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Inventergy: Intellectual Property Licensing with a Soul
Published Tuesday, November 11, 2014 by Ryan Allway
Intellectual property licensing companies have a mixed track record. While companies like VirtnetX Holding Corporation (NYSE MKT: VHC) and Acacia Research Corp. (NASDAQ: ACTG) have successfully sued Fortune 500 companies like Apple Inc. (NASDAQ: AAPL) and others for hundreds of millions of dollars in damages, the industry is characterized by bullying, volatility, and uncertainty.

Inventergy Global Inc. (NASDAQ: INVT) is an intellectual property licensing firm that is taking a fresh approach to the industry. Instead of backroom bullying and dirty deals that involve sending out thousands of “cease and desist” letters hoping for a miracle, the company works to create real value by leveraging intellectual property to build long-term value for clients in the telecom industry.

In this article, we’ll take a look at why investors that have shunned the intellectual property market may want to take a closer look at the company.

Changing Industry

The intellectual property industry has been plagued for years by so-called patent trolls that use threats to extract money from patents. For example, a popular patent troll by the name of Jay Mac Rust bought five patents from an inventor in 2012 for $1.00, setup 101 separate LLCs, and sent out more than 16,000 cease and desist letters to small businesses demanding payment to avoid a costly lawsuit.

In April 2014, the U.S. Supreme Court significantly expanded the grounds under which defendants may collect attorney’s fees from abusive patent litigants in order to stem these kinds of behaviors. The tech industry has also taken a much stronger stance on patent issues by demanding reforms from the federal government in the way that software is patented and patents are enforced.

The changing industry landscape could eventually phase out patent trolls that rely on sending thousands of cease and desist letters threatening a lawsuit. As litigation becomes more expensive, these companies will no longer be able to afford to take defendants to court en masse. The successful firms in the industry may instead be those focused on mutually beneficial transactions benefiting licensor and licensee.

Building Value

Inventergy acquired over 180 patent assets from Huawei Technologies Co. related in IP Multimedia Subsystem and Voice over IP (“VoIP”) telecom infrastructure technologies back in May of 2013. Management expanded these holds by acquiring an additional 500 or so patent assets related to 3G and 4G mobile communications and an additional 77 patent assets in IMS and VoIP by June of 2014.

The company’s “corporate licensing” style of engagement – rather than “shot gun” style litigation – leverages its industry relationships, reputation, and model to engage with potential licensees via sensible business discussions. In particular, the strategy seeks reasonable value rather than nuisance value for its patent assets, which encompass many fast-growing areas of the telecom industry.

According to its October shareholder letter, management has already identified over 100 potential licensees of its three patent portfolios and is engaged in various stages of discussion with over 20 companies. The company began monetizing its Huawei portfolio earlier this year and the full impact of the other two acquired IP portfolios could take effect over the coming one or two years.

Management & Backing

Chairman & CEO Joe Beyers – a 34-year veteran of IP licensing for Hewlett-Packard – heads the team at Inventergy. While working at HP, he was responsible for increasing the IP income for the company by 20x over just six years, demonstrating his exceptional ability to create value. Mr. Beyers was also instrumental in developing the world’s first single chip 32-bit microprocessor as an inventor.

In a recent vote of confidence, the company secured $11 million in financing through Fortress Investment Group, structured as $10 million in debt financing and $1 million from sale of restricted stock at $2.00 per share. The investment is a major endorsement from a leading IP financing firm and provides a critical cash runway needed to close on its monetization efforts.

Management’s demonstrated ability to generate value for patent holders, as well as the vote of confidence on the part of Fortress, lends a lot of credibility to its business model. With hundreds of high-quality patents and numerous potential licensees identified, the company is well positioned to unlock significant long-term value for shareholders without relying on bullying or “one-hit wonders”.

Looking Ahead

Inventergy represents a breath of fresh air in an industry that’s rapidly changing. While many of its competitors rely on long-shot licensing deals or a “shot gun” approach to hasseling small businesses, Inventergy is focused on building mutually beneficial partnerships with its licensees by leveraging its enormous portfolio of high-value patents within the burgeoning telecom industry.

Investors may want to take a closer look at the stock over the coming quarters as it works to monetize its IP portfolio, particularly as it trades with a market capitalization of just over $30 million.

For more information, see the following resources:

Company Website