader was recently acquired by Sensata Technologies (NYSE:ST) at the end of 2014 for $1 billion. Schrader considers themselves the world leader in Tire Pressure Management Systems (TPMS) and has sold over 300 million of the devices.

As mentioned in the original article the potential of litigation in the German courts could provide huge returns for companies like Marathon and Acacia for years to come. This potential has in no way been factored into their market caps which are only $500 million for Acacia and $72M for Marathon. The ability to seek injunctive relief in Germany is a huge factor in getting companies to settle prior to actually going through the next step and is exactly what Marathon has already done in its German case against Stryker. I

In the Stryker case Marathon was successful in getting a favorable ruling on two patents in its Medtech portfolio on November 3rd, 2014. Less than a month later they announced they had taken all necessary steps to start enforcing the injunction which stopped Stryker from manufacturing and selling any of the products covered under these patents in Germany. I expect the same speed with the above mentioned Schrader case. As Doug Croxall said in the Q1 transcript:

"I've talked many times about the big events that we have ahead of us and I'm not going to continue to drone on. And we look forward to our Q2 earnings call and look forward to the announcement tomorrow morning and the activity throughout the month of June, July and August."

As with any microcap stock there are risks. The ability to raise capital is one of the key problems many small companies face. Marathon so far has been able to accomplish this on very good terms but will need to continue to do so in the future and this area must be closely monitored. Being in the IP monetization space brings several additional areas to watch. One being the ability to continue acquiring prime assets and also the ability to monetize these assets in an expedient manner. Investors should continue to monitor these areas to make sure Marathon continues down its very successful path to date.

While nothing in the IP monetization business is easy or happens as quickly as shareholders would like the above statement may be the most obvious precursor for what could be the most exciting summer in Marathon Patent's short history. Given this is really only its second full year in operation it's already hitting on all cylinders and with six Markman hearings, three US trials and nine German trials scheduled for the remainder of the year the excitement is just beginning.