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eye-opening article about SPEX+Rockstar: http://www.iam-magazine.com/blog/Detail.aspx?g=ff3958e6-e067-48d8-b3a4-7f4b71e07cea

Rockstar's hook-up with Spherix could be more than a straight privateering play

A press release issued by Spherix yesterday concerning its acquisition of “a suite of patents” from Rockstar contains no detail on how much, if anything, the firm paid for the patents; or, indeed, what the patents cover. What it does say, though, is that Rockstar has become a shareholder of Spherix and that the firm is set to launch its first action against what are termed “known infringers” within the space of 30 to 60 days.

To the best of my knowledge Rockstar, the NPE formed by the consortium that successfully bid for the Nortel patent portfolio back in June 2011, has yet to sue anyone for infringement, though in an interview I did with its CEO John Veschi, that was published in IAM 60, there was a clear message that at some time soon it probably would. “We have not litigated yet, although we think about it virtually every day, as it is always the backstop or alternative path to our negotiations,” he told me. “I suspect we will need to resort to litigation in the near future, as some of the users of our patents feel no remorse or obligation to pay fair royalties. Personally, I just think it’s a shame that some users have chosen as a matter of course to treat you like a second-class citizen if you haven’t sued them. Systemically, something seems wrong with that picture.”

Although we do not yet know what patents are involved in this deal, if Spherix does start litigating soon we will begin to get an idea about whether they are core assets in the Rockstar portfolio, or more peripheral. When I asked Veschi about the NPE’s sales strategy, this is what he told me:

With sales we do a lot more thinking about it than doing. There are a lot of opportunities, but it is not our primary business. About 20% of my time is probably invested in talking about sales and partnerships, but it has to be a no-brainer for us to go ahead with a deal.

There are no Rockstar assets that are not for sale. Does that mean they will be sold? No. But if there is an offer made we cannot refuse they will go. That is business. Sometimes patents are simply more valuable in someone else’s hands. We are often approached by other parties about sectors or subsets of our portfolio that they would like for either tactical or strategic needs. We need to explore those opportunities.

It also may help to concentrate certain parties’ minds when it comes to a negotiation. Maybe they should agree to a licence with us just in case we sell the relevant patents. We have a lot of very good assets and do not need them all.

Bearing in mind all of that, maybe the most interesting thing about the hook-up with Spherix is how much of a stake Rockstar has taken in the firm. By becoming a shareholder, of course, Rockstar will benefit from any successful assertions Spherix undertakes, while removing itself (and, therefore, its five big corporate shareholders – Microsoft, Apple, BlackBerry, Sony and Ericsson) from the direct firing line. The fact that actions are expected imminently suggests that a lot has been going on behind the scenes in the lead up to yesterday’s announcement.

On the face of it, then, what we have here is a classic privateering arrangement (what was it BlackBerry said about privateers recently?); but it is possible there is more to it than that. As a Spherix shareholder it is not only assertions of its own patents that Rockstar will benefit from, but also of other portfolios Spherix owns and may acquire in the future. Should Rockstar have taken a sizeable portion of the ownership, that may indicate that the firm is set to become a vehicle through which Veschi and his team get to play with a lot more than the ex-Nortel patents they currently manage. If Rockstar is to have a long-term future that is important – because without acquisitions it will eventually disappear as one by one those Nortel rights expire. Should it turn out that Spherix is asserting what would generally be considered to be among the crown jewels of the Rockstar portfolio, as opposed to, say, rights that the NPE has previously advertised are for sale in its Summer and Winter 2012 catalogues, it would probably be safe to assume that there is a long-term significance to what was announced yesterday.

There is one other thing about Spherix that is also worth noting. If you go to the About Us section of the firm’s website, you’ll find that a certain Anthony Hayes is expected to become CEO next month. Regular IAM blog readers may recognise the name. At the start of this year, we reported that Hayes, previously a partner at law firm Nelson Mullins Riley & Scarborough, was one of the people behind JaNSOME IP Management, a New York-based IP advisory and monetisation outfit launching a $30 fund that would invest “in global opportunities in the patent market”. Whether his move to Spherix is fund-related, or whether Hayes has cut his links with JaNSOME is not clear.