Submitted by Mike Anthony as part of our contributors program.
Bascom Research announced Wednesday evening at 4:00pm ET that it is suing Facebook (NASDAQ: FB), LinkedIn (NYSE: LNKD), Broadvision (NASDAQ: BVSN), Jive Software (NASDAQ: JIVE) and Novell (private) for serious patent infringements. Bascom Research is a wholly-owned subsidiary of Lexington Technology Group that signed a definitive merger agreement with Document Security Systems (NYSE: DSS) on Tuesday. In response, shares of Document Security Systems rallied 7% on Thursday morning from $4.02 to $4.30 during the opening hour of trading.
The five companies named as defendants have been summoned to the District court of the United States in the Virginian Eastern District, known as the “rocket docket” for its historically rapid proceedings. Bascom Research named four U.S. patents at stake in the lawsuits, addressing issues like network storage, document objects and link relationships that all seem related to core technologies of social media companies.
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Lexington Technology Group CEO Will Rosellini commented on the lawsuit, “Our pioneering technology was patented as early as 2001—long before the advent of Facebook, LinkedIn and other social and business networks—and covers key aspects of online collaboration and relationship linking.” Rosellini will be discussing the lawsuit, and the pending merger with Document Security Systems, on a conference call at 4:00pm ET on October 4th.
Bascom Research owns copyrights and patents connected to the technological innovations of Tom Bascom of LinkSpace. Mr. Bascom originally developed the technology for the telecom sector and nationwide security departments, though it has been used in a variety of sectors. LinkSpace patented and commercialized the patented technology as a way of planning data networks and distributing information through a network of computers. In general, methods in which users and developers of applications create connections between document objects such as photos, pages and text areas are covered under Bascom Research patents. According to Mr. Bascom, the defendants named in the lawsuit are liable for infringing upon his firm’s legal rights. The plaintiffs will seek damages and injunctive relief.
This type of lawsuit against Facebook is not unique. Facebook and other networks have been known to violate significant digital patents before. For instance, Vringo shares have rallied over 400% the past year after the infamous “patent troll” sued Google (NASDAQ: GOOG) for violations of its fundamental search technology. In fact, shares of Vringo rallied over 70% in the past two trading sessions alone after a judge recently ordered settlement talks be scheduled on October 9th. VirnetX (NYSE: VHC) is another firm with a primary business model of monetizing its intellectual property against major technology firms. VirnetX’s stock has rallied over 400% in the past 5 years due to its success in generating revenue through litigation.
Shares of Document Security Systems are trading higher today on slightly above average volume following the lawsuit announcement. Bascom Research’s press release does not indicate a total damage or injunctive relief amount being sought in the lawsuit, but speculation is circulating that the number could be in the billions. The current market capitalization of Document Security Systems is approximately $87 million.