We are an intellectual property asset management company. Our principal operations
include the development, acquisition, licensing and enforcement of intellectual
property rights that are either owned or controlled by us or one of our wholly-owned
subsidiaries. We currently own, control or manage ten intellectual property
portfolios, which principally consist of patent rights. Our ten intellectual
property portfolios include the portfolios which we acquired from Intellectual
Ventures Assets 16, LLC (“Intellectual Ventures”) and five of its
affiliates. As part of our intellectual property asset management activities
and in the ordinary course of our business, it has been necessary for us or
the intellectual property owner who we represent to initiate, and it is likely
to continue to be necessary to initiate, patent infringement lawsuits and engage
in patent infringement litigation. We anticipate that our primary source of
revenue will come from the grant of licenses to use our intellectual property,
including licenses granted as part of the settlement of patent infringement
lawsuits. We also generate revenue from management fees from managing intellectual
property portfolios.
We seek to generate revenue from three sources:
Patent licensing fees relating to our intellectual property portfolio, which
includes fees from the licensing of our intellectual property, primarily from
litigation relating to enforcement of our intellectual property rights.
Management fees, which we receive for managing structured licensing programs,
including litigation, related to our intellectual property rights, although
we do not currently receive these fees.
Licensed packaging sales, which relate to the sale of licensed products.
Intellectual property monetization includes the generation of revenue and proceeds
from the licensing of patents, patented technologies and other intellectual
property rights. Patent litigation is often a necessary element of intellectual
property monetization where a patent owner, or a representative of the patent
owner, seeks to protect its patent rights against the unlicensed manufacture,
sale, and use of the owner’s patent rights or products which incorporate
the owner’s patent rights. In general, we seek to monetize the bundle
of rights granted by the patents through structured licensing and when necessary
enforcement of those rights through litigation, although to date all of our
patent license revenues have resulted from litigation.
We intend to develop our business by acquiring intellectual property rights,
either in the form of ownership of or an exclusive license to the underlying
intellectual property. Our goal is to enter into agreements with inventors of
innovative technologies for which there may be a significant market for products
which use or incorporate the intellectual property. We seek to purchase all
of, or interests in, intellectual property in exchange for cash, securities
of our company, the formation or a joint venture or separate subsidiary in which
the owner has an equity interest, and/or interests in the monetization of those
assets. Our revenue from this aspect of our business can be generated through
licensing and, when necessary, which is typically the case, litigation efforts
as well as intellectual property management fees. We engage in due diligence
and a principled risk underwriting process to evaluate the merits and potential
value of any acquisition, partnership or joint venture. We seek to structure
the terms of our acquisitions in a manner that will achieve the highest risk-adjusted
returns possible, in the context of our financial condition. In connection with
the acquisition of intellectual property portfolios, we have granted the party
providing the financing an interest in any recovery we have with respect to
the intellectual property purchased with the financing, and we expect that we
will have to continue to grant such interests until and unless we have generated
sufficient cash from licensing our intellectual property to enable us to acquire
additional intellectual property portfolios without outside financing. However,
we cannot assure you that we will ever generate sufficient revenues to enable
us to purchase additional intellectual property without third-party financing.
Mobile Data
The real-time mobile data portfolio relates to the automatic update of information
delivered to a mobile device without the need for a manual refreshing. The portfolio
is comprised of U.S. Patent No. 7,194,468 “Apparatus and Method for Supplying
Information” and all related patents, patent applications, and all continuations,
continuations-in-part, divisions, extensions, renewals, reissues and re-examinations
relating to all inventions thereof (the “Mobile Data Portfolio”).
We initially entered into an agreement with the patent owner, Worldlink Information
Technology Systems Limited, whereby we received the exclusive license to license
and enforce the Mobile Data Portfolio. Under the agreement we received a monthly
management fee and a percentage of licensing revenues. Subsequently Worldlink
transferred its remaining interest in the Mobile Data Portfolio to Allied Standard
Limited. In October 2012, we entered into an agreement with Allied pursuant
to which Allied transferred its entire right title and interest in the Mobile
Data Portfolio to Quest Licensing Corporation, which was at the time, a wholly-owned
subsidiary. Under the agreement, Allied was entitled to receive a 50% interest
in Quest Licensing. Quest Licensing’s only intellectual property is the
Mobile Data Portfolio. Our agreement with Allied provides that we and Allied
will each receive 50% of the net licensing revenues, as defined by the agreement.
In June 2013, we entered into an agreement with The Betting Service Limited,
an entity controlled by a former director of Worldlink. Pursuant to the agreement,
we granted The Betting Service an interest in licensing proceeds from the Mobile
Data Portfolio in return for The Betting Service’s assistance in developing
certain Mobile Data Portfolio assets. In April 2014, we entered into a further
agreement with Allied whereby Allied relinquished certain rights under the October
2012 agreement, including its entitlement to a 50% interest in Quest Licensing,
in exchange for our commitment to fund a structured licensing program for the
Mobile Data Portfolio.
In March 2014, we entered into a funding agreement whereby a third party agreed
to provide funds to us to enable us to implement a structured licensing program,
including litigation if necessary, for the Mobile Data Portfolio and engaged
counsel on a partial contingency basis in connection with a proposed patent
infringement action relating to the Mobile Data Portfolio. Under the funding
agreement, the third party receives an interest in the proceeds from the program,
and we have no other obligation to the third party.
In April and June 2014, as part of a structured licensing program, Quest Licensing
Corporation brought patent infringement suits in the U.S. District for the District
of Delaware against Bloomberg LP et. al., FactSet Research Systems Inc., Interactive
Data Corporation, SunGard Data Systems Inc. and The Charles Schwab Corporation
et. al. These cases have been consolidated for trial. A hearing, known as a
Markman hearing, in which the judge examines the evidence from the parties on
the appropriate meanings of relevant key words in the claim was held on February
8, 2016. In June and August 2016 Quest Licensing Corporation entered into settlement
agreements with SunGard Data Systems Inc. and FactSet Research Systems Inc.
On January 19, 2017 the Court granted the remaining defendants’ motion
for summary judgment of non-infringement. On January 31, 2017, Quest Licensing
Corporation filed a notice of appeal with the United States Court of Appeals
for the Federal Circuit whereby Quest Licensing Corporation appealed the court’s
order construing the terms of U.S. patent No. 7,194,468 as well as the court’s
order granting defendants’ motion for summary judgment of non-infringement.
In connection with this litigation, a third party funding source incurred approximately
$153,125 in 2017 and $809,000 in 2016, which was paid to litigation counsel
and other third parties. In addition, the funding source paid management fees
to us of approximately $21,000 in 2017 and $25,000 in 2016. In 2016, modest
licensing fees generated from settlement agreements were paid directly to the
funding source pursuant to our agreement with the funding source. As a result,
through December 31, 2017, we did not receive any proceeds from the Mobile Data
Portfolio.
Following the court’s decision granting the defendant’s motion
for summary judgment, the defendants moved for an award of attorneys’
fees under Section 285 of the patent act which provides that “the court
in exceptional cases may award reasonable attorney fees to the prevailing party.”
Our funding source for the Mobile Data Portfolio litigation has no obligations
to fund any judgment against us. Although the motion, if granted, would result
in a judgment against Quest Licensing Corporation, such subsidiary does not
have the financial resources to enable it to pay any judgment which may be rendered
against it, and, the defendants may seek to enforce their judgment by seeking
to foreclose on the patents owned by the subsidiary or seek to force the subsidiary
into bankruptcy and purchase the patents in the bankruptcy proceeding, either
of which could result in a default under our agreement with United Wireless.
On June 29, 2017, the defendants’ motion for attorney fees in the Mobile
Data litigation was denied, without prejudice. Defendants may renew their motion
thirty days from the decision of the appellate court on Quest Licensing Corporation’s
appeal.
Online Marketing, Sweepstakes, Promotions & Rewards (Von Kohorn Portfolio)
The portfolio consists of three United States Patents that include patent claims
related to, among other areas, online couponing, print-at-home boarding passes
and tickets, online sweepstakes; including the promotion by television networks
of online sweepstakes (the “Von Kohorn Portfolio”). In December
2009, we entered into an agreement with Intertech Holdings, LLC pursuant to
which our wholly-owned subsidiary, Quest NetTech Corporation, acquired by assignment
all right, title, and interest in the Von Kohorn Portfolio. Under the agreement,
we will receive 20% of adjusted gross recoveries, as defined. In August 2013,
we and Intertech Holdings amended the December 2009 agreement to provide that
Intertech Holdings will receive 33% of the adjusted gross recoveries and Quest
NetTech will receive 67% of adjusted gross recoveries.
Flexible Packaging - Turtle PakTM
In March 2008, we entered into an agreement with Emerging Technologies Trust
whereby our majority-owned subsidiary, Quest Packaging Solutions Corporation,
acquired the exclusive license to make, use, sell, offer for sale or sublicense
the intellectual property of Emerging Technologies Trust (the “Turtle
Pak™ Portfolio”). The Turtle Pak portfolio relates to a cost effective,
high-protection packaging system recommended for fragile items weighing less
than ten pounds. The intellectual property consists of two U.S. patents, U.S.
Patent No. RE36,412 and U.S. Patent No.6,490,844, and the Turtle PakTM trademark.
Turtle Pak™ brand packaging is suited for such uses as electrical and
electronic components, medical, dental, and diagnostic equipment, instrumentation
products, and control components. Turtle Pak™ brand packaging materials
are 100% curbside recyclable.
As the exclusive licensee and manager of the manufacture and sale of licensed
product, we coordinate the manufacture and sale of licensed products to end
users; we contract for the manufacture and assembly of the product components,
and we coordinate order receipt, fulfillment and invoicing. Revenues from the
TurtlePakTM product sales were approximately $14,000 and $18,000 for the years
ended December 31, 2017 and 2016, respectively. We continue to generate modest
revenue from this product.
Universal Financial Data System
The invention describes a universal financial data system which allows its
holder to use the device to access one or more accounts stored in the memory
of the device as a cash payment substitute as well as to keep track of financial
and transaction records and data, such as transaction receipts, in a highly
portable package, such as a cellular device (the “Financial Data Portfolio”).
The inventive universal data system is capable of supporting multiple accounts
of various types, including but not limited to credit card accounts, checking/debit
accounts, and loyalty accounts. Our wholly-owned subsidiary, Wynn Technologies
Inc., acquired US Patent No. 5,859,419, from the owner, Sol Wynn. In January
2001, we filed a reissue application for the patent, and the United States Patent
and Trademark Office issued patent RE38,137. This reissued patent, which contains
35 separate claims, replaces the original patent, which had seven claims. In
February 2011, we entered into a new agreement with Sol Li (formerly Sol Wynn),
pursuant to which we issued to Mr. Li a 35% interest in Wynn Technologies and
warrants to purchase up to 5,000,000 shares of our common stock at an exercise
price of $0.001 per share. We also agreed that Mr. Li would receive 40% of the
net licensing revenues generated by Wynn Technologies with respect to this patent,
which is the only patent owned by Wynn Technologies.
