criterion in austalian today

IPERNICA
FOR the intellectual property minnow, winning $US28.5 million of damages from Nortel seems as good as it gets. Except for doing the US telco giant for up to three times that amount.

Any day now, a Texas court will rule on a jury's finding that awarded $US28.5 million ($34 million) in favour of Ipernica, for Nortel's "wilful infringement" of network management patents held by Ipernica.

The amount could be tripled - or indeed reduced - but the Perth-based Ipernica is in little doubt about the judge's thinking: "We have asked for $US92 million, plus interest," says Ipernica head Graham Griffiths.

Welcome to the obscure but increasingly lucrative field of "assertion licensing" - funding court actions against parties suspected of breaching IP rights. There's a David and Goliath element to it all, in that the technology innovators - a university department, for instance - know they're being dudded but have little idea about how to keep big companies honest. "We're not afraid to take on the big guys," says Griffiths.

In the case of Nortel's IP breach, three other telcos - Alcatel-Lucent, Cisco Systems and Juniper Networks - opted not to contest and settled for a collective $US15.25 million. As a rule of thumb, says Griffiths, the spoils are shared one-third with Ipernica, one-third with the lawyer (engaged on a contingency basis) and one-third with the client.

"We are building up a portfolio of a dozen programs running over the next 12 months," Griffiths says.

Locally, Ipernica is suing Ericsson in the Federal Court for breaches of a licence agreement relating to Ericsson's ATMs. Ericsson launched a number of cross-claims, but they've since been struck out.

The Ericsson case is different in that it alleges breach of contract of a global licensing deal. No figures are mentioned, but the amount potentially is big enough to warrant a mention in Ericsson's global accounts under "contingent liabilities". A Federal Court hearing is scheduled in early 2008.

Ipernica's wider business is a melange of IP consulting, patent acquisition and venture capital funding of start-up companies. Ipernica will also take on a "sweat equity" role with a research group, providing management skills for a share of the action.

The central philosophy is to realise the commercial value of patents, which is often under-appreciated by the boffins with the crazy ideas.

"Ipernica is a complex story starting to show a track record," Griffiths says. "We like to think of ourselves as a mix of businesses. We are not patent attorneys, we are not venture capitalists, but we do invest in new technology."

In the year to June 30 - the "defining year in Ipernica's evolution" (Griffiths' words) - Ipernica earned $4.42 million on revenue of $21.3 million, compared with the previous $4.6million loss on revenue of $485,000.

Griffiths says Ipernica's priority is to ensure a healthy mix between long-term income and the patchy but spectacular assertion-licensing stuff.

Ipernica has $14 million in the bank and is looking at a capital return this year. "Ipernica's outlook has never been better," says Griffiths.

Ipernica, formerly QPSX, spun off from the University of WA, which had created world-leading telco technology. Initially backed by Telstra, QPSX reinvented itself under its new moniker, this time with the backing of Richard Pratt's Thorney Investments and Kerry Packer's Challenger Investments. Pratt and Challenger remain cornerstone investors, with Ipernica chairman Ross Norgard accounting for 20 per cent.

While undiscovered among retail investors, Ipernica is well known among high-net-worth groupies and specialist funds.

Ipernica is unique as a listed IP stock, but shares traits with the litigation funders IMF and Hillcrest Litigation Services.

We rate Ipernica a buy. Just remember that Pratt and the Packers are billionaires because they hate losing money.