Walker Digital Merger Complete, More Patent Lawsuits Coming

Jay Walker

Earlier this month GlobalOptions Group, Inc. (“GlobalOptions”) (OTCBB:GLOI) and Walker Digital Holdings, LLC, a wholly-owned subsidiary of Walker Digital, LLC (“Walker Digital”), announced that they completed the previously announced merger of the two companies. The newly formed entity consists of the patent portfolio created by Walker Digital, the research and development lab led by renowned inventor, entrepreneur and Priceline (NASDAQ:PCLN) founder Jay Walker. Walker, who is named on more than 450 issued and pending U.S. and international patents, is one of the most prolific individual living inventors.

The merged company will seek a corporate name change to Patent Properties, Inc. as expeditiously as possible. All of the patents owned by Patent Properties, Inc. were developed internally by Walker Digital, with Jay Walker as a named inventor on all issued patents and the lead inventor on most of the patents in the portfolio. Currently the Company’s patent portfolio includes 377 granted patents and 94 pending patent applications.

Prior to the merger, GlobalOptions Group provided risk mitigation and management services, including forensic DNA analysis, proprietary DNA collection products, and related research services to law enforcement agencies, federal and state governments, crime laboratories and disaster management organizations. Thus, this merger seems in some ways to be a backdoor way for Walker Digital to obtain a ticker symbol for trading purposes.

“For the past 20 years, we have consistently created intellectual property to address some of the most complex customer behavioral issues in various industries, thus unlocking unrealized value for consumers and businesses alike,” said Mr. Walker, Executive Chairman of Patent Properties’ Board of Directors. “Today’s merger allows us to bring to the public market a broad and still-growing portfolio of wholly-owned inventions, as well as our ongoing efforts to protect and enforce our property rights. In addition, we are now able to accelerate the commercialization of an entirely new, big data business system for patent licensing currently under development. We believe our new licensing platform will address significant inefficiencies in the multi-billion dollar patent licensing market.”

Since 2011, Walker Digital has generated $65 million in revenues from licensing and litigating its patent portfolio as well as from patent sales. Presently the company has 19 ongoing litigation matters, and Patent Properties says that it expects to file additional patent infringement cases before the end of 2013.

Patent Properties also announced the completion of an $11.6 million primary private placement from the sale of 3,860,616 shares of common stock at $3.00 per share. Investors also received 50% warrant coverage exercisable for a period of three years at $3.00 per share. The warrants are subject to a call if the stock trades above $6.00 per share for 20 of 30 business days once the underlying shares are registered. The company intends to use its approximate $25 million in cash, which comprises the net proceeds from the private placement plus the cash currently on GlobalOptions’ balance sheet, to fund operations.

Under the merger transaction, all of the outstanding membership interests of Walker Digital Holdings, LLC were exchanged for shares of GlobalOptions common stock and shares of a new Series B Preferred Stock of GlobalOptions. On a non-diluted basis, Walker Digital owns approximately 64% of the economic interest and 80% of the voting interest of the newly formed entity, respectively. Walker Digital may also receive an additional 2,166,667 shares subject to certain performance conditions. At the completion of the transaction and the primary private placement, the company has 41,976,130 outstanding shares on a fully diluted basis.

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12 comments so far.

  • [Avatar for Gene Quinn]
    Gene Quinn
    September 29, 2013 12:58 pm

    Mark-

    Excellent point. Edison was all about innovating products that people found useful and which would succeed in the marketplace. There is no doubt in my mind that Edison, if he were alive today, would be innovating in the software, Internet, E-commerce, smartphone spaces.

    -Gene

  • [Avatar for Anon]
    Anon
    September 28, 2013 01:48 pm

    Mark,

    Go one step further: what happens when machines start inventing on their own?

    This line of thought is not new: witness the literature from such renowned science fiction writers as Asimov or Cameron, and present day movies such as “I Robot” and The Terminator movies (or the Matrix series). Heck, even 2001 A space Odessy touched on these concerns.

    Then turn to the ethical concerns with bio-tech and innovation dealing with genetics and the fear that we may unleash our own doom.

    As to patent artisans directly, the niche will be able to learn from the automation effects of the more easily automated general law practice first.

  • [Avatar for Mark Nowotarski]
    Mark Nowotarski
    September 28, 2013 11:58 am

    Think Luddites

    Anon: You inspired me to look up “Luddites” on Wikipedia. https://en.wikipedia.org/wiki/Luddite Fascinating. They were English textile artisans in the early 1800’s whose livelihood was threatened by the invention of power looms. They responded by organizing unions, destroying machines and killing factory owners. They were ultimately suppressed.

    Regarding the subject matter of this blog as a whole, the relevance it seems to me is how will we patent artisans (attorneys, agents and examiners) react when the preparing, filing, and examination of patents becomes fully automated.

  • [Avatar for Mark Nowotarski]
    Mark Nowotarski
    September 28, 2013 11:40 am

    Edison would be impressed.

    I think Priceline would impress Edison in that it was an innovation they invested in to commercialize. Are there any others?

  • [Avatar for Steve]
    Steve
    September 27, 2013 08:23 pm

    Mark — initially had the same thought. Given the great number of — and wide and varied scope of — their issued patents and the generally sizable and profitable infringing companies they’ve obtained settlements from, seems like they’d have pulled in at least $200M by now …

    However, their successes have only begun to “pile up” in earnest over these last few years or so …

    So this is likely only the beginning for them … with some 100’s of millions yet to come in.

    Jay and his team have done amazing work. Edison would be impressed.

  • [Avatar for Gene Quinn]
    Gene Quinn
    September 27, 2013 02:50 pm

    Anon-

    Fair enough.

    -Gene

  • [Avatar for Mark Nowotarski]
    Mark Nowotarski
    September 27, 2013 07:12 am

    $65 million seems like a small number. Anyone looked at total legal costs?

  • [Avatar for Anon]
    Anon
    September 27, 2013 06:43 am

    Yes it was a rant. I do get that.

    I am just pointing out that the rant is not so far removed from valid concerns that a first blush view might indicate.

    There was logic behind the Luddite movement that is often ‘lost in translation,’ and the human element is something that should not be lost when one is considering what innovation impacts. It is very easy to take a view of the Luddites as being backwards lunatics for being anti-progress, but that misses what they were trying to be: anti-human progress**.

    And note that ‘keeping it in mind’ is not the same as conflating it with the legal impacts. It is not a matter of semantics, or any attempt to redefine ‘progress,’ ‘innovation,’ or ‘invention.’ But job loss is a societal cost that is often externalized – at least conceptually. In small doses – singularly – such easily slips under the radar. In the aggregate, such fruit of progress becomes the elephant in the room.

    **I grant that I may be romanticizing the Luddites who may have been merely concerned with their immediate situation and their personal job security, but I do so with a nod to Adam Smith’s Invisible Hand.

  • [Avatar for Gene Quinn]
    Gene Quinn
    September 26, 2013 08:16 pm

    Anon-

    I understand what you are saying. @JustAsking said in his deleted comment that Walker wasn’t an innovator because he laid off employees, which seems like an unproductive, irrelevant rant.

    -Gene

  • [Avatar for Anon]
    Anon
    September 26, 2013 05:24 pm

    One aspect of employee layoffs that may be pertinent is that many of the innovations that business strives to make are innovations to reduce business cost factors.

    Unfortunately, the number one business cost factor for many businesses are its own employees.

    There is a very real, (and human) element – with a very historical basis at play (think Luddites).

  • [Avatar for Gene Quinn]
    Gene Quinn
    September 26, 2013 03:08 pm

    RE: @Just Asking:

    The above comment has been deleted as being non-substantive and irrelevant. The comment did not address any issues raised in the article and simply complained about employee layoffs by someone using a fake name and fake e-mail address.

  • [Avatar for Just Asking]
    Just Asking
    September 26, 2013 02:51 pm

    DELETED AS INAPPROPRIATE