Patriot Scientific adding to patent portfolio
By DOUG SHERWIN
Thursday, August 24, 2006
David Pohl has an issue with the term "patent trolls."
It's a moniker derisively used to describe companies who acquire patents for the express purpose of charging a fee to anyone found to be using the patented technology. These patent owners don't actually use the technology themselves.
"It's too bad this so-called patent troll label carries a negative connotation," said Pohl, president and CEO of Patriot Scientific (OTC: PTSC). "Patent laws are designed to protect the intellectual property of people who were inventive.
"In my personal opinion, it's not necessarily bad for a company to acquire rights to intellectual property because there are many investors out there who don't have the necessary capital. There's nothing inherently wrong in (the acquisition of patents by) a business that has experience in licensing and, in effect, creating value that the original invent! or deserves."
Pohl especially bristles when the term is applied to his company, which licenses and markets intellectual property involving semiconductor technologies.
The Carlsbad-based business jointly owns the Moore Microprocessor Patent portfolio with the TPL Group, a Silicon Valley company that specializes in the management of intellectual property assets.
In the last eight months, the venture has successfully acquired licensing agreements from six major companies, including Sony (NYSE: SNE), Intel (Nasdaq: INTC), HP (NYSE: HPQ) and Fujitsu Limited.
"Patriot acquired the technology when the company was young, when the technology had a distinct use and application in work that Patriot was doing on its own product and development," Pohl said.
"Patriot really acquired technology and rights t! o intellectual property that it not only intended to use but also did use and market."
First incorporated in 1987, Patriot Scientific originally worked on projects for military and government applications.
Its major focus in the early 1990s was the development of a ground-penetrating radar. During the process, it acquired technology that is "basically fundamental to the design or architecture of almost every microprocessor in use around the globe today," Pohl said.
The technology's two original inventors applied for a patent in 1989. It took nearly 10 years for the application to get granted, which eventually resulted in seven different patents.
In the meantime, the inventors sold their interests separately to two different companies, which ultimately became Patriot Scientific and TPL.
Patriot, which needed the microprocessor design for use in its ground-penetrating radar, soon discovered "it was! more exciting and made more sense to focus on the microprocessing chip than on ground-penetrating radar," Pohl said.
But Patriot had difficulty raising capital and marketing the chip. So in the summer of 2005, company officials decided to join with TPL to license the patented technology together.
"It became apparent the bundle of patents was really valuable," Pohl said. "As a result, Patriot, which had market recognition problems and financial problems, found itself in a position to have really impressive names signing up for licenses."
The company streamlined its operations, eliminating its research and development operation, and now has a team of five executives in Carlsbad.
Patriot then paid off some long-term convertible debt, and issued two cash dividends to its shareholders in a period of six weeks last spring. The first was for 2 cents a share and ! the second was for 4 cents a share.
"Sud denly a company that had been struggling for recognition in the marketplace leaped into the limelight with the success of its licensing program," Pohl said.
According to Pohl, more than 300 companies "have been put on notice" that they might be infringing on Patriot's portfolio, making the potential for continued revenue extremely promising.
The company is now thinking about paying more dividends in the future, Pohl said, as well as investing in other technologies that might be compatible with microprocessing.
"We're very enthusiastic and optimistic about the potential of this company in terms of just the licensing of its existing patent portfolio," Pohl said.
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