Avigilon Acquires All ObjectVideo Patents for $80 Million USD
Author: John Honovich, Published on Dec 18, 2014Wow.
You thought Object Video played hardball suing large manufacturers like Bosch, Samsung, Sony, Pelco, etc.
Now, Avigilon has acquired all of OV's patents for $80.3 million, and all of their licensing agreements with a who's who of surveillance manufacturers.
Good for Object Video
OV never succeded as a product company, despite being the first major provider and raising tens of millions. Finally, in 2011, they pivoted, raised $27 million in 2011 to fund a patent litigation / enforcement campaign. Now, they get to cash out. A good move for them.
OV also retains its services / R&D business, which is not part of the deal.
Good for Avigilon
This is very good for Avigilon as they now get to control who uses analytics and how much they have to pay Avigilon.
Avigilon is a fierce competitor to those companies and now those rivals need to pay Avigilon and ensure that they do not violate any OV / Avigilon patents.
This builds on Avigilon's acquisition of VideoIQ a year ago. Though the OV deal does not give them any new technology, it secures them the underlying patents to video analytics in general.
A half dozen OV employees who deal with patents / litigations will come to Avigilon as part of the deal.
This deal uses a little more than half of heretofore Avigilon's cash in the bank (~$150 prior to this acquisition).
Revenue for Avigilon
The direct way for Avigilon to generate revenue from these assets is the royalty payments that their rivals will now have to pay them. From what industry sources have noted, this averages a few dollars per camera running analytics. Avigilon says that currently OV's licenses generate 'millions' in revenue and that more specifics will be revealed once they file a business acquisition report.
[Update: $18 Million Already Paid to ObjectVideo, Now It's Avigilon's Turn]
The indirect way for Avigilon to do so is to use those patents strategically to block rivals and/or increase the costs of those rivals licensing from Avigilon. Also, from a marketing standpoint, Avigilon can surely emphasize that buying analytics from them is the best way to ensure that they violate no patents and will not be sued.
Bad for the Industry
These patents, in general, were bad for the industry, as they are so broad, many have felt that this was patent trolling from the very beginning.
Now, with Avigilon owning it, it is much worse for the industry. Avigilon does not have a culture of playing nice or sharing with others (nor should one expect them to). They will seek to use these patents to maximize their competitive advantage of their end to end solutions beating their rivals, who now need to pay Avigilon for the right to compete against them in video analytics / surveillance.
Analytics Future
Analytics have been the 'next big thing' almost every year for the past decade. Though analytics has not yet delivered, it eventually will.
And unless manufacturers rise up and spend the money to try to invalidate these patents (which is probably too late tactically at this point), they are now stuck with Avigilon dictating terms of using analytics.
Background Reports
For those looking for more information on Avigilon and Object Video analytics, see:
- Avigilon Analytic Cameras Tested
- Testing Avigilon / VideoIQ Rialto Analytics Unit
- ObjectVideo News and Events Directory
- Avigilon News and Reviews
What Do You Think?
19 reports cite this report:
Comments (44)
I cannot help but admire this ruthless move. Avigilon has no friends, and doesn't much care.
Stock price update: The market has opened and Avigilon stock is only up slightly (less than 50 cents / 2.7%) at this time.
Evidently, investors are not particularly pleased or upset with this move.
That noted, though the immediate revenue impact may be modest, we believe the strategic / competitive benefit of this deal to Avigilon could be tremendous.
Maybe the investors don't understand the impact?
I am not aware of who ObjectVideo went after. Were AgentVI and Briefcam one of them?
It appears Avigilon investors are more concerned about short term profits and revenue growth than long term strategic impacts (which are, in fairness, riskier than immediate cash in hand).
OV went after pretty much everyone.
As for the two companies you mentioned, AgentVI signed an agreement with OV. I have not seen any report of Briefcam signing an agreement.
Ultimately, though, the real impact is for the big manufacturers who need (or will need) analytics over the next decade.
It appears Avigilon investors are more concerned about short term profits and revenue growth than long term strategic impacts
That is the state of modern equities investing. Very few of us left who "buy and hold". I believe it's a symptom of modern society's focus on instant gratification.
For those who want to hear more from Avigilon, here is the 39 minute investor call audio recording.
A member mentioned to us that it was amazing that OV's patents, which include no products nor technology, sold for 2.5 times that what VideoIQ's entire business including technology, products, their own patents and ~$20 million in revenue did.
It's a good observation.
The premium for OV's patents reflect a few things:
- The gross margins / profits on patent licensing is extremely high, so if those agreements generate $3 million in annual revenue, perhaps only $300,000 in ongoing admin costs are needed.
- The patents could last another 10 to 20 years, depending on which patents are in question, when they were issued, etc. This means a (rising) and probably highly profitable revenue stream for many years to come.
- Last, but not least, is the strategic value of blocking or hindering competitors from selling video analytics because they can control the terms of licensing / allowing rivals to be in the market.
Of course, there is one really big risk. That is that the broadest patent ('945, for tripwire / calibration) is invalidated. Bosch tried this before but abandoned this after they reached a favorable settlement condition. However, such a process could take years, it has its own significant cost, there is no guarantee of winning, etc. It depends how tough Avigilon plays its hand negotiating with their rivals.
As somebody who has protected patents for a good number of years, I would like to add another view to the mix.
Successful patent trolling is an art form and when you add greed to the mix (something the Avigilon Management Team have demonstrated in spades over the past 5 years), typically nobody wins.
Large successful companies typically aquire patents to increase their intellectual property and strengthen their R&D capabilities.
The trouble Avigilon will have is deciding what is more important; increasing the R&D capability of the company by puting the patents to work OR tweaking the royalty framework to make instant profits and make shareholders very happy.
My ancient educated guess would be that Avigilon will find it hard to resist making easy money versus working hard to make a better Avigilon.
I think this purchase will benefit nobody in the short to medium term and will probably set the industry back a few years while all the patent lawyers fight with each other ie Truth, Justice and the American Way.....
"increasing the R&D capability of the company by puting the patents to work"
I do not believe Avigilon is claiming the patents will help them in any way on the R&D side. From the call, Avigilon's CEO stated that ‘what we acquired is not technology but patents that cover the technology’ and that ‘we felt videoiq was the most robust advanced technology’. By their own acknowledgement, OV gives them nothing in terms of technology.
While I hear what you are saying, "putting the patents to work" also includes freeing up the ability to innovate in an unimpeded environment. If Avigilon's R&D budget increases and more inhouse developed patents result then we have proof that they have been putting the patents to work. If we see R&D remain flat or reduce and worse we see the income stream from royalties increase then nobody will benefit from the patent acquisition.
I don't believe the industry is big enough or mature enough to be able to afford the extraordinary cost of contesting patents so its easy to see why patent trolling may well be a new and profitable core competency for Avigilon.
Mind you, for the sake of our industry, I would be more than happy to be proven wrong.
"While I hear what you are saying, "putting the patents to work" also includes freeing up the ability to innovate in an unimpeded environment."
No. Avigilon already had patent protection via VideoIQ's agreement with OV. They are no more unimpeded today than they were last week.
Thanks for your perspective Chris. I enjoy reading other people's thoughts and opinions.
OV also retains its services / R&D business, which is not part of the deal.
Any idea what agreement may be in place so that OV's R&D unit itself would not be beholden to Avigilon's control of their erstwhile patents? One would assume that whatever OV is developing would likely build on their existing portfolio.
License in perpetuity unless company sold? No partnering? Tricky stuff...
My understanding of what OV does now is more professional services than product / commercial solutions. We covered some of those contracts here: ObjectVideo Revenue Breakdown.
To that end, I do not think Avigilon is concerned about that as being a competitive infringement. Avigilon's CEO alluded to this briefly in the call but made it clear it's not a concern.
If this was such a good deal, why wouldnt a large, publically traded company see the value and make an offer to OV?
I would think a large publically traded company must have conisdered buying OV and what that would mean fincaially and competitivly but decided not to pursue after some due dilligance.
some of the quesitons from the analyst seem to indirectly question the purchase.
Well, Avigilon is a publicly traded company and they are worth ~$820 million as of today.
I think the big reason that Avigilon bought this, rather than an outsider, is that these patents have far greater strategic / tactical value to an incumbent surveillance company. For an outsider, the patents are worth simply the financial projections of the royalty streams over the patent lifespan. But for Avigilon, these patents can be used to help sell more of their own analytics and their own end to end systems (by increasing costs and creating barriers to entry for rivals into analytics). So the patents should be worth more to Avigilon than a large outsider.
So do these patents only effect the American market? Surely wont effect AgentVI, IOIMAGE or any of the other video analytics operating outside the USA. There seems to be a big upsurge in video analtics for people counting in marketing applications wonder if this is going to be efffected. I am sure the shareholders of Avigilon wont be happy if they loose a challenge in court. Hats off to Avigilon, taking the initiative to drive the analytics market though.
Since every major manufacturer needs to sell in the US market (because it is so large), it will effect pretty much all of them.
For your examples, ioimage is owned by DVTel, DVTel is headquartered in NJ, USA. And AgentVI already has a license from OV, which is now owned by Avigilon.
Btw, I am pretty sure OV has patents filed outside the US as well. I don't know how many or where, but this point came up during the course of the litigation over the past few years.
Does anyone know how much total coin was pumped into OV by DARPA and US Navy over the years? OV has, and has had, some smart people working on amazing projects. They were at one time considered the standard for video analytics. Former DARPA PhDs started OV, then collected pork grants as video analytics was starting to really take shape in the early 2000's. US Small Business Innovation Research / Tech Transfer records show $17M+ in grants to OV over the past 10+ years: OV's SBIR Page. Other outside investors took a swing at OV payback.
As a US taxpayer, I question two things: 1) Did OV actually contribute anything of true value to DARPA/Navy, the industry, or customers?; 2) Did/does the DoD stand at all to recoup any cash benefit from the high-risk grant money it gave to OV? I have to assume that OV was delivering what was promised, otherwise why in the world would they continue to throw money at them for years? Why them? Were they the only ones going after these projects? Were they coming up with ideas and feeding them to the DoD to turn into programs that would lead funding back into OV? My pea brain can't wrap its arms around why DARPA/Navy would be so satisfied to be as loyal as they were, while hundreds, if not thousands of end-customers worldwide ended up licensing a product that largely underwhelmed and is most likely not in active use today.
I'm not suggesting anything was illegal, but more so deceitful. And to announce this at holiday time is all the more a kick in the pants of this industry who can look forward to Avigilon's cute little 'Wolf of Wall Street' approach to business getting cranked up a notch. Not only will customers get the whole truth when Avigilon represents their product, but an extra dose of 'the product you have AND the product(s) you are looking at buying are both probably infringing on our patents.'
Somebody please debunk these concerns in part or whole.
As a point of fact, OV has won over $50 million US government contracts including over $20 million in 2012 / 2013.
It is amazing compared to how poorly their products did in the commercial space.
The biggest year they had in FedGov was was 2012, with $13m, and 2013 was back down to $7m. In the grand scheme of security with the Feds, OV is a pretty minor player. Even if they could keep things at $13m, that much business could be easily won by an company with 10 - 20 employees.
| Govt Contracts (Defense) - Count/$ Dollar Amount | |
| 2013 | 16/$7,887,685 |
| 2012 | 19/$13,269,019 |
| 2011 | 13/$2,383,363 |
| 2010 | 18/$5,476,166 |
| 2009 | 12/$5,827,478 |
| 2008 | 9/$2,488,956 |
| 2007 | 9/$6,876,811 |
| 2006 | 6/$2,267,173 |
| 2005 | 11/$2,752,346 |
| 2004 | 9/$789,102 |
| 2003 | 10/$2,225,266 |
| 2002 | 3/$1,010,769 |
| 2001 | 1/$359,078 |
| 2000 | 2/$518,024 |
I doubt OV's good/bad/dubious product performance reputation will be a factor with Avigilon owning these patents.
Avigilon does not/will not 'represent (OV) product', just their right to pursue infringement in court.
OV got $80M+ for these in exchange for all the risk they leveraged in suing everyone. That risk paid off, now Avigilon has a tight court tested weapon they can wield.
I think it's clear: OV's best performing/most lucrative development was their legal team, not their analytics.
A fly in the ointment?
Sounds like Avigilon has effectively cornered the market in analytics; in addition to their acquisition of market leader VideoIQ, they now gain agreements with Axis, Bosch, Panasonic, Sony, Pelco, Hikvision and Tyco to name but a few. Is that everybody?
Almost... Missing is Samsung Techwin, who was able to successfully defend itself against OV's claims back when others were caving. How did they do it? The OV spin was that once they got a good look at Techwin's technology they realized it was too primitive to infringe. Techwin simply claimed they were right all along. And clearly Techwin is now providing more than just primitive analytics with their Wisenet III line.
And just recently (August), they were granted this sophisticated patent:
METHOD AND APPARATUS FOR DETECTING ABNORMAL MOVEMENT
Provided are a method and apparatus for detecting an abnormal movement. The apparatus includes a feature tracing unit configured to extract features of a moving object in an input image, trace a variation in position of the extracted features according to time, and ascertain trajectories of the extracted features; a topic online learning unit configured to classify the input image in units of documents which are bundles of the trajectories, and ascertain probability distribution states of topics, which constitute the classified document, by using an online learning method which is a probabilistic topic model; and a movement pattern online learning unit configured to learn a velocity and a direction for each of the ascertained topics, and learn a movement pattern by inferring a spatiotemporal correlation between the ascertained topics.
If Techwin is the only other analytic game in town now, couldn't one argue that their portfolio increases in value as well?
I do not know if "Techwin is the only other analytic game in town now."
It comes down to how much other manufacturers want to fight. I talked to a lot of manufacturers privately during the lawsuit phase and the consensus was that it was simply cheaper to pay OV than to pursue a long, drawn out legal battle.
The big question becomes: Now that Avigilon owns the patents, will rivals manufacturers be willing to spend what it takes to fight it / beat it?
The big question becomes: Now that Avigilon owns the patents, will rivals manufacturers be willing to spend what it takes to fight it / beat it?
Bosch already spent quite a bit without success, no? It also seems odd that samsung Techwin actually beat OV months before Bosch and Pelco capitulated. As if whatever defense was employed by Techwin was unavailable/inapplicable to the others, or not made available to the others by Techwin intentionally.
Is it legal under anti-trust statutes for defendants to combine / share legal resources to fight a common plaintiff? Kind of like a class-action in reverse.
"Bosch already spent quite a bit without success, no?"
Success in these matters is (typically) minimizing overall total expense (total licensing costs vs total litigation costs).
I believe that Bosch terms with OV were sufficiently attractive to lead them to believe that it was less expensive to take it than to continue paying their lawyers.
The Techwin "Method and Apparatus for Detecting Abnormal Movement" was not granted yet. In August the application was simply published as US20140241619.
In the near term, it may be bad for the industry especially if Avigilon makes it difficult or expensive to license. But this might actually spur companies to come up with innovative ideas on video analytics.
"But this might actually spur companies to come up with innovative ideas on video analytics."
Ed, then they will be explaining to Avigilon's attorney's how they do not violate their patents. And, as a bonus, Avigilon can request access to the competitor's source code as part of discovery. OV did this in a number of their lawsuits. I think Avigilon would be happy to do the same.
If I remember correctly OV's technology started with Darpa's SBIR contract. They were able to develop their product using government funds.
Perhaps it's time for DARPA to issue another challenge to create better algorithms since we know the current ones don't work that well.
"to create better algorithms since we know the current ones don't work that well."
This would be very valuable.
Unfortunately, I am pretty sure OV, and now Avigilon, would claim that such algorithms would still fall under their patents because they are claiming patents essentially on the concept / process of analyzing video, not just specific algorithms.
I thought you could assume a patent if you improved on it.
From what we have seen in the OV litigation, the OV patents are so broad, that it already covers every permutation.
For example, calibration, our understanding is that OV's patents cover all calibration, whether it be manual or automatic (see the '945 patent, for tripwire / calibration). From what we have seen, that is how OV positioned / argued this.
For example, VideoIQ, who Avigilon bought before buying OV's patents, has no manual calibration method and does so automatically. However, OV still went after VideoIQ and VideoIQ still settled. That does not mean OV was right, of course. VideoIQ was a small startup, they were sold shortly thereafter, etc. But it does show that even if your analytics are an improvement on OV's, it does not mean you will avoid their legal efforts.
Here's an interesting take:
"Alex [Avigilon CEO] found his competitors napping (Samsung, pelco, axis, bosch, sony, Panasonic etc..) and pulled the rug from under them. When they wake up, they will then realize the damage that was inflicted on them, it will be like general Norman Schwarzkopft said in the Desert Storm Campaign, "shock and awe."
I agree with the potential for damage. I also agree that they were napping, but the real napping occured during the initial OV lawsuits. It is now even more obvious that the manufacturers should have fought harder to stop / invalidate OV back then.
As for other manufacturers pulling this move (buying OV's patents), their culture / business model would not support this. Companies like Axis, Pelco, Sony, etc., seek to partner with others. Buying patents and using them to maximize payment / competitive damage is something that Avigilon is uniquely suited to do.
Knowing how agnostic you are on this brilliant website John, I am sure you don't care one way or the other personally about which company wins or losses in anything.
The way I am reading this, you seem to honestly believe this is almost case closed for the rest of these companies. That is scary. Pay Avigilon or get out of the game. Thats how it reads to me. Great game everyone, see you next time.
One of my favorite games growing up was Monopoly. Acquire as much as possible, take everyone else out. For three hours, and in some way shape or form, it made cheaters out of the whole family. (IPVM -ers, just try and tell me you didn't cheat at this game).
As soon as one of us started repeatedly using an effective strategy, the others would switch gears and the table talk would elevate.
Avigilon is winning, adaptation is coming in some way shape or form.
I can think of some examples. The army of integrators; will motivations change in how they push analytics now? To downplay them? Are consultants now going to choose; drive up the price of specific systems or flat spec Avigilon? Are manufacturers really going to think its just easier to pay Avigilon? All of them? Really?
I don't know, I just don't believe people give up or in that easily and in my experience nobody can really take over and dominate this business.
Well played Avigilon, I believe you force everyone else to be better by being so clever.
Dan, I tell you this much. Don't play monopoly with Avigilon's CEO! :)
You mention:
"You seem to honestly believe this is almost case closed for the rest of these companies."
That is what history shows for manufacturers in this market. They are very poorly coordinated. They know all these patent litigation / troll issues are bad for everyone but they repeatedly allow it to happen. SIA, who is supposed to be the organization for manufacturers, could not organize a lemonade stand, so forget about an issue this compex.
Individually, it is almost always better to settle than fight. That is one of the lessons of the OV litigation / enforcement over the past few years.
Now, Avigilon is way more of a threat than OV. With OV, the perception was that this was simply a tax, pay them, they go away. With Avigilon, it could mean losing deals, having to disclose proprietary information to them, etc.
Maybe at least one manufacturer sees this as a threat they have to face head on and does so. I don't know.
Last week Avigilon's CEO was in New York discussing how he wanted their products to enable more use cases for customers aside from security, namely business intelligence in retail applications.
http://www.bnn.ca/Video/player.aspx?vid=509479
It's something they couldn't offer with VideoIQ's products but the OV patent portfolio now allows them to build and deploy it. There must be a reason they appointed a machine learning and computer vision PhD as CTO. Maybe it's already been built secretly and they now have the greenlight to commercialize it while being immune to lawsuits and copycats.
Many in the comments seem to assume Avigilon is looking to become a glorified patent troll but it seems more logical for them to use this to further differentiate and enhance their products. While people worry about camera commoditization, they'll have the smartest cameras and turnkey systems around and be able to offer them while underpricing competitors. Since I'm not one of those competitors but an end-user and part-time industry analyst, I must admit it's a shrewd and brilliant move.
I, cut it out. You are an Avigilon investor, as you have previously disclosed. You misrepresent yourself as "an end-user and part-time industry analyst."
Btw, Avigilon was already 'immuned' to lawsuits, as they had a patent license agreement with OV in place. And assuredly, they would pay far far less licensing patents from OV over time than paying OV $80 million immediately.
Any company can "further differentiate and enhance their products" without buying patents. The fact that they bought them, and paid such a premium means they are looking for more than self-protection.
Update. Avigilon filed a material change report on Dec 24, 2014. One notable new piece of information was included:
"Avigilon also has the right to receive 50% of the proceeds of any sale of all or any part of the remaining ObjectVideo business segments over the next five years."
There's some potential upside there. OV still has its R&D / services business which has his historically generated ~$10 milllion annually and is considered to be to quite profitable.
Given that OV secured such impressive and successive federal funding, I wonder to what degree their IP is subject to shared rights with the feds. Unless OV documented that the IP was developed prior to, or without the benefit of, federal funding then the feds enjoy shared rights. The consequence is that sales of products to the feds are not subject to IP royalties. Please note, I am a propeller head and NOT an attorney….
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