AOL Board fight on patent monetization

According to a story in the Atlantic Wire, a major shareholder is going after AOL for not being more aggressive in monetizing its patent portfolio. Starboard Value LP has sent a letter to the AOL Board late December and then again in late February criticizing the Board’s actions. Starboard’s February letter highlight the patent monetization issue:

As one specific example, in addition to the valuable assets highlighted in our December Letter, AOL owns a robust portfolio of extremely valuable and foundational intellectual property that has gone unrecognized and underutilized. This portfolio of more than 800 patents broadly covers internet technologies with focus in areas such as secure data transit and e-commerce, travel navigation and turn-by-turn directions, search-related online advertising, real-time shopping, and shopping wish list, among many others.
Since our initial public involvement in AOL, we have been approached by multiple parties specializing in intellectual property valuation and monetization, some of whom believe that (i) a significant number of large internet-related technology companies may be infringing on these patents, and (ii) AOL’s patent portfolio could produce in excess of $1 billion of licensing income if appropriately harvested and monetized. Unfortunately, several of these parties have expressed severe frustration that AOL has been entirely unresponsive to their proposals regarding ways to take advantage of this underutilized asset. The Company’s inaction is alarming given our understanding that many of the key patents have looming expiration dates over the next several years which could render them worthless if not immediately utilized.

AOL’s response – we’re working on it:

We have a valuable patent portfolio and several months ago, prior to Starboard’s first letter, the AOL Board of Directors authorized the start of a process, and hired advisors, to realize the value of these non-­‐strategic assets.

I don’t know if this will result in a possible AOL auction or other sale of their patent portfolio. But since Starboard Value has also nominated its own slate of Directors for the AOL Board, this could result in a major proxy fight. Regardless of the outcome of that fight, the mere fact of its occurrence would send a shot across a lot of corporate bows. How you handle your IP assets has become a Board of Directors issue. Will the broader question of managing intangible assets follow?

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