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Is there anything worth saving in the junkyard of dead and dying dot-com companies? In prior stock market collapses, investors with large appetites for risk and sharp eyes peeled for value have scooped up assets at bargain prices. They were called vultures or grave dancers or even less flattering names, but many of them made a killing by being contrarian. Dot-bombs don’t generally have much in the way of hard assets. Their most productive assets are the brains of the employees gazing at computer screens each day, and those brains aren’t for sale. But a few savvy investors and lawyers say that the overlooked assets of these companies might be the property represented by brain power, otherwise known as intellectual property: patents not yet issued, clever domain names, targeted customer lists, and the like. One potential miner is Jonathan Marshall, a partner at New York’s Pennie & Edmonds who is best known for representing barnesandnoble.com in the business-method patent-infringement suit brought by Amazon.com. Marshall says that he did “very well” by scooping up a few properties as a private investor after the real estate investment trust bubble burst a decade ago. The current dot-com decline could well present opportunities for the equally enterprising. “The question is what is coming back and who are you going to sell it to,” he says. “If you study history, the same things have happened over and over again.” Not everyone is so sure that there’s anything left of the dot-com boom. George Vinyard, chair of the IP and information technology group at Chicago’s Sachnoff & Weaver, says that the life cycle of many dot-coms was too brief. Companies were born and disappeared “in less time than it takes a good patent lawyer to get a patent on file,” he says. The best example of a company that has rescued itself through the value of its intellectual property may not be a dot-com but Dallas-based Texas Instruments Inc. Up until recently, half of TI’s annual revenue — more than $2 billion — came from licensing royalties on chips and memory technology. The company essentially became a litigation bully — forcing other manufacturers to pay fat licensing royalties in order to use TI’s technology or risk being sued for patent infringement. Chief architects of this strategy are Jones, Day, Reavis & Pogue partners Kenneth Adamo of the firm’s Cleveland office and Robert Turner of its Dallas office. Jones Day helped extract hundreds of millions of dollars from overseas chip-maker competitors. In the meantime, the company’s moribund manufacturing operations turned around. Robert Bramson, the head of the VAI Patent Management Corp. in Conshohocken, Penn., hopes to pull the same trick, only with the IP of dead dot-coms. Bramson, 63, says he was a “misfit” as a patent lawyer at Philadelphia’s Schnader Harrison Segal & Lewis and at the Unisys Corp. For the past decade or so, Bramson has brokered patent-licensing deals for companies such as the now-defunct Wang Laboratories of Boston and the InterDigital Technology Corp. of King of Prussia, Penn. But it hasn’t always been an easy way to make a living. Motorola Inc., for example, refused Bramson’s licensing overtures. The company went to court rather than pay InterDigital licensing fees for wireless technology. In 1994, Motorola won a jury verdict declaring InterDigital’s patents invalid. The verdict was upheld by the U.S. Court of Appeals for the Federal Circuit in 1997. Bramson was fired after the trial court verdict. Bramson “doesn’t have anything to contribute to the advancement of technology. Instead, he collects what others have done and places a toll or a tax on the technology,” says Robert Krupka, a partner in the Los Angeles office of Chicago’s Kirkland & Ellis who was Motorola’s lead trial counsel. Bramson acknowledges this is how he does business. If he can license the patents quickly, he takes a retainer of between $4,000 and $15,000 per month. Bramson will then take a 10 to 15 percent commission when the deal goes through. For the riskier transactions — typically those that will involve litigation — his risk and potential reward are much larger. He will take no retainer up front, but will seek a 40 percent to 50 percent contingent fee. BTG, a British company that has commercialized products ranging from antibiotics to insecticides, is now betting on Bramson. In November, BTG invested $250,000 in Bramson’s VAI Patent Management Corp. The day the investment in VAI was announced, BTG’s stock rose 4.9 percent. Bramson says that he’ll be searching for patents for the British company. “Clearly,” says Bramson, “there are opportunities that have presented — and are presenting — themselves.” Pillsbury Winthrop’s Silicon Valley deal-maker Jorge del Calvo has worked with about 100 startups. Last year he spent between 30 and 40 percent of his time helping to bring new San Francisco Bay area dot-coms and technology companies to life. Now, he says, many of those companies are back, seeking his help in winding down. “The assets of these companies you can buy are in the form of intangibles. But often it’s half-finished –maybe a million lines of code,” he says. Sachnoff & Weaver’s Vinyard says patent attorneys often know about applications still moving through the U.S. Patent and Trademark Office at the time of a company’s death. They may be able to persuade inventors to stick around long enough for patents to issue. So-called soft goods of IP — such as domain names, customer lists, and trademarks — are easier to identify and market than high-tech patents. But they are also likely to bring in less money. For example, New York’s upscale retailer Saks Fifth Avenue recently bought customer lists from UrbanFetch.com for an undisclosed sum after the New York-based shopping and quick-delivery service went down in October. PetSmart.com bought the pets.com domain name and other assets from the once-popular Internet retailer for an undisclosed sum. The famous sock puppet has not yet resurfaced. So much for hard assets. But the foraging will continue as long as dot-com and tech companies lay dying. Looking for exploitable IP is like “pulling the gold out of the teeth of cadavers,” says Bramson. It’s interesting to see what you can find on the ground. Victoria Slind-Flor is West Coast editor for IP Worldwide.

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