Acacia Research Corporation (Nasdaq: ACTG) announced on Friday, July 5, 2013, that its Board of Directors appointed Matthew Vella, Acacia’s current President, as Chief Executive Officer and a Director effective August 1, 2013. Mr. Vella will also continue to serve as President of Acacia, thus assuming the title President & CEO. Paul Ryan, Acacia’s current Chief Executive Officer and a Director, has announced that he will retire. Ryan will retire and leave Acacia effective July 31, 2013.
Mr. Ryan commented, “In anticipation of my retirement I want to thank all of the very talented employees who have built Acacia into a premier patent licensing company. Acacia has a very deep and experienced management team and I along with our Executive Chairman, Chip Harris, and all of our board of directors are very confident that with Matthew Vella as CEO, the company will continue to build its leadership role in the industry.”
I had the opportunity to interview Ryan on the record earlier this year. We talked about a number of topics, including the Acacia business model and how the patent system incentivizes inventors. One of the things that many are critical of is the type of monetization done by Acacia and others relative to so-called non-practicing entities. Ryan explained to me that it really shouldn’t matter where the right comes from. We talked about it being a very dangerous slippery slope if you start focusing on whether a patent plaintiff is an operating company or one that simply innovates, or even acquires from the original innovator. Why? Because many (if not most) of the big players simply do not play fair with smaller business and individual inventors. They push around smaller players, ignore legitimate inquiries regarding licensing and simply force small companies and individuals to pursue expensive litigation, which they know many won’t pursue.
For Ryan it would be tragic for a big company to be able to abuse smaller players, put those smaller players out of business and then through reform laws make the patents that were legitimately obtained and infringed no longer valuable because the acquiring company — which paid the original innovator for the patents — cannot seek redress or fears the heavy hand of one-sided fee-shifting legislation. Ryan explained:
In a democracy where you have rules of law and where you have a free enterprise system, and you have property rights, for that discussion of who owns the asset strikes me as being inappropriate, but that, in some ways, seems to be the focus. If you’re a large operating company and you do R&D you’re allowed to enjoy the fruits of your invention. If you’re a small company who may get obliterated by a large company with more capital who prices you out of a market, and destroys you, then the R&D that was invented by those shareholders and paid for all of a sudden becomes worthless or worth less? Certainly that would give an incentive to companies to try to practice unfair competitive practices to eliminate those competitors and thereby the patent rights that they originally held if that’s the case. So to me I think that’s a fundamental issue when you start going down that slippery slope of questioning who owns the patent. It seems to fly in the face of what the whole patent system is about.
In my opinion Ryan is correct. Certainly there are bad actors in the patent enforcement space, but equally bad are the tactics used by the giant companies. Focusing on one side of the equation and treating all actors the same is misguided and wreaks of the type of arbitrary discipline handed out to unruly third-graders. Punishing everyone is not the solution, and punishing only the patent owners ignores defense abuse and is flat unfair.
At this important moment when the patent rights pendulum has swung Vella takes over. He will have his hands full as he steps into the spotlight as the public face of Acacia. There is growing animosity toward non-practising entities and numerous legislative attempts underway to benefit big business at the expense of universities, individual inventors, research and development companies and those who acquire rights. His task will not be an easy one. As a publicly traded company Acacia’s information is there for all to see, making them an easy target.
Although new to the spotlight perhaps, Mr. Vella is not new to Acacia. He joined Acacia in November 2006 as Vice President. He was appointed Senior Vice President in October 2007, Executive Vice President in October 2011 and President in September 2012. Prior to joining Acacia, Mr. Vella was Senior Intellectual Property Counsel for ATI Research, Inc., Lead Patent License Counsel for Nortel Networks, Inc. and Counsel for Nortel Networks Corporation. So he has been in the industry for many years.
Upon the announcement that Vella would replace the retiring Ryan, Executive Chairman, Chip Harris, commented, “Paul and I have worked together for the last 13 years and we have added many highly talented individuals with expertise in the patent licensing business to the Acacia team. We started working on this succession plan over 18 months ago. Following Paul’s 68th birthday, this new management structure is the culmination of that process. Paul was instrumental in Acacia’s success and he will be sorely missed by our shareholders, employees and patent partners. I look forward to having the same type of relationship with Matt Vella as I did with Paul. Paul and I and all of the members of the board of directors have every confidence that Matt has the leadership skills and expertise to assume this new role.”
Acacia’s stock was largely unchanged on the news of Ryan’s retirement. The stock opened at $23.30 on Friday, July 5, 2013, after the 6am announcement via press release and then traded down to a session low of $22.58. The stock opened higher on Monday, July 8, 2013, and spent the day trading between $23.24 and $23.48, closing at….