e.Digital Corporation (fka EDIG)

[Cassandra]

PATENT ASSERTION AND US INNOVATION - Executive Office of the President - June 2013
http://www.whitehouse.gov/sites/default/files/docs/patent_report.pdf

FACT SHEET: WHITE HOUSE TASK FORCE ON HIGH-TECH PATENT ISSUES - LEGISLATIVE PRIORITIES & EXECUTIVE ACTIONS
http://about.bloomberglaw.com/files/2013/06/WHPatentFactSheet13Jun4.pdf

Quote from President Obama in bold:

Nevertheless, innovators continue to face
challenges from Patent Assertion Entities (PAEs), companies that, in the President’s
words “don’t actually produce anything themselves,” and instead develop a business
model “to essentially leverage and hijack somebody else’s idea and see if they can extort
some money out of them.” These entities are commonly known as “patent trolls.”
Likewise, the so-called “Smartphone Patent Wars” have ballooned in recent years and
today, several major companies spend more on patent litigation and defensive
acquisition than on research and development.

e.Digital is clearly a PAE/NPE/patent troll. The eVU does not practice the flash patents so does not make e.Digital a "practicing" entity. I find it ironic that the eVU was actually a concept stolen from a baggage handler who came up with the concept and believed e.Digital's good faith in signing a non-disclosure/non-compete agreement when he came to e.Digital to help him build it. He was simply too unsophisticated to know that he should have included which state law would govern the agreement.

Asy yourself- who has benefited from e.Digital's infringement settlements since the initiation of the "monetization" effort? Certainly NOT shareholders who saw the price drop after each settlement was realized. Why wasn't some of the settlement money distributed as a dividend?

By far the biggest individual beneficiaries have been the lawyers, followed by Fred Falk personally as he has been able to maintain a $185,000/year job despite not performing. Arguably the few people employed by e.Digital have benefited as they still have jobs, but I would guess that they could find other employment if e.Digital folded. Allen Cocumelli has benefited by receiving a $5,000/mo retainer to "manage the outside attorneys." Lastly, e.Digital's creditors benefited.

The EDIG stock price came out of the $.03 gutter when the patent monetization efforts were renewed last year and the approval of the Nunchi patents was announced, but it has already substantially re-traced and will likely continue back to the same gutter when it is realized that the settlements in the CA suits are inconsequential.

The share price could severely tank if the patent extortion scheme ever results in sanctions by having been deemed an exceptional case. Watch out for Newegg's motion in the Creative case.

The next business strategy is to monetize Nunchi, probably in the same manner with lawsuits filed solely with the intent of extracting a settlement regardless of whether there is any infringement.

The promise the company appeared to have many years ago when most shareholders first invested hasn't existed for a very long time. Just because the doors are still open doesn't mean shareholders have benefited by being able to maintain hope that someday there will actually be some real value to the company. The stock is so illiquid that exiting is difficult at recent prices. I see EDIG investors as hostages.

The sad reality is that e.Digital is a failed company that resorted to patent-trolling by asserting its patents against companies that don't infringe with shake-down extortion suits. There is nothing to be proud of in that business model.