Marathon Patent restructuring will put Fortress subsidiary in charge of patent monetization

Doug Croxall, Marathon CEO.

On Wednesday, August 9th, Los Angeles, CA-based Marathon Patent Group (NASDAQ:MARA) filed a Form 8-K with the U.S. Securities and Exchange Commission (SEC). The filing discusses plans for corporate restructuring which would result in Marathon transferring certain parts of its intellectual property portfolio to newly created special-purpose entities (SPEs), which would give greater control over patent monetization strategies to a financial partner of Marathon.

As the Form 8-K filing notes, certain patents owned by Marathon will be designated to newly created SPEs as elected by DBD Credit Funding, LLC, a financial firm that is being designated as the “IP Monetization Manager.” Marathon is not committing all of its patents to the restructuring agreement as a certain amount of non-designated intellectual property will remain with the company.

“All Monetization Revenues arising from the Designated IP and Non-Designated IP shall be paid to an account that is under the sole and exclusive control of the Collateral Agent as the IP Monetization Manager. In addition, until the Restructuring, the Company shall be responsible for the expenses associated with the maintenance, prosecution and enforcement of all of the Company’s intellectual property including the Designated IP and the other IP owned by the Company which is not to be transferred to the SPE, and for any expenses associated with the pursuit of monetization activities relating to both the Designated IP and the Non-Designated IP.”

Thus it appears that DBD Credit Funding, as the IP Monetization Manager, is provided with control of the monies raised and costs spent litigating a fair portion of the patents owned by Marathon.

Given DBD’s new responsibility as IP Monetization Manager for Marathon, it’s interesting to note that the financial backer seems as though it’s not very experienced with patent litigation. Data collected from legal data analytics service Lex Machina shows that DBD has been a party to a single patent infringement case as a defendant. In March 2016, a summary judgment entered in that case held that the defendant infringed the asserted patents, putting DBD on the losing side of that situation.

DBD’s parent company Fortress Investment Group LLC, however, has been making interesting forays into patent licensing operations in recent years. According to a February 2015 article published by The Patent Investor, Marathon is only one of several patent monetization companies in which Fortress made investments through its DBD subsidiary. This February, Japanese telecom corporation SoftBank Group (TYO:9984) purchased Fortress for $3.3 billion in cash. Although Marathon’s recent restructuring deal is with DBD, it’s interesting to see the name of a major tech investor such as SoftBank connected to the transaction.