Part III: Enough with the Troll Narrative: The New Era has Arrived

Middlemen Graphic

The “troll” term was ridden to such great heights – to provide air cover for much more menacing behavior from certain companies and non-profits…

 

Tom Hochstatter - Managing Editor, IPWire  by: Tom Hochstatter | August 16, 2017

[This is the third of a three part series dissecting the patent troll myth, exposing the actors still lurking to perpetuate it for ill-gotten advantage and a clear path forward for all us espousing the virtues of intellectual property. Part I and Part II]

In my first and second post in this series I outlined why this ridiculous, and now, potentially defamatory, term was applied to our all-important innovation industry. It wouldn’t be right to squabble about this problem, point a bunch of fingers and not offer a rational and reasonable way out.

 

First My Mea Culpa

As one of the original “squawkers”, I’ll take my share of responsibility:

  1. for letting things go too far, and getting this bad and primarily just bitching about it, and,
  2. to now do something positive about it and not just crow about it on this blog.

Now yours…

 

So Where To?

How about we start with a different vocabulary? In addition to shelving “troll”, let’s add non-practicing entity (NPE), patent assertion entity (PAE) to our banned list. They are overly technical, hard to provide a common definition and slightly scary to an outsider. They cause more arguments than they solve.Middleman definition

So, I’m moving to middleman. It’s simple and people understand it in almost any business situation – even when those same people are not steeped in that particular industry. An Internet definition I believe we can all understand and then ascribe to the patent industry. (see right)

Translated: a person [or company] that buys, licenses or contracts [patents] and sells [or licenses] them to another [company] or consumer [that needs them to best operate own their company]. Or, a person [or company] who arranges [patent] deals between [or among] other people [or companies]. It’s pretty simple folks.

In the case of a middleman, a patent middleman, or otherwise, that middleman either adds a proven value to the marketplace – and gets to stay and get paid for said value, or gets found out by that market’s participants as a bad actor – and they get flushed by macro market economics. Perhaps its the invisible hand that slaps them. No need for name calling or Congressional hearings.

Dominion Harbor is an effective, valuable and highly successful patent middleman that provides a vast array of services to the invention and innovation industry. Go check out our website for some stats and references. We executed nearly $1.0 Billion in patent transactions for our clients and much of that would never have transacted had it not been for our assistance. One of our primary goals as a patent middleman is to make our market even more efficient – driving deal costs down and patent value and deal volume way up.

Now with a bit of hindsight on our side look back – free market economics took care of the Shipping & Transit and Personal Audio knuckleheads. The public IP companies with similar one hit wonder business models are either dead or have pivoted back into true product operating companies. All this in spite of AIA in my opinion – we just had to be patient. Unfortunately, the law of unintended consequences bit is by devaluing all patents and patent rights when we rushed in to “save ourselves, from ourselves.” Just Read This Paper from the Regulatory Transparency Project.

So hopefully you all now see with the “troll” term was ridden to such great and negative heights – to provide air cover for much more menacing behavior from companies and non-profits like these.

 

A Story and then Let’s Wrap

I have yet to read a Wall Street Journal or Financial Times article touting the “Money Troll” or “Wall Street Troll” for anyone that sits between buyer and seller of securities and helps facilitate a financial transaction in a meaningful way.

[Note: I did search the WSJ for the “troll” term and not until Page 3 of the results did an article about that term surface for patents – the recent #SCOTUS TC Heartland decision. Nearly all of the rest were about Martin Shkreli and his recent escapades.]

 

Snap’s Snap Fall from Grace

Let me give you a recent Wall Street example that I believe could qualify, but as a follower of the law I have to honor their behavior. I, for one, just choose not to like it.

Snap, Inc. recently went public and one of its co-lead underwriters was Morgan Stanley who along with Goldman Sachs earned a majority of the $85.0M in fees associated with its IPO. Not a bad haul. As we all know an underwriters job, ultimately, is to sell (sell and hype) that pending stock supposedly based upon deep due diligence by those same underwriters to support that company’s stock price, or the overall corporate valuation, etc. Simple enough, right?

Morgan Stanley was issued 60.5 million shares in its allocation for the IPO, by far the largest. The IPO then got priced at $17.00 per share and even then it was oversubscribe by ten times the IPO allocation of shares to the public. This usually means the stock will pop upon its release; it did pop and rocketed to $29.44 as its all time high.

 

You still with me?

Fast-forward to May 10th to Snap’s first earning call and the whole world is suddenly surprised about their earnings and their new earnings guidance is not what anyone expected. Really?

The Morgan Stanley underwriting crew with more Ivy League diplomas than custom suits didn’t see this coming? Really? So down comes the stock price, rumbling, stumbling, bumbling to new lows.

And now the kicker – on July 11, low and behold, Morgan Stanley’s own analysts downgrade Snap stock from a $28.00 target to $16.00 – $1.00 below its initial IPO price just 5 months previous. Interesting timing to see such a fall for a stock in such a short period of time. [I’m not ignoring US Federal Securities laws prohibiting an Investment Bank’s research department from collaborating directly with underwriters. I’m assuming my reader knows this and anyone please feel free to cite the laws in the comments section.]

How much of the Morgan Stanley allocation was “flipped” at a price above the IPO with a majority of those “flippers” receiving an allocation ever planning to hold the security long term? Is there a “Troll” among them there? Nope, just people acting on their own self-interest, behaving within the law (assumedly), and, well, winning.

And the world marches on: no pejoratives slung; no new Congressional Legislation proposed; no new well-intentioned non-profits formed (and secretly financed) to root the scourge of Wall Street out. Nobody got time for that…

Nope, just middlemen (and women) doing their jobs within the bounds of the law – helping a seller, Snap in this case, meet a few hundred thousand buyers efficiently and then executing a transaction that both sides, at the time, felt was fair and reasonable.

So why, with all the diplomas, extra degrees and two and three letter acronyms after most folks’ names in the patent space – is this concept so hard to grasp?

[This is the third of a three part series dissecting the patent troll myth, exposing the actors still lurking to perpetuate it for ill-gotten advantage and a clear path forward for all us espousing the virtues of intellectual property. Part I and Part II]

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