Newport Beach-based Acacia Research Corp. has seen its top line soar since 2004 by acquiring patents and collecting royalties from companies that appear to be infringing on them.
The company has seen sales grow 2,225% in the past three years through June as it has struck big licensing deals with Kohl’s Department Stores Inc., Eastman Kodak Co. and Oracle Corp., among others.
The company has just 41 workers, all patent experts, lawyers and engineers. It splits sales and licensing fees with the original developers of the patents it holds.
Acacia also works with smaller companies to manage,and en-force,their patents.
“We know how to get deals done and we know how to structure them,” Chief Executive Paul Ryan said. “We take over all of the expense and go out and generate revenue for them.”
In effect, Acacia works as a patent law firm for smaller companies, filing suits to coerce alleged offenders into striking licensing deals.
“We are the only company of our kind in the country,” Ryan said. “The majority of patented technologies are developed by small companies. But they don’t have the expertise or the scale to go out and make money off them. We’ve tapped into a huge unmet need in the marketplace.”
To date, Acacia has collected more than 80 patent portfolios, including U.S. patents and their foreign equivalents. About 24 of them are from this year alone.
For the 12 months ended June 30, Acacia reported sales of nearly $45 million, up from about $2 million for the same period in 2004.
A few years ago, Acacia paid $27 million for its onetime competitor, Northbrook, Ill.-based Global Patent Holdings LLC.
The company got its start as a venture capital firm based in Pasadena in the late 1990s. It got into the patent licensing business through one of the companies it invested in.
Acacia moved to Newport Beach in 2001, officially kicking off its licensing business.
The company faces critics who say it is a “patent troll” that uses the courts as a means to shake down unsuspecting companies.
Acacia doesn’t see it that way.
“More and more small tech companies want to earn revenue from their patented technologies, just like the big companies do,” Ryan said. “We want to make sure that if other people want to use their technologies they are getting paid for it.”
He points to San Diego’s Qualcomm Inc., a maker of cell phone chips, as a prime example of having an aggressive intellectual property protection strategy.
About a third of Qualcomm’s nearly $9 billion in revenue comes from licensing fees that it collects from cell phone makers.
Acacia is looking to represent small tech companies, research institutions and hospitals in need of help managing their patents.
It recently signed on Cedars-Sinai Medical Center’s research arm.
“As a hospital they don’t have the capabilities to license their technologies, but they have spent a lot of money in development,” Ryan said.
Acacia’s customers have grown as word has spread about how it enforces its own patents, according to Ryan.
“We have done more than 500 licensing agreements and that makes us much more attractive to potential clients,” Ryan said. “As we develop a track record more and more companies are turning over their intellectual property portfolios.”
THE NUMBERS
Three-year growth: 2,225%
Yearly sales through June 30: $45 million
Yearly profit: $35,000
Market value: $480 million
Employees: 41, all in OC
Company: patent licensing
Busy Acacia
What’s it like a day in the life of Acacia Research Corp.? Here’s a look at one week:
SEPT. 24: Acquires rights to a patent relating to video editing technology.
SEPT. 25: Acquires rights to a patent relating to surgical instruments, such as scalpels, that are heated to reduce bleeding when tissue is cut.
SEPT. 27: Enters into a license agreement with Sonic Solutions that resolves a patent dispute.
SEPT. 27 : Reaches a settlement with Timberland Co. regarding a patent dispute related to credit card fraud protection technology.
SEPT. 28: Acquires patents for graphics data processing technology.
OCT. 1: Enters into license agreements with Misys Plc and Riverdeep Interactive Learning Ltd., resolving legal disputes with the two companies. The agreements cover patents relating to portable storage devices with links.
