| The Company is in the business of acquiring interests in patents, copyrights or other intellectual property (collectively referred to herein as “IP”), for the purpose of participating in any successful settlements or judgments resulting from patent infringement lawsuits. The Company may acquire an interest in the IP itself or directly in the outcome of the litigation. Although the Company will invest in a variety of IP, its main focus will be on patents.
The Company believes that its investment in IP subject to infringement will entitle it to participate in the outcome of successful litigation and will result in two potential sources of revenue. The Company will be entitled to a share of the settlement or judgment; additionally, the Company may be entitled to ongoing royalty revenue well beyond the conclusion of the litigation.
Lawsuits relating to IP which has been infringed can be very expensive, which often prohibits IP holders from pursuing claims. Plaintiffs can retain legal counsel on a contingency fee basis. In contingency fee situations, a law firm finances the litigation on behalf of a plaintiff with the agreement that the firm will retain a percentage of any settlement or damages award upon the successful conclusion of the litigation. Typically, a law firm will require the IP holder to pay out-of-pocket disbursements, which can reach US$250,000 or more. In addition, the IP holder may be required to fund the costs of an appeal regardless of the outcome at trial, which can total up to US$100,000 or more. Most individual IP holders cannot afford these costs, particularly when the outcome is uncertain.
The Company acquires interests in IP which have been infringed in consideration for agreeing to finance all, or part of the costs of pursuing damages for the alleged unauthorized use of the IP. The Company’s interest is acquired either by way of a registered ownership interest in the IP or an equity interest in the entity owning such rights or by way of a contractual right to participate in the proceeds of the litigation. The Company’s contractual right may also include an interest in future royalties.
The Company believes it offers unique flexibility for IP holders pursuing infringement litigation by providing alternatives when negotiating with IP holders. An agreement by the Company to acquire an interest in an IP right may include a payment of cash or shares of the Company to the IP holder or its representative as well as the payment of all or a part of the out-of-pocket expenses of the litigation. The Company may also negotiate a sliding scale payout plan with respect to the size of the settlement proceeds, damage awards and royalties, as applicable. The Company believes that one of the benefits it can provide to an IP holder is the ability to retain the most reputable law firms in the United States to handle infringement litigation. Furthermore, the funding provided by the Company allows IP holders to retain appropriate experts.
A major consideration in the Company’s decision to acquire an interest in the IP itself or in the outcome of related litigation will be the impact of applicable laws regarding champerty and maintenance. In certain jurisdictions, the Company may be limited to acquiring either an interest in the IP directly or an equity interest in an entity, which holds a registered ownership interest in the IP. In other jurisdictions, the Company will have more flexibility and will be able to enter into alternative arrangements, including funding agreements. (Please see (The Legal Doctrines of Champerty and Maintenance”).
|
