Date: Fri, 21 Jan 2000 03:21:13 -0500 (EST)
From: Gregory Aharonian <srctran@world.std.com>
To: patent-news@world.std.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.