Crossroads Got $10 Million in Litigation Financing

Crossroads Systems, Inc. has secured $10 million in litigation financing related to its ‘972 patent portfolio.

The investment was led by Techquity Capital Management, an Austin, TX based IP investment firm specializing in advancing innovation through patent commercialization and monetization. The Techquity team has decades of experience in IP licensing and management and has completed nearly 100 transactions together.

Crossroads used $2.7 million of the proceeds to retire its credit facility with an affiliate of Fortress Investment Group LLC. The remaining $7.3 million was added to the company’s cash balance to fund litigation related expenses. Together, the Fortress debt service and litigation expenses previously represented approximately 60% of Crossroads’ monthly cash requirement. As of October 31, 2015, after retiring the Fortress credit facility, Crossroads has a cash balance of approximately $11 million.

Richard K. Coleman, Jr., president and CEO, Crossroads, stated: “This financing supports our ongoing patent infringement litigation against NetApp, Oracle, Cisco, Quantum, and Dot Hill as well as the repayment of 100% of our outstanding debt. As a result of the financing, we believe Crossroads has secured the capital necessary to execute our business strategy, and our shareholders can now be confident in our ability to manage the litigation to a successful conclusion.”

Mark Roche, co-founder and MD, Techquity, stated: “Crossroads is well positioned to realize significant value from its ‘972 patent portfolio. The patents have a long and successful licensing history and we strongly believe that Crossroads should prevail in the current litigation.”

Terms of the agreement call for the investors to receive a share of the proceeds generated from monetization related to the ‘972 patent family.

After more than a decade of successful licensing and enforcement of the ‘972 patents, Crossroads’ current litigation was initiated in late 2013 and early 2014 as the only remaining recourse to the defendants’ failure to respond to repeated licensing efforts. Crossroads has licensed the ‘972 patent family to 51 companies for over $60 million. The patents have been repeatedly upheld through a series of challenges both in court and in hearings before the United States Patent and Trademark Office (USPTO). Crossroads believes the patents will continue to be upheld in the current challenges before the USPTO and in court. It also continues to believe that potential compensatory damages in the current cases could be in excess of $200 million.