DSS sues the big guys
Matthew Daneman, @mdaneman Published 7:48 p.m. ET Dec. 24, 2014
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If one is to be judged by the quality of one's opponents, Document Security Systems Inc. is in some pretty rarefied company.
The Rochester-based firm specializes in anti-counterfeiting technology — collectively its AuthentiGuard line — but with a healthy side business of suing some of the biggest names in the technology world over alleged patent infringement or other misuses of proprietary technology.
DSS currently has lawsuits going against Facebook Inc., LinkedIn Corp., Apple Inc., Taiwan Semiconductor Co., NEC Corp of America, and Lenovo Inc. Last month, after having its 2011 lawsuit against Coupons.com dismissed, Document Security appealed to the U.S. 2nd Circuit Court of Appeals.
And more are in the works. CEO Jeff Ronaldi in a conference call last month said DSS executives "anticipate filing additional infringement (complaints) on our current patent portfolio" with more litigation as well as licensing in 2015.
Companies whose major focus is in the areas of IP acquisition, licensing and protection — like New York's Vringo Inc.. and Virginia's Spherix Inc. — have taken a drubbing on Wall Street lately. Such firms are often derided as "patent trolls" for allegedly using those patents only as a means for expensive licenses and lawsuits, and not for actually churning out products or services.
Vringo had been averaging between $3 and $4 a share most of the spring before a sharp plunge in August after a court ruling in a lawsuit against Google sent it below $1, where it's largely been since. Spherix, which started the year in the $8 range has been on a steep slide since then, briefly dipping below $1 in October.
And privately-held Intellectual Ventures, the 800-pound gorilla of such firms, reportedly laid off about 20 percent of its workforce earlier this year.
DSS, meanwhile, has felt much of the same pain. After a peak in January at $2.50, its stock price has been in a long slow slide, dipping below $1 in September and remaining at roughly 50 cents since the start of the month.
"We've been trading tick for tick with a bunch of entities whose only assets are patents," said DSS Chief Operating Officer Peter Hardigan. "We're painted with the same (patent troll) brush. It doesn't matter anything else we're doing. If you're a little company and engage in patent litigation, you're a bad actor, a bad person."
"Patent troll" is a tag DSS rejects. "DSS is deliberately a different entity," Hardigan said. "Roughly 100 employees. We have a packaging plant in Victor. We have a plant in California. We have a 30-year operating history."
But, he added, "Our survival ... is entirely dependent on our ability to protect our IP."
Before 2006, DSS made pretty much all its money from intellectual property licensing. It was that year it bought a plastic card manufacturer in California. Then came a series of acquisitions in the Rochester area — commercial printer DPI of Rochester LLC, Victor packaging company Premier Packaging Corp., and ExtraDev Inc., an IT and cloud computing firm.
But after its 2013 merger with Lexington Technology Group, a intellectual property firm, DSS started spending considerably on buying patents.
DSS owns more than 120 U.S. patents, as well as numerous patent applications. According to the company, most of its patent holdings are in hardware and brand protection technology.
All of that IP protection activity comes as the ground beneath IP is shifting rapidly — something Ronaldi described to analysts as "the many adverse changes that have occurred in the IP landscape this year."
One of those was a September ruling by the U.S. Patent and Trademark Office ruled against DSS subsidiary VirtualAgility in a 2013 suit brought against Salesforce.com.
But perhaps the biggest such change was the U.S. Supreme Court in June upholding the patentability of software, but said patents that just cover abstract ideas aren't legitimate. A year ago, the U.S. House passed the Innovation Act aimed at cutting some of the legal power of so-called patent trolls, though similar efforts died earlier this year in the Senate.
"Everything Congress is doing, they're throwing out the baby with the bathwater," Hardigan said. "I think more companies are going to look like DSS in the future. They're going to realize their viability is going to depend on going head to head with big tech companies trying to crush them."
Small companies "are going to have to get a lot more aggressive in defending their IP or they're going to have nothing," he said.
MDANEMAN@DemocratandChronicle.com
Matthew Daneman, @mdaneman Published 7:48 p.m. ET Dec. 24, 2014
CLOSE
AuthentiGuard.jpg
(Photo: Provided photo)
CONNECT
TWEET
COMMENT
MORE
If one is to be judged by the quality of one's opponents, Document Security Systems Inc. is in some pretty rarefied company.
The Rochester-based firm specializes in anti-counterfeiting technology — collectively its AuthentiGuard line — but with a healthy side business of suing some of the biggest names in the technology world over alleged patent infringement or other misuses of proprietary technology.
DSS currently has lawsuits going against Facebook Inc., LinkedIn Corp., Apple Inc., Taiwan Semiconductor Co., NEC Corp of America, and Lenovo Inc. Last month, after having its 2011 lawsuit against Coupons.com dismissed, Document Security appealed to the U.S. 2nd Circuit Court of Appeals.
And more are in the works. CEO Jeff Ronaldi in a conference call last month said DSS executives "anticipate filing additional infringement (complaints) on our current patent portfolio" with more litigation as well as licensing in 2015.
Companies whose major focus is in the areas of IP acquisition, licensing and protection — like New York's Vringo Inc.. and Virginia's Spherix Inc. — have taken a drubbing on Wall Street lately. Such firms are often derided as "patent trolls" for allegedly using those patents only as a means for expensive licenses and lawsuits, and not for actually churning out products or services.
Vringo had been averaging between $3 and $4 a share most of the spring before a sharp plunge in August after a court ruling in a lawsuit against Google sent it below $1, where it's largely been since. Spherix, which started the year in the $8 range has been on a steep slide since then, briefly dipping below $1 in October.
And privately-held Intellectual Ventures, the 800-pound gorilla of such firms, reportedly laid off about 20 percent of its workforce earlier this year.
DSS, meanwhile, has felt much of the same pain. After a peak in January at $2.50, its stock price has been in a long slow slide, dipping below $1 in September and remaining at roughly 50 cents since the start of the month.
"We've been trading tick for tick with a bunch of entities whose only assets are patents," said DSS Chief Operating Officer Peter Hardigan. "We're painted with the same (patent troll) brush. It doesn't matter anything else we're doing. If you're a little company and engage in patent litigation, you're a bad actor, a bad person."
"Patent troll" is a tag DSS rejects. "DSS is deliberately a different entity," Hardigan said. "Roughly 100 employees. We have a packaging plant in Victor. We have a plant in California. We have a 30-year operating history."
But, he added, "Our survival ... is entirely dependent on our ability to protect our IP."
Before 2006, DSS made pretty much all its money from intellectual property licensing. It was that year it bought a plastic card manufacturer in California. Then came a series of acquisitions in the Rochester area — commercial printer DPI of Rochester LLC, Victor packaging company Premier Packaging Corp., and ExtraDev Inc., an IT and cloud computing firm.
But after its 2013 merger with Lexington Technology Group, a intellectual property firm, DSS started spending considerably on buying patents.
DSS owns more than 120 U.S. patents, as well as numerous patent applications. According to the company, most of its patent holdings are in hardware and brand protection technology.
All of that IP protection activity comes as the ground beneath IP is shifting rapidly — something Ronaldi described to analysts as "the many adverse changes that have occurred in the IP landscape this year."
One of those was a September ruling by the U.S. Patent and Trademark Office ruled against DSS subsidiary VirtualAgility in a 2013 suit brought against Salesforce.com.
But perhaps the biggest such change was the U.S. Supreme Court in June upholding the patentability of software, but said patents that just cover abstract ideas aren't legitimate. A year ago, the U.S. House passed the Innovation Act aimed at cutting some of the legal power of so-called patent trolls, though similar efforts died earlier this year in the Senate.
"Everything Congress is doing, they're throwing out the baby with the bathwater," Hardigan said. "I think more companies are going to look like DSS in the future. They're going to realize their viability is going to depend on going head to head with big tech companies trying to crush them."
Small companies "are going to have to get a lot more aggressive in defending their IP or they're going to have nothing," he said.
MDANEMAN@DemocratandChronicle.com
