Acacia Research seeks to profit from patents

Matthew Vella certainly doesn't look like a troll.

Vella is the regular-guy chief executive of Acacia Research Corp., which calls itself a patent outsource licensing company. The Newport Beach firm links up with inventors who fear that others are elbowing in on their patents or whose patents aren't making the money they could.

"Our clients often can't afford to hire specialists that will help turn those patents into money," Vella said. "They are not looking to sell them necessarily, but if they are looking to get money because people are infringing their patents, we want to be their partner."

But critics say Acacia Research and companies like it are "patent trolls" that exist to file frivolous lawsuits and exploit the work of others, thereby standing in the way of innovation.

Vella said Acacia Research doesn't work like that. The company, he said, makes sure clients get a proper share of the profits from the technologies they have developed.

"If you are a company that has patents on coronary stents, you don't really need our protection," Vella said, referring to one of Acacia Research's long list of partners, who split patent revenue with the firm. "What you need is a license fee in exchange for allowing others to use your patents. That is all we are trying to get."

Vella said that 95% of the company's business involves working with the patent holders as partners.

"Essentially the deal is you hand over your patents," Vella recently told a group of investors, according to a transcript of the talk.

"If we like them and if you like working with us, we work on monetizing them, often through patent litigation if necessary," Vella said, later adding, "when the profit stream comes back out, we do a split, usually 50/50, sometimes we adjust the splits either way. So, that's the basic idea."

One of the company's best-known examples involved the Japanese firm Access Co., which had acquired PalmSource, the software spinoff of Palm Computing Inc. Through PalmSource and some of its own research and development, Access had a portfolio of more than 200 patents, primarily for mobile device software and technology.

But it wasn't until Access partnered with Acacia Research in 2010 to develop a comprehensive licensing program than Access began to receive revenue from companies including Microsoft, Apple and Samsung.

"This could never have been achieved without the great specialties and diligent efforts of Acacia Research Group," Access Chief Operating Officer Koichi Narasaki said in a case study on the Acacia Research website.

The latest

In March, the company announced it had reached settlements and patent license agreements in six cases, resolving litigation that had been pending in several courts around the country. An additional 10 settlements have been announced this month. Terms weren't disclosed.

The settlements and license agreements included deals reached with GE Healthcare Biosciences Corp. and Feit Electric Co.

In February, the company reported a $33.3-million loss for the quarter that ended Dec. 31. That compared with net income of nearly $10 million a year earlier. For the full year, Acacia Research lost $56.4 million compared with net income of $59.4 million in 2012.

Vella said in a conference call with analysts that financial results can be uneven because of royalty volatility, and "the company now finds itself in what we think is a temporary revenue trough."


Vella said that the company has turned over more than $500 million to its partner companies since 2000. Acacia Research has about $250 million in cash on hand and no debt.

"We have a very deep lineup of people who want to partner with us and we are very proud of that," Vella said.


Tech sector giants have been lobbying for patent-law changes in both houses of Congress, saying that innovation is being stifled by a rash of frivolous lawsuits by patent troll companies that buy patents with the express purpose of suing for a quick settlement.

Vella said it would be difficult to say how any new legislation would affect its future.

"It's a double-edged sword," Vella said, explaining that the uncertain climate has probably brought them some clients. "I think it has helped us more than it has hurt us. That is definitely one of the challenges we have been successfully navigating."

Analyst views

Six analysts regularly cover Acacia Research Corp., according to Thomson/First Call.

Four of the analysts have the company rated as a buy. One has it rated as a hold and another rates the company as "underperform."

Twitter: @RonDWhite

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