Avigilon Acquires 96 MORE Patents

Spending $80 million on patents last month was evidently just the start.

Now, Avigilon has acquired 96 more patents from 4 different companies.

In this note, we examine this high risk / high reward strategy and how it can impact rivals and the industry at large.

Deal Overview

Avigilon spent $13.375 million buying 96 awarded patents and 25 applications from 4 companies:

• BRS Labs - the infamous analytics company who has spent $100 million trying to revolutionize analytics
• Facedouble [link no longer available] - a service / site that is no longer available, it developed 
• ITS7 - a company without much of a web presence but that held a patent on "Smart network camera system-on-a-chip"
• VideoMining - a niche retail analytics developer

Which patents were specifically acquired was not disclosed. A future Canadian government filing may include more details.

Patents as a Weapon

This deal further signals that Avigilon intends to use patents as a competitive weapon to beat their rivals. There's just no other good reason to spend nearly $100 million on patents from 5 different companies. The level of 'investment' is huge and cannot be returned through reduced litigation threats and could take a decade or more to pay back from RAND patent licensing.

The only way Avigilon can generate sizeable returns in the next 3 to 5 years from these deals is to use it to block / knock-out competitors for large scale end to end surveillance deals. This is, of course, the primary business / revenue focus anyway. Having these patents, and threatening competitors with litigation, can either result in extremely high patent royalties or ensuring that Avigilon wins the overall project.

High Risk

While we believe Avigilon can succeed with this strategy, it certainly has high risk.

First, Avigilon investors have shown impatience for short term profitability. Now that Avigilon has spent 60% of their war chest (including money that was raised at levels 70% over their stock price currently), they are going to need to show investors that this gambit can deliver returns quickly.

Secondly, the more of these patent deals they do and the clearer it becomes that Avigilon is going to use these patents to harm their competitors, the greater the probability that one or more decide to fight back, trying to invalidate key patent claims. On the other hand, so far surveillance manufacturers have largely ignored or quickly tried to settle with the patent trolls and threats they have faced.