The next focusIR Investor Webinar takes places on 14th May with guest speakers from Blue Whale Growth Fund, Taseko Mines, Kavango Resources and CQS Natural Resources fund. Please register here.
Hello everyone,
The IPR process really kicks off today, with our first set of submissions due. I will be closely monitoring whether we motion to amend any of the patents. The filings are going to be very technical so it would be great if we had some chemistry and/or engineers on the board to could help interpret what they mean.
As a reminder - see the procedural schedule below.
DUE DATE 1 ........................................................................ August 12, 2021
Patent Owner’s response to the petition
Patent Owner’s motion to amend the patent
DUE DATE 2 .................................................................... November 4, 2021
Petitioner’s reply to Patent Owner’s response to petition
Petitioner’s opposition to motion to amend
DUE DATE 3 ................................................................... December 16, 2021
Patent Owner’s sur-reply to reply
Patent Owner’s reply to opposition to motion to amend
(or Patent Owner’s revised motion to amend)7
DUE DATE 4 ......................................................................... January 6, 2021
Request for oral argument (may not be extended by stipulation)
DUE DATE 5 ....................................................................... January 27, 2021
Petitioner’s sur-reply to reply to opposition to motion to amend
Motion to exclude evidence
DUE DATE 6 ....................................................................... February 3, 2022
Opposition to motion to exclude
Request for prehearing conference
DUE DATE 7 ..................................................................... February 10, 2022
Reply to opposition to motion to exclude
7
If Patent Owner files neither a reply to Petitioner’s opposition to the MTA
nor a revised MTA, the parties are directed to Section B(3) above.
IPR2021-00182 (Patent 9,680,068 B2)
IPR2021-00183 (Patent 7,588,828 B2)
IPR2021-00184 (Patent 7,803,423 B2)
IPR2021-00185 (Patent 7,867,557 B2)
IPR2021-00186 (Patent 8,524,365 B2)
15
DUE DATE 8 ..................................................................... February 23, 2022
Oral argument (if requested)
See the story below. Quite interesting in the face of what we have seen management do, albeit a much smaller company.
Dukemount Capital rallies as shareholders vote against unwanted loan facility
A look at some of the main risers and fallers in London on Thursday
Nanoco Group PLC -
Immedia specialises in-store radio
Dukemount Capital PLC (LON:DKE) shares are striding higher after a display of shareholder power at its annual meeting, with the board losing two key votes.
The long-dated income provider's shares were heavily sold off last month on news that the board had arranged £6.5mln of loan note funding from Global Corporate Finance Opportunities for an entry into the green energy market via a gas peaking venture.
Investors have been venting their anger on social media at what they saw as a highly dilutive facility and at the meeting the main board listed company was roundly defeated on the votes.
"As a result of the voting of the general meeting, the company will not now be able to pursue its agreement," Dukemount said, adding that it will continue to look for alternative funding options.
Hopes now rest on the company announcing a better financing deal to get them started in the fast-moving flexible power market.
https://www.proactiveinvestors.co.uk/companies/news/955094/dukemount-capital-rallies-as-shareholders-vote-against-unwanted-loan-facility-955094.html
Regardless of how 'immaterial' some of you view this 105% nominal bonus of the loan notes is, I think it stinks. Why wouldn't they have gotten RG and LOAM to underwrite the deal and then let other shareholders take part? It is all very strange. I don't like the wording in the RNS and comparing the pricing to what was received during the process to obtain litigation funding. It is wholly irrelevant - sweetheart deal for the two of them and very bad behaviour from Brian Tenner to let that pass. It irks me and I would like to understand via lawyers whether this needed shareholders approval because of insider involvement - at first glance I think it does.
Nanonano - exactly. Their defence purely rests on prior art (invalidity).
I think this transaction is odd - I don't agree with it. There would be secured lenders out there who could lend at 10-12%. LOAM and RG are getting litigation funding like returns, when our litigation funding is secured, and they are the most senior in the capital structure.
I think there is also a bigger problem here. Richard Griffiths is the Chairman - this is a clearly a related party transaction that must be approved by shareholders. The FCA’s Listing Rules require a transaction like this to be approved by shareholders. I believe the rule is that the transaction must equal or exceed 5% of the company’s assets, turnover, profits or market capitalisation for the shareholder approval requirement to be triggered. That is triggered here on the basis of both the level of turnover and profits (or lack there of).
Stewards enquiry ordered.
Collectively, Richard Griffiths and LOAM own around 33% of the company, but they have clearly been able to walk all over us if this is the case. I am sure they were desperate to jam this financing into the company this late in the game having seen how the litigation has progressed.
I don't understand why this wouldn't have been offered to the market. As someone pointed out, many of us would have jumped on this deal.
Well spotted here - I think you may be correct and I rescind my earlier comment until we get further clarity from management. This looks like costly litigation funding more than anything, for a case that is well advanced and has gotten over a number of procedural hurdles, most certainly the positive Markman ruling and Samsung being shot down by the PTAB on a number of our claims.
This would raise a few questions for me:
What does a 'successful litigation outcome mean'? What happens if we win USD 50m in damages and 50% of that goes to the funder.
If they are entitled to a 2x MOIC bonus, then why wouldn't they have just raised equity or looked at alternative sources of finance (vanilla IP portfolio lending)?
Again if the 1.05x MOIC litigation success bonus is how this instrument works, to call it a non-dilutive instrument is an insult to the intelligence of shareholders on these boards. It would be absolutely dilutive - it is linked to the litigation outcome, which at the same time they call transformational. That is what is going to drive this share price in the next 24 months, nothing more. The organic side of the business looks promising, but it is just that for now.
I also pick out something peculiar:
"Importantly, the terms of the subscription for the Loan Notes ensure that there is no dilution for equity holders at this transformational point in the Company's value. The terms of the subscription are superior to all of the offers received in the independent tender exercise carried out to select the litigation funding partner."
Why is the offers received in the independent tender exercise carried out to select the litigation funder relevant here. The litigation is fully funded, this is for the organic business and OPEX? The offers received previously are irrelevant now given how far the case has advanced. Imagine Samsung settle this case within one year, LOAM and RG would make a 166% return on their money (that is our effective rate of interest) with a DEBT instrument. If a successful outcome came in year two, they would make a 1.8x or a 90% effective rate of interest, and so on... Its usury. Also, bear in mind that the litigation funding facility would be non-recourse. This debt would have recourse.
Bonkers if this is the case and I think someone should get on to Brian Tenner to figure out how this works. It stinks to me.
Edelman came across as a great blagger and traveling salesman, but delivered very little. Brian Tenner seems to be very transparent and to the point. The flow of information coming out of the company is superb.
I am frustratingly involved in another similar situation similar to Nanoco where I cannot say management is doing the same. That company is involved in multi-year litigation proceedings with no operating business and management sits back and repeatedly says 'we are bound by confidentiality and cannot make any comments on the proceedings'.
We can safely assume that any royalty or licensing would be granted via lump sum payment. This is the norm in IP litigation.
It is impossible to tell if Samsung settles or not but I think that would come later rather than sooner. This sound completely obvious, but the more individual claims we have that get through IPR process, the easier it will be to craft our case around the nature of the infringement (wilful or not), given they were in the room with us for years.
Very shrewd business from Brian Tenner and Liam Gray.
An UNSECURED note for which payment is essentially contingent on success. This is as close to equity as it gets with a capped return - the notes aren't even paying coupon/cash paying, remarkable. This is a much better structure than I expected. The unsecured nature of the note also leaves the rest of our IP portfolio as an additional source of collateral in case there is a rainy day.
As someone pointed out, LOAM and Richard Griffiths would have been privy to private information with respect to both the Samsung litigation and the organic business. As pointed out by many, the transparency being served up by management is great to see.
I think what all of this tells us is that there will probably be a lot more good news before we see an outcome with respect to the litigation proceedings. There is a lot of activity happening on the commercial side and you can only look to Nanosys' acquisition of the Swedish company, Glo, to underpin the value in what Nanoco offers.
So Gilstrap had no interest to stay the case... at least I feel exonerated for pushing the view that Samsung's motion to stay would fail. This was absolutely going to trial until the change of heart by Nanoco's lawyers.
Perhaps there are talks behind the scenes between the two sides but what is still more likely is that this is about simplification. As the Edison note pointed out, the court allots one week for both sides to present their case. The fact that we are asserting 50+ claims across 5 patents means we would have had to argue validity of those claims, proved wilful infringement, and then argued damages, all in a very short space of time in front of 12 jurors who are likely not lawyers or chemistry PhDs.
The simplification story makes the most sense. It was perhaps after analysis of our prospects at the PTAB and the decisions to institute themselves that we decided a simpler trial would be to our benefit. As someone pointed out, maybe this came on recommendation from the mediator, David Folsom.
Bitter sweet to think we were three months away from a verdict but I am still very encouraged by our prospects.
The motions to strike experts and for summary judgement are all normal, nothing out of the ordinary. These are all regular pre-trial motions.
I am very surprised that Judge Gilstrap has not yet ruled on the joint motion to stay. I would have thought that would come shortly after it was filed, but evidently not. Strange...
It is quite amazing to read some of the comments on these forums and also ADVFN. On one hand, everyone has been worried about dilution for the last couple of months - with many posts expressing worry about and equity raise -then we get non-dilutive financing and no one seems to be happy. A convertible loan is dilutive, so I highly doubt that it will be a convert.
I have even seen suggestions that there is interest from Lombard Odier and Richard Griffiths to credit bid for the patents. First of all, there is more than GBP 3m of value in Nanoco's patent portfolio and I am sure the company can borrow much more if needed, but the reality is neither of these parties will have any interest in the IP. I would say this was more of a case of Nanoco working with their core investors who know the story well and could move quickly. It saves Brian and the team time and hassle of going through a process to obtain financing, when they are clearly operationally focused at the moment.
The extended timing of the litigation proceedings has made clearly made many uncomfortable and I am surprised how many jumpers there have been, but the reality is we have now de-risked the balance sheet and have rid ourselves of the need to worry about liquidity for the next two years.
The jumpers - I am sure there will be more - will create some good buying opportunities over the months ahead.
No real surprises in the RNS this morning, I think this covers but I did think one thing they mentioned was quite peculiar in that "We have more claims than could have been argued at trial." - whilst there are no statutory limits on the number of claims one can assert, a judge can ask a plaintiff to narrow the scope of their claims before the court. See Unwired Planet v Apple - https://www.lexology.com/library/detail.aspx?g=001089a3-9aeb-4801-8704-8badf2421f6f
I do wonder whether Judge Gilstrap informed Nanoco that they would have to narrow the number of claims otherwise he would grant Samsung's motion to stay and this got us thinking to wait for the PTAB to decide what our best (and valid) claims are, knowing that many of the claims are deemed to be valid. Whilst we can see court filings, we are not privy to discussions behind the scenes involving the judge and the two parties to the litigation.
I think I saw a question on appealing IPR decisions. That can be done at the Court of Appeal for the Federal Circuit, but bear in mind that if we have a positive PTAB outcome, where many of our claims survive, followed by a district court judgement, we are nearly home and on the way to getting paid.
I would expect by 'non-dilutive' debt facility, management genuinely means it and that it is not a convertible instrument.
Hawi,
You could also be right. I had the same initial thoughts this morning, but I am not hear to sell dreams or pump a stock. Yeah, maybe Samsung and Nanoco looked at the IPR decisions and saw how balanced they were and then Samsung said 'heck, we are going to lose on at least some of these asserted claims and we will then definitely lose in front of a jury, so let's convince Nanoco to stay this and iron out a global settlement'.
It was odd for Nanoco to file replies to the original motion to stay and then go back a week later to the judge and say 'Hey, we won't be prejudiced by a stay'. Both sides also agreed as part of this motion that they can no longer depose witnesses or pursue any further fact discovery, so I believe all previous challenges are moot, such as the claim construction challenges, but I would need to check further on that.
I am of the view that Nanoco believes, we aren't going to get paid by Samsung on a first instance judgement in the EDTX, certainly not without an appeal, and definitely not without the IPR process completing, so we might as well simplify this and let Samsung hang themselves at the PTAB before trial.
I will start to follow the PTAB proceedings more closely. Our three judges are:
Christopher M. Kaiser (Former Kirkland & Ellis IP litigation partner)
Erica A. Franklin (Not a whole lot written about her)
Grace K. Obermann (Trump appointee for the Federal claims court)
I have been looking through some of their decisions and track record, all look well balanced so far.
Yes - it is hard to see a near term pop in the share price that is related to the litigation proceedings, so we will need to wait. For companies in a similar positions, there is usually a run up in the share price ahead of trial or an arbitration outcome, led by short term punters. I don't think there is a huge amount of that type of money in this name at the moment but I could be wrong.
You guys know much more about the organic side of the business then I do and I follow your lead on the STMicro front.
Also, one other point. Do not disregard that as the case narrows through the IPR proceedings this can also drive settlement - IPRs are regularly withdrawn and settled. Keep in mind that if Samsung fall here, their experts can be struck from the civil case in relation to all claims and they are purely relying on experts to back their invalidation argument. It is a high stakes game, no doubt.
Sorry Ecclescake, I don't quite understand what you mean. The burden to prove the infringement would be on Nanoco, not Samsung.
The motion to compel is under seal, so we won't know what it relates to. It could be info related to many different things; info that Nanoco deems to be privileged, info showing Nanoco delayed to file (knew they were infringing or should have put on notice earlier), info trying to show Nanoco knew there is prior art in some of the patents, etc, etc, etc. We don't know and won't ever know.