Questions Arise Around Qualcomm’s Strategic Direction
July 21, 2015 (Mimesis Law) — It has been three months since we first highlighted potential risk to Qualcomm’s highly profitable patent licensing business (see here and here) from a changing legal landscape regarding licensing of standard-essential patent. In those three months, we have sign activist agitation around Qualcomm die down a bit, only to rebound i volume over the past few days with news that the company is: 1) considering major layoffs (on the order of thousands of jobs) and 2) revisiting the idea of splitting off the patent licensing arm of the company into a stand-alone entity.
While we are sure the business pundits will have their say, we think that the potential patent licensing challenges we highlighted in April continue to pose risk for Qualcomm — irrespective of whether the company stays together or breaks up. As we have noticed with other situations, Qualcomm’s potential customers for patent licenses (US-based Big Tech companies, and Asian aspirants to their position in the US market) are not really lining up to pay top dollar towards licensing fees. In fact, Qualcomm has been dealing with a bit of a backlash over the extreme profitability of their patent licensing scheme, with foreign antitrust agencies taking a close look at Qualcomm’s licensing approach. In the U.S., we continue to monitor for the upcoming (any day now, but who knows with courts) 9th Circuit decision in the Motorola case we highlighted in April. That case has the potential to do more to “reset” the value of standard-essential patent licensing than perhaps any prior decisions in that area of law.
In short, investors in Qualcomm have to keep a close eye on legal developments, in addition to their evaluation of the typical business metrics that keep the financial news machine humming. Perhaps our favorite observation to date was the Seeking Alpha commenter who worries about Qualcomm spinning off its patent licensing division and becoming a non-practicing entity — and thus susceptible to the “patent troll” moniker. We chuckle, since we are sure that Qualcomm feels that it is fully justified licensing its patents, even for inventions they don’t practice. But when another non-practicing entity comes knocking (Parkervision, anyone?) on Qualcomm’s door, we don’t expect them to get a very warm reception.
The Week(s) Ahead — Expected Events
- Parkervision and Marvell CAFC decisions – TBD
Hopefully you have had a chance to catch our “Markman Minute” videos (available at www.mimesislaw.com/intellectual-property) for a deeper look at some of the biggest current patent stories of interest to investors. Finally, we want your feedback and suggestions, so feel free to send it along to email@example.com or to @markmanadvisors on Twitter. You can also visit our website at www.markmanadvisors.com. Questions from the readership are always welcome as well; we will try to get you answers in future issues of the Markman Note.
Disclosures and Disclaimers:
Nothing in this material is intended to constitute legal or investment advice of any kind, nor is any of this material based on any non-public information of any kind. In addition to my work at Markman Advisors, I am also a name partner at a NYC-based intellectual property litigation boutique firm, Kroub Silbersher & Kolmykov PLLC (www.kskiplaw.com). Markman Advisors is affiliated with a Houston-based investment management firm, Perdix Capital Management, which may have existing or potential positions relating to situations discussed in this material. Markman Advisors also provides consulting services to buy-side investors, including hedge funds and family offices, that may also have or enter into positions relating to situations discussed in this material.