The Markman Note: Marvell, Enzo Biochem, Spherix
Mar. 24, 2015 (Mimesis Law) — Welcome to the first issue of the Markman Note, a special section on Mimesis Law focusing on the intersection of investing and intellectual property. For the most part we’ll be looking at patent litigation-related activities and their impact on investors — which happens to be the core of our work at Markman Advisors. That said, the focus will often broaden to encompass interesting events in the world of trade secrets, copyrights, and trademarks as well. As long as those events have market impact, of course. There will usually be a video component posting later in the week, with a deeper look at one of the bigger stories we are keeping an eye on.
The Big Story: 4/7 Federal Circuit Oral Argument in CMU v. MRVL
At 10 a.m. on April 7, 2015, one of the largest patent verdicts in history will finally come under review by the Federal Circuit. The oral argument is the penultimate step in the appellate process, followed by a decision on the merits. That decision can take anywhere from a few days to a year or more to come down. Considering the importance of this case, and the important legal issues likely to be addressed, we think this case will take at least a few months to decide. This is a big one; I plan on attending live, and highlighting some of the important considerations surrounding this case on my video discussion later this week.
MRVL (Marvell Semiconductor)
Ok, let’s start off by taking a look at Marvell’s take on the CMU case appeal. The fact that MRVL has an entire page of their website dedicated to a patent case is both unusual, and illustrative of the importance of this situation to the company and its shareholders. In response, CMU (Carnegie Mellon University) happens to have a helpful FAQ on the situation.
CMU’s lofty rhetoric on the importance of the patent system is inspiring, if a bit of a downer for MRVL shareholders to read as long as the $1.5B or so total judgment stands. For those that are familiar with CMU’s prior license offer to MRVL, the fact that they refer to it in the FAQ provokes a chuckle. Especially since they don’t disclose the proposed terms. Hint — the original license terms were way cheaper for MRVL than +$1B.
For an in-depth overview of the appellate issues, check out this note prepared by an investment management company we are affiliated with.
More to come. This is a monster of a case.
Recent Patent Litigation-Influenced Moves:
Enzo Biochem’s (ENZ) $61M verdict tossed out by Federal Circuit Court.
Look at this chart:
Enzo’s fall on Monday, 3/16, is a good example of the impact that a Federal Circuit patent decision can have on a company’s share price. Especially when a verdict or judgment being appealed is material in terms of monetary value to at least one of the litigants. For those interested in a deeper dive, comparing the November 2014 Federal Circuit oral argument for this case (available here) with the Federal Circuit’s decision on March 16th, is indicative of why listening closely to oral arguments is a key component of analyzing Federal Circuit proceedings. Another important aspect of Federal Circuit-guided trades for investors is that Federal Circuit decisions are always issued between the hours of 9-11 AM on market days; unlike District Court decisions that can come after market hours, and often do. You can see the almost immediate impact the decision in ENZ had on the share price that day, as news seems to get released quicker than ever these days.
Claim construction decision issued in Vtech/Uniden litigation.
Here comes another chart:
SPEX’s spike on Friday, 3/20, is a good example of the impact that a claim construction (Markman) decision — even one that is a mixed-bag, as many Markman Hearing decisions are — can have on a company’s share price. Especially when the company is proactive about “spinning” the decision with a timely press release. Considering that this decision was over 100-pages long, it is no surprise that investors needed some guidance in terms of deciphering the impact on the remainder of the case. SPEX stepped into the breach. We have our own opinions on the actual merits of the Court’s decision, but at minimum, this decision and subsequent price movement is illustrative of how important litigation decisions are to publicly-traded patent enforcement companies like SPEX. Yes, they can be thinly traded and illiquid, but talk about stocks and situations that are uncorrelated to the rest of the market, and it is easy to see why patent situations can be so interesting to investors. Also interesting to watch will be the interplay between the Inter Partes Review (IPR) petitions filed by the defendants challenging the validity of SPEX’s asserted patents in the USPTO — that process will continue in parallel with the District Court case that resulted in this past week’s opinion.
The Week Ahead — Expected Events:
- Trial, focusing on trade secret misappropriation allegations, between Netlist (NLST) and Diablo Technologies, is expected to result in a jury verdict early this week.
- An important hearing on claim construction and a Section 101 / patent eligibility challenge brought by Netflix (NFLX) against patents owned by Rovi (ROVI) (that NFLX is accused of infringing) is scheduled for Wednesday in Oakland. Lot to discuss here down the road.
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 Markman Advisors, I also am 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. Questions or comments can be directed to me at firstname.lastname@example.org. All suggestions are welcome.
Main image via Flickr/Tyler Yeo.