Date: Fri, 21 Jan 2000 03:21:13 -0500 (EST) From: Gregory Aharonian <firstname.lastname@example.org> To: email@example.com Subject: PATNEWS: Let's attack Geoworks with prior art and put options !20000120 Let's attack Geoworks with prior art and put options Next Monday I will launching my Web site (I need the weekend to clean things up), which over the long run I plan to use to make lots of money off the dysfunctionality of the patent system. Some of you were kind enough to respond to the announcement of my new plans by offering some help along the lines of business plans/investors. Thanks to a brief item in today's Wall Street Journal, I was inspired to an idea on how to use my Web site to make lots of money being the contraLemelson, a concept I explain below in the form of a really rough outline of a business venture to outrageously exploit the PTO's inability to properly examine software/Internet/business methods patents. The idea is to find weak (portfolios of) patents for which, thanks to the craziness of the Internet, their assignee's stock price is bubble-ish to the point of having a high price and volume (creating liquidity and volatility to exploit). After very thorough prior art searches, one launches lawsuits to get courts to declare the patents to be invalid while at the same time buying put options (or just shorting the stocks for those more risk-adverse). With careful market timing and public information campaign based on the patent truly being crap, you could legitimately push down the price of the stocks and collect on your options/shorts. With billion dollar valuations, the profit potential would be in the tens of millions of dollars, if not more. By raising enough money to implement such a strategy against multiple companies, a few are bound to hit for the big bucks, given the statistics of invalidity of most software patents. And given the lengthy proceedings surrounding such lawsuits, there are additional profit opportunities as the stocks rebound then get pounded down again as some of the patents get invalidated in the court. I illustrate the economics of this in general, and then describe one such company susceptible to such an attack. The offhand strategies below I assume securities lawyers can implement cleanly. First I would raise an investment pool of, say, $21,000,000 to be used to go after ten companies. I would spend one million doing ten thorough invalidity searches of patent or portfolios preliminarily identified as being weak for companies with large (pending) valuations, relying on my proprietary resources and familiarity with killer patent litigators (and I know the best ones when it comes to software), as well as some tools I am developing to sweep through patent portfolios and make quality assessments based on probabilistic models of software patent validity (i.e. patents with prior art deficiencies equal to the prior art deficiencies of patents invalidated in court, such patents have a good chance of being invalid as well). The invalidity studies would be converted into invalidity lawsuit filings and held back until the stock prices of any of the corresponding companies is in a lull - minimal volatility and market drift (relying on the stock market analysis tools I have been assembling over the years, plus the usual analysts reports). We could first approach the company with the filing and negotiate a deal to not file the lawsuit, "priormail" so to speak. One could use the scare of a investor-based class action lawsuit (if the lawsuit ultimately is successful and the stock price drops) in the mind of the company's insurance company to sweeten such a settlement. If this fails, using a multi-million dollar portion of the remaining $20,000,000, we would buy put options/short the stock while simultaneously filing the invalidity lawsuit. Given the rumor-driven nature of the stock market, and a solid well argued invalidity opinion properly publicized, there is a good chance that market momentum would reverse, leading to a drop in the stock price, and allowing a profitable execution of the options. Given the multiples in profit involved with options, all that is needed is for a few of these maneuvers to work to return the original $20,000,000 investment, plus much more. Think of the investment as Venture-Ending Capital. If the company has multiple patents, you could first choose a really crappy patent of lesser importance to the company, file a reexam at the PTO, which if successful, creates a track record of dubiousness with regards to the company's entire portfolio. This would be accompanied with the public sale of an exhaustive report showing the inability of the Patent Office to handle these patents for years, all the while applicants abusing the system by not doing any searching. Let the general investor community know just how screwed up the software/Internet patenting system is. Let's turn the hypocrisy of the patent system into exploitable market uncertainty. In short, with the markets being distorted because of the many crappy patents the PTO is issuing, it seems to me that there is a lot of money to be made by aggressively and publicly going after the bad patents that are the basis of unsupported market valuations. And because the patent(s) are indeed really bad-to-invalid, it is hard for the SEC to object due to reasons of market manipulation. The defense would be that the patent owner and the PTO manipulated the market to begin with (especially for those companies that don't thoroughly analyze their patent before they make pronouncements, something the SEC should be investigating), and the attack is just removing a market distortion - a public service. Case in point. Thursday's Wall Street Journal, page B6, reports that the markets are abuzz that the next Qualcomm (i.e. companies that over few years experience tremendous increases in their stock price) is Alameda's Geoworks. The article, appropriately titled "Son of Qualcomm?", talks about Geoworks and the operating system software for portables it has been developing. I quote: "But [Geoworks] won a potentially powerful patent on software that allows server computers to rearrange pages of information to fit on the screens of phones and mobile devices. Now it wants to get paid." The article is referring to the one patent Geoworks owns, 5,327,529 issued in 1994 (CIPed from 1990), titled "Process of designing user's interfaces for application programs", one of the many early-1990s software patents to issue with an inadequate amount of non-patent prior art considered (remember that prior to 1994 and Compton's multimedia patent stunt, the PTO was pretty much ignoring this issue hoping the courts would kill the idea of software patents). Geoworks's recently issued statement on the patent and its goals appears below. Also at their Web site are some white papers on the patent, which describe everything Geoworks has done and is doing with the patent, except the (lack of) efforts Geoworks put into determining just how valid the patent is, given the PTO's inability to do so. The article continues with: "Much like Qualcomm in digital phones, Geoworks says it is owed a royalty from every company associated with a hot Web phone technology called WAP, or wireless application protocol. ..... 'I think virtually everyone that is working on WAP will have to buy into this', said Andrew Cole, head of the wireless practice at Renaissance Worldwide consultants." The type of comment in the Journal that drives the speculators, which the article ends with: "But Geoworks stock, which traded at just $3 in October, yesterday more than doubled to $31.5625, up $16.5625 in 4 p.m. Nasdaq stock market trading on word of its licensing scheme." Great baby, let the stock rise. Where's the opportunity? A quick look at the '529 patent reveals the classic weakness of the software/Internet patents - an insufficient amount of non-patent prior was cited, i.e. NO non-patent prior art published prior to the original filing date of the application. For software patents, a priori, that is a decent indicator that the patent has problems. If indeed the patent proves to be invalid, then at the right an invalidity lawsuit filing could lead to a nice market correction to profit from, and in the case of Geoworks, with the public commentary support of all of the companies Geoworks will be trying to get license fees from. Offhand, I would venture that there is a decent 103 attack on the patent, given the dynamic GUI research throughout the 1980s from non-patent prior art that can be found. The more I write this article, the more I tempted to actually do a study of the patent myself. Multiply this by ten target companies to spread the risk, raise the ante from tens of millions to hundreds of millions of dollars, and you end up with an investment opportunity with a risk/reward ratio well within the current ranges for Wall Street investment strategies, and for patent litigators, an opportunity for far more profit than just your typical patent litigation fees. And in the years to come, the business method patents oozing out of the PTO in large quantities will provide even more opportunities. And given the non-enablement problems over in the biotech patent world (nice grounds for invalidity), additional opportunities as well. With solid prior art databases, patent analysis tools, and market analysis tools (to be showcased at my new Web site), and of course the investment monies, all I can saw is ka-ching, ka-ching. So if I can't be a really nice guy and funded with lots of money to fix the current dysfunctional system for software/Internet/business patents, why not be a nasty guy and lead an effort to exploit the resulting market distortions? And to patent litigators, start thinking more greedily. Anyways, a thought. You have my phone number :-)))))))))), if not to invest then the above makes a pretty good outline for a movie. Its time anyways for Hollywood to pay attention to the patent world. Greg Aharonian Internet Patent News Service ==================== GEOWORKS ANNOUNCES INTELLECTUAL PROPERTY RIGHTS POSITION ON WAP AND INITIATES LICENSING PROGRAM Company Supports One, Open Standard For Wireless/Internet Communications January 19, 2000 Geoworks Corporation (NASDAQ: GWRX), a pioneer in wireless data communications services and technologies, today announced it has officially informed the WAP Forum and its members that it holds essential Intellectual Property Rights (IPR) for the Wireless Application Protocol (WAP), and the Wireless Markup Language (WML) Specification, and has established a licensing program to make this IPR available to all WAP Forum members. In May of 1999, Geoworks, in accordance with WAP Forum guidelines, was the first WAP member to announce its patented technology is employed as essential technology in the WAP standard. In accordance with the WAP Forum's IPR protocol, Geoworks has now informed all WAP Forum members that it is pursuing licensing of its patented technology on fair, reasonable and non-discriminatory terms and conditions. The Geoworks patent for invention of a flexible user interface for mobile communications devices (US Patent #5,327,529) is potentially implicated by products and services based on the WAP specification. Geoworks holds this patent for devices, including mobile phones, which are based on the WAP specification and placed into the stream of commerce in the United States and Japan. According to Boston-based industry analysts The Yankee Group, more than 52 million WAP handsets are expected to be shipped in the United States by 2004. In Japan, IDO and DDI already support the WAP standard and NTT DoCoMo, the world's largest wireless carrier, has announced its intention to support WAP. "As part of our support for WAP and a single industry standard, Geoworks is happy to make its proprietary technology available to all members of the WAP Forum," said Dave Grannan, President and CEO of Geoworks Corporation. "We will be actively working with all members to ensure that they have fair rights to our technology." Geoworks is dedicated to driving a single, open standard for WAP to accelerate the worldwide market for mobile devices that can easily and instantly access and interact with information and services. "We have been studying the intellectual property, financial liability, and licensing issues carefully with an experienced team of advisors for quite some time," said Don Ezzell, General Counsel of Geoworks Corporation. "Our objective is to handle technology royalties in the businesslike manner proposed by the WAP Forum, and we believe our comprehensive licensing program is the right approach." Geoworks has already entered licensing discussions with several key WAP Forum members. The WAP Forum is the industry association that has developed the de facto world standard for wireless information and telephony services on digital mobile phones and other wireless terminals. Member companies include Ericsson Mobile Communications AB, Intel, Microsoft, Motorola Limited, Nokia Mobile Phones, Phone.com Inc., and QUALCOMM Inc., among 200 other member companies around the world. Geoworks has posted on its web site (www.geoworks.com) a white paper entitled "The Geoworks Wireless Internet Patent: Invention and Innovation in Flexible User Interface Technology." The white paper details many issues of interest to WAP Forum members and non-members, including licensing details, legal issues and technical information.