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After the market crash of 1987, Alan “Ace” Greenberg, the bridge-playing, card trick-making chairman of the Bear, Stearns & Co. Inc. brokerage, was asked to comment on the collapse. He said that markets go up, markets go down. Next question. In 2001, after a year-long market slide in many ways more devastating that the cataclysm of 1987, the next question is: What’s left? 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. (Don’t you wish you had bought an apartment in New York City in 1989, or even better, in 1975?) BRAIN POWER Dot-bombs don’t generally have much in the way of hard assets. Their most productive assets are the brains wired to the eyeballs of the employees gazing at computer screens each day; and those brains aren’t for sale. 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. A potential miner suspect is Jonathan Marshall — a litigation partner at New York’s Pennie & Edmonds. Marshall 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” himself by scooping up a few properties as a private investor after the real estate investment trust bubble burst a decade ago. The present dot-com decline could well present equal opportunities for the 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, though, that there’s anything left once the bodies have been carted away. BRIEF LIFE CYCLE George Vinyard, chair of the intellectual property, information technology, and Internet commerce practice 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. “They were moving 100 miles an hour, understaffed and overworked, and not minding the store to protect their intellectual property,” concurs Michael Zuckerman, a lawyer recently let go as vice president for business development at San Francisco’s Driveway.com. LICENSING RICHES The best example of a company that has rescued itself through the value of its intellectual property may be not a dot-com but Texas Instruments Incorporated of Dallas. 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 the company’s strategy are Jones, Day, Reavis & Pogue partners Kenneth Adamo of the Cleveland office and Robert Turner of the Dallas office. They picked up the reins from former Jones, Day intellectual property partner Hal Cooper, who extracted hundreds of millions of dollars from overseas chip-maker competitors. In the meantime, the company’s moribund manufacturing operations turned around. Today TI is a powerhouse in semiconductor products. Robert Bramson, the head of VAI Patent Management Corporation in Conshohocken, Pa., hopes to pull the same trick, only with the IP of dead dead-coms. Bramson, 63, was a “misfit” as a patent lawyer when he practiced for Philadelphia’s Schnader Harrison Segal & Lewis and at Unisys Corporation. “I’m a much more outgoing personality, a jalapeno pepper,” he says. For the past decade or so, Bramson has brokered patent-licensing deals for companies such as the now-defunct Wang Laboratories of Boston and InterDigital Technology Corp. of King of Prussia, Pa. 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. A TOLL COLLECTOR 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. RETAINER FEES 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 finally 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 40-50 percent contingency fee. BTG PLC, 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 there are opportunities that have presented — and are presenting — themselves,” he says, adding that there are now deals in the works. The challenge for Bramson and his breed is to find the next Texas Instruments on the horizon. Pillsbury Winthrop’s Silicon Valley dealmaker superstar partner Jorge del Calvo has worked with about 100 startups. Last year he spent between 30-40 percent of his time helping to bring new Bay Area dot-coms and technology companies to life. HALF-BAKED ASSETS 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 intellectual property — such as domain names, customer lists and trademarks — are much easier to identify and market than high-tech patents. But they are likely to bring in much less money, too. In recent months, for example, Warminster, Pa.’s privately held Burpee Holding Co., a seed company, picked up the name and customer lists of Garden.com, which died last December. Wal-Mart Stores Inc. bought Garden.com’s editorial content — specialized gardening advice — and dispensed it through its stores’ nursery departments. The two deals brought a total of $4.4 million. Granted, though, that’s a drop in the bucket when stacked against the more than $220 million in funding that Garden.com burned through. New York’s Saks Fifth Avenue, the upscale retailer, bought UrbanFetch.com’s customer lists 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.

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