In January, the venerable information technology (IT) software and services company, Micro Focus, was acquired by enterprise software provider OpenText in a $6 billion all-cash transaction. Beyond the obvious business impacts, the acquisition is of particular interest to LOT Network members: Micro Focus, a member of LOT Network since 2021, has been withdrawn by OpenText, who has never been a member. What does this mean for LOT Network and its members?

The Micro Focus Patent Portfolio is a risk for to the innovation ecosystem

Micro Focus’s patent portfolio presents significant risk should it be enforced. The portfolio includes over 2500 active granted patents and pending applications, in domains ranging from the expected, such as engineering software, security and databases, to general technologies that are widely employed like eCommerce, artificial intelligence, and blockchain (see Figure 1). This broad portfolio is a potential threat to companies far outside the IT and software industry, representing the full breadth of the innovation ecosystem.

Figure 1

A rejection analysis of the Micro Focus portfolio – identifying companies that have had patent applications rejected by the USPTO based on prior art owned by Micro Focus – reveals large technology players as well as companies in a wide range of industries, including banking, manufacturing, retail, chemicals and more. Companies that have had their patent applications rejected by the Micro Focus portfolio are more likely to have overlap between their revenue streams and the Micro Focus portfolio.

In addition to its homegrown patents, the Micro Focus portfolio includes patents obtained through its numerous acquisitions (see Figure 2). Many of these patents were originally developed by highly respected innovators. For example, the portfolio includes over 150 patents that originally belonged to Novell, a leading provider of network operating systems in 1990s known for making foundational contributions to the internet. Patents on foundational technologies are particularly risky, as they cover systems and processes that underlie entire industries.

Figure 2

OpenText may sell the Micro Focus portfolio to patent assertion entities

While it is not yet known how OpenText plans to use the Micro Focus portfolio, there is a real possibility the portfolio may be monetized. Per Clarivate’s Darts-IP data, OpenText has asserted over 40 patents in 19 patent litigations in the past 10 years. 

Given the cost, complexity, and risks of patent enforcement for an operating company, one course for OpenText would be to sell the Micro Focus patent portfolio to one or more patent assertion entities (PAEs). While an operating company such as OpenText must be cognizant of the reputational risk of suing industry peers, partners, and potential customers, as well as the financial risk of a countersuit, PAEs have no such concerns. Withdrawing Micro Focus from LOT Network opens the door for OpenText to engage is this type of sale.

OpenText is also aiming to shave $400 million in costs from the bottom line of the merged companies. According to figures provided by Clarivate’s Innography platform, Micro Focus’s patent portfolio costs over $3 million per year in filing and maintenance fees alone (see Figure 3). Offloading those costs to a PAE in return for a payment would provide a greater financial benefit to OpenText than abandoning those patents without any compensation.

Figure 3

LOT Network is the Answer, and It’s Not Too Late to Join

LOT Network members, of course, need not fear should OpenText choose to sell Micro Focus patents to PAEs, as they are protected by the LOT Network agreement. 

Companies who have not yet joined LOT Network have no such protection – but it is not too late to join. The LOT Network membership agreement provides a six-month withdrawal period, during which a company may still join LOT Network and receive protection from the patents that are being withdrawn. The period for Micro Focus began on January 31, 2023, meaning any company that joins LOT Network before July 31, 2023, may still obtain full protection from any Micro Focus patents that are transferred to a PAE.

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Sam Wiley joined LOT Network in 2023 as VP, Thought Leadership and Partnerships. In his IP career, he has examined patents with the USPTO, testified in Federal court on the value of IP, and advised clients ranging from Fortune 100 multinational companies to boutique law firms on implementing technologies that streamline IP operations and provide critical decision support on innovation strategy. He has presented on IP and innovation topics across North America, Europe, and Asia, and is the chair of the Licensing Executives Society Valuation and Pricing Committee.

Sam holds an undergraduate degree in computer science from New Mexico State University, as well as a Juris Doctor and a master’s degree in accounting from the University of Arizona.