Acacia Research Corp.’s latest deal with a major medical-device maker highlights the Newport Beach-based company’s shift to license patents beyond the technology sector.
Chief Executive Paul Ryan targeted medical and diagnostic companies about 18 months ago. The segment now represents more than 15% of Acacia’s annual revenue and its fastest-growing business line.
“We think it could become half our business,” Ryan said.
The company saw about $172 million in sales in 2011, up 31% from 2010.
Last week the company cemented one of its largest deals to date, acquiring seven portfolios with more than 1,900 patents and applications, including some related to retrieval and vena cava filter technologies, among several others.
The licensing deal is thought to be with Natick, Mass.-based Boston Scientific Corp., though the company was unnamed in the announcement. Financial details are also uncertain, but Acacia typically splits sales, licensing fees and court settlements with the patent holders.
Prior Model
The deal brings the company a big anchor in cardiovascular devices and applications and follows a similar model Acacia used to gain a foothold in the technology sector.
It struck a partnership in early 2010 with Access Co., a Tokyo-based company that acquired many of the original Palm operating system and smart phone patents in a $324 million deal. Business began to escalate on the technology side afterward.
“We think the same thing will happen in the medical sector,” Ryan said.
Acacia has licensed patents from the Access portfolio to Microsoft Corp., Samsung Electronics Co. and Finland-based Nokia Corp., among others.
• Headquarters: Newport Beach
• Business: Investor in patented technologies
• Founded: 1992
• Ticker symbol: ACTG (Nasdaq)
• 2011 revenue: About $172 million
• Recent earnings: $6.3 million for the June quarter
• Market value: About $1.28 billion
• Notable: Mostly a tech investor in the past, recently moved into medical-device companies, other areas
Medical companies currently only account for about 15 of Acacia’s 200-plus portfolios but are projected to become a larger portion of the pie as the industry turns to this emerging asset class to wring out revenue from legacy technologies and research and development.
Technology companies only recently turned to patent licensing or sales to bring in new revenue streams. Many had been debt-stricken or were struggling to survive, as evident in a couple recent developments:
• Eastman Kodak Co. put its portfolio of digital camera patents—valued as high as $2.6 billion—up for sale as part of a Chapter 11 bankruptcy. But the company since has delayed those auctions, as it assesses whether licensing the patents would be more lucrative for creditors.
• Apple Inc., Microsoft and Research In Motion Ltd. led a group that purchased a patent portfolio last year from bankrupt Canadian telecom Nortel Networks Corp. for $4.5 billion in cash, outbidding Google Inc. in the process.
Acacia’s growth in the medical sector likely won’t come from distressed companies but via established players with longstanding profits, Ryan said.
“This is quite a different dynamic,” he said.
Medical companies also are more receptive to paying royalties than technology companies and less likely to engage in litigation, Ryan added.
“They’ve seen what we’ve done on the tech side, and we’re getting a great reception,” he said.
New Hires
Acacia has bolstered its management team and added about 15 employees since developing the medical business line.
Vice President Robert Rauker came aboard early last year. Rauker previously worked as chief intellectual property counsel for Boston Scientific’s endoscopy division.
Acacia also recently struck a partnership with Bonutti Technologies Inc., an Illinois-based orthopedics-device maker.
