Concurrent Plays the Patent Card
Concurrent Computer Corp. (Nasdaq: CCUR) has retained an intellectual property specialist to help the video-on-demand (VOD) server and software firm make money from three patents that Concurrent believes are critical to targeted advertising applications. But the question remains whether Concurrent will use a carrot or a stick to execute this "value extraction program."
That hired gun, Atlanta-based IPinvestments Group, will base the effort on a batch of intellectual property, including three U.S. patents: 5,931,901; 6,038,591; and 6,161,142.
Filed in 1997, the '901 patent is considered the parent, with the other two marked as continuations of the original. The '901 and '591 patents describe a method for "Programmed music on demand from the Internet," but also detail a system and method for targeted advertising messages. The '142 follow-on patent is similar and scope, but comes under the more refined heading of "Method and system for using a communication network to supply targeted streaming advertising in interactive media."
Concurrent obtained the patents in late 2005 via a $15 million acquisition of Everstream , a company that specializes in systems that analyze performance data and reporting for VOD and other digital services. (See Concurrent Acquires Everstream.)
As for the strategy itself, some question Concurrent's motives. "This is a billboard that says, 'We need money,' " says one industry observer.
Earlier this month, Concurrent closed a $14 million private placement comprising the sale of 11.2 million common shares for $1.25 a piece, plus warrants for an additional 2.8 million shares. At the time, Brian Coyne, a senior analyst for Friedman Billings Ramsey & Co. Inc. , noted that the move "removes the liquidity overhang" on the vendor and could reinvigorate Concurrent's opportunities with cable MSOs and telcos. He also anticipated that Concurrent could begin to monetize a portion of the Everstream patent portfolio. (See Concurrent's War Drawer .)
Concurrent executive vice president Kirk Somers insists the patent monetization strategy has nothing to do with the financial standing of the company. He asserts that Concurrent has been mulling this strategy for several quarters, going as far as hiring outside council to research the file history of the patents and determine whether Concurrent should move forward "with a more aggressive stance with this portfolio."
"The question was how to monetize this portfolio in the best way possible," Somers says.
At this point, Concurrent has identified two possible paths: auctioning the patents and receiving a license for the intellectual property; or enforcing the patents through litigation.
Somers says the company has not ruled out either strategy but will explore the auction option first.
So far, Concurrent has identified between 50 and 60 "targets" for an auction strategy. All targets, Somers notes, are companies that Concurrent believes infringe, or have products that could infringe, on the patent portfolio.
In addition to cable operators, those targets include Yahoo Inc. (Nasdaq: YHOO), Google (Nasdaq: GOOG), SeaChange International Inc. (Nasdaq: SEAC), C-COR Corp. (Nasdaq: CCBL), Microsoft Corp. (Nasdaq: MSFT), and aQuantive Inc. (Nasdaq: AQNT), an Internet and VOD advertising specialist that is in the process of being acquired by Microsoft for $6 billion. (See Microsoft to Buy aQuantive.)
Concurrent sent a letter to all of these targets, giving them 60 days to perform due diligence and decide whether they want to participate in an auction. If there's no interest, it's likely that Concurrent will pursue patent enforcement.
"It's possible," Somers said, when asked if that could put MSOs into harm's way as patent enforcement targets. But, he acknowledged, Concurrent would like to avoid that situation if at all possible: "You don't want to bite the hand that feeds you."
Concurrent plans to make a final decision by September, with revenue from the strategy arriving before the end of this calendar year. Somers declined to estimate how much revenue Concurrent might generate from its patent-related moves.
If Concurrent decides to enforce the patents, it could slow down a category that cable operators and telcos alike believe will reduce consumer ad-skipping and create a new source of revenue. Although early implementations will target ads to groups based on demographic data, eventually operators and advertisers hope to target specific spots to individual homes or viewers.
— Jeff Baumgartner, Site Editor, Cable Digital News