http://www.cringely.com/2012/04/microsoft-aol-patent-theater/

Late Friday update. I’ve not been able to uncover anything more about this story from those I know who should know. There does seem to be some reluctance to comment. More digging to do when back on Sunday.

Let’s Go with Ryanair this quarter has a picture of it’s chief skank officer, claiming “thank you for choosing to fly with Ryanair, the worlds favourite airline”…ha! firstly nobody in their right mind would “choose” to ride with your airline, it’s just there is often no choice. Second, just because a lot of people use your airline doesn’t make it a favourite….people use it often as there is no choice, but that doesn’t mean using it is anything other than a tortuous, horrific and awful customer experience. Look up favourite in any dictionary Mr o Bleary, you’ll find words that describe an experience you’ll want to repeat, not something that is anticipated with dread and regret for choosing one of the worlds truly dreadful customer experiences. 

Looking at this objectively and with an advisors hat on, what is it that is wrong with Ryanair? Let me give you two very fresh examples. I’m flying back from Sevilla and find I’m 4 kilos over. Bugger, I think. I thought it was close but not over, as the smiling assistant tells me that will be €80 to pay. €80!  Not that they haven’t got space, it’s just another way of taking the piss by maximising profit at the customers expense. Loathe point #1. Angry, disillusioned, yes I know you charge but it’s like excess parking charges and private contractors who enforce them…punish me but please there is no need to take the piss because it makes me hate you. There is just no need. I’m then standing in the queue to board and I’ve got my tennis racket in my backpack. Sorry, can’t travel with that even though we have tons of space in the cabin. That will be…..let’s pause to let you guess……..that will be an arbitrary and punishing, way out of context and scale €50 to put that in the cabin. Grrrrrrrrrrrr. 

I totally utterly and absolutely despise you Ryanair and I hold you personally responsible Michael o Leary. Don’t think you can be the smiling laughing face of Ryanair doing your aeroplane impression in your magazine and expect that the shit doesn’t stick. Ugh, yuk, aaaarggh, steam. 

So if I were your adviser on brand what would I say? Get to know what your customers like and want. And get to know what it feels like when someone is taking the piss and only trying to take every penny from your pocket during the experience. Look at Apple if you want to learn. A brand with universal appeal and massive margins in the most hostile competitive environment, but which will achieve longevity by delighting it’s customers. Not in showing contempt for them. Just because you started out with a taking the piss apparently low cost but not really model, don’t feel that need to perpetuate it. Adapt, take slightly lower profits to engender goodwill. Find new roots and brand values. Grow up! Probably replace the founder with someone who cares even 1% about customers and not 100% about profit. 

Or what? Or else you will find in time that people will delight in finding an alternative. And alternatives there will be, as you’ll grow too big and, like Tesco, you’ll cap out and start slipping back and never recover. It will happen and you know it. And by the time you realise it will be too late to adapt. 

There are barriers to entry but they aren’t that high and you aren’t that cheap any more. So learn and adapt or please, just die. 

As an anecdote for you btw, I travelled by Easyjet to Sevilla in November and, to my amazement, one of the worlds favourite brands, Rafael Nadal, travelled on the same flight (now isn’t that cool, with Cisca too, braving the natives to travel at 7am from Gatwick and he didn’t even have speedy boarding!) With a huge bag of Babolat rackets on his back. Any extra charge for that bag. No? You see Easyjet has adapted, caused by a change in founder. Profit sacrificed for longevity. It can happen. If it doesn’t with Ryanair, then sell. Fast. 

1. AOL needs the cash and cannot monetize the portfolio itself in the time needed to give its board some breathing space;

2. MSFT clearly has a need for these, and it’s a good bet that this portfolio is not being acquired just to give MSFT an additional revenue stream. MSFT has been a very quick learner of the strategic value of patents and is slowly perfecting its execution. This is another bold move by MSFT is its IP evolution. Somewhere in this portfolio is also possibly another big clue to MSFT’s corporate strategy, continuing it’s move towards the cloud and towards the consumer;

3. At the typical rates earned by corporate finance advisers and investment banks this may well be the easiest and quickest earned $75-100m by an adviser. A stunningly fast return in a market where new go to names are emerging. Well done Evercore Partners.

As an update on this story, it’s great to see our own Tom Ewing appearing on the mainstream NBR news report to explain the context. NBR was so keen to get it’s story out it gave Tom only a few minutes to brush his hair and prepare and was happy with a grainy Skype connection but Tom was polished as ever.

Wow! This year could well exceed last in terms of big IP news stories, for volume in not single deal sizes.

Thanks to my favourite Beeb for being swiftest with the news.

I’ve had this theory for a while, bringing this back to IP, that Apple’s patent fights of 2011-12 and the panic buying of MMI by Google are about one thing–the price for community access. Apple, in my theory, is building the World’s largest community and hasn’t even started monetising it yet. But its major difference over say Facebook or Google is that it is a deeply personal and intensely pleasurable thing to be part of the Apple community. A community that doesn’t compromise on substance or style. A community users want to be part of and which could pervade all parts of a user’s life.

Ask me for my payment details and to process all my payments through Apple-done, ask me to use Apple as my search provider-done. To be my social network provider-done. In fact, ask just about anything and the answer is yes of course.

And why? Because there is no compromise and Apple is trusted by an increasingly large community. Who know that Apple makes things feel good and makes them simple and stylish. Trust. As simple as that.

My theory expands into imagining what keeps Larry Page and Mark Zuckerberg awake at night. Answer. Apple competing in their core markets. Search 3.0 and Social Media 2.0.

And what should but probably doesn’t keep various banking giants awake at night. Answer, Apple competing in their core retail banking markets. I don’t think the banks will even see it coming.

There’s a deep IP angle to this.

We’ve said for a long while now that patent monetisation is passing through a phase, an epoch where monetisation is viewed through a one-D lens of “I’ll wave a big litigation stick at several large companies, particularly those later but more successful market entrants and that will demonstrate the value of my IP” or variations on that theme like “getting someone else to buy my stick and waving it at several large companies, particularly…..etc etc”.

I was taught a basic lesson in economics by an investment banker some while ago and it goes like this. If you can see a benefit then also try to work out where the cost is, it may not be obvious. And it particularly may not be obvious in an intangibles world where the impact may not be easy to see. Let’s explore that theory and wonder where the AOL cost could be.

According to our intangibles model, the benefit will be found by AOL in some short term disruptive revenues. Expect AOL to find some patents that Facebook, Twitter or a host of other web-based success stories are infringing and to take licensing revenues from them. The revenues  may even be turned into a capital sum by selling off all or part of the portfolio and taking a license back.  All pretty mundane and frankly unimaginative. And very short term. The sort of plan that could only really be invented by a legal mind.

And the cost? In our minds both Yahoo! and AOL will feel the cost in their corporate reputation. In fact Yahoo! could also feel it in its own pocket in net payments out if Facebook has done its job well in what it has bought from IBM. AOL too could feel the wrath of a newly patent confident and stocked up Facebook if it decides to wave its stick in that direction.

Short term revenues 1, corporate reputations nil, or in fact more likely minus a lot. Not a good outcome. Perception wise neither benefit. They would, we think, be better trying to work out how to better out-innovate and reinvent themselves. Think different. Facebook is not a popular social network with many of its users as it scrambles to monetise its base. Is there not a better way, focussed on giving a better consumer experience, than dragging a reputaion through the IP mud?

Food for thought AOL board?

The Guardian Online this afternoon reports that the purchase is of 750 families with some insightful comment from Boult Wade Tennant on the context. The comment is right; Facebook is up against it and was late to the patent party but fills it’s patent gap and vulnerability by going on a buying spree using it’s cash reserves wisely. No news on value or any intermediaries involved but I’m hazarding a guess that RPX had a role, and have a role in guiding Facebook through the process of navigating the choppy waters of getting away an IPO with multiple patent claims in tow.

We ‘re seeing this as a very positive step for innovation in the UK. Although we would have loved to see the legislation cover a wider IP scope, this is at least a very good start and will hopefully encourage more UK businesses to consider their IP strategies with more seriousness (and non UK businesses to consider the UK as their corporate home) given the immediate ROI available.

It makes for a positive start that GSK  has announced its first new factory in the UK for a generation based on the introduction of the legislation. Given the certainty of the announcement, GSK must have a high degree of confidence in their estimated Patent Box savings and their timing. The legislation is quite complex and will stretch smaller companies with less resources in many ways.

Even with the Patent Wars of 2011 and the continued IP related news stories (Apple-iPad, Yahoo trolling, AOL considering trolling, RPX & Alcatel Lucent) in 2012, it still seems that European CEOs are lagging behind their US and Asian countrparts in IP understanding. We’re very hopeful that this legislation can have a catalysing impact at least in the UK. More to come but for now, well done George.

My only expansion point is to emphasise the vital importance of learning new IP skills along this journey. If we are going to make this journey as a country, and let’s face it, we don’t have much choice, we need to learn how to capture, protect and monetise IP in the new world economy. The UK is not good at this right now. We must get better.

This feels exciting for the UK. Alongside the Patent Box legislation that will be introduced this week, it feels as though the politicians are catching onto a key strategic plank to support a new UK PLC.

The article in full:

This should be interesting as amongst the first  but not surely the last big social media patent fight. We predict settlement–and probably this side of the IPO as a large glow of common sense descends and persuades both that this really isn’t worthwhile.

I’d fogotten that Yahoo got 2.7m Google shares when suing just before their IPO. No wonder there was such an absence of surprise with Facebook.

Who’s next to be duffed up by the new troll on the block?

The letter is powerful.

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.

As IAM reports, this is becoming a trend in large well known public companies. In our expeience it is also becoming a trend in smaller public companies and in private companies. Boards, shareholders and others asking “why have we got these?” and “if they are any good, what can we do with them to create value?”.

It doesn’t feel to be coincidental that the public statement comes out in the same month as Yahoo! starts to get active with its portfolio. Another patent licensor on its way to being born. Watch out Facebook and Google.

Intangible Economy reports an AOL board response too. Their final paragraph relfects our own thoughts.

 ”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?”