Local.com (LOCM): A Little Blackmail With Your Patent?

Local.com (LOCM) received a couple of patents that would appear to be pretty valuable. The first patent number 7,231,405 is for the process of indexing and retrieving web-related information by geographical location. The second patent number 7,200,413 is for the method of responding to enhanced directory assistance inquiries using various protocols including voice-enabled and SMS systems.

Local.com’s CEO made a couple of telling statements: "In our view, the burgeoning free 411 marketplace is being underwritten by a variety of advertising supported models. Our patent 7,200,413 is directly related to a referral advertising model such as pay-per-click or pay-per-call listings, which are delivered to consumers as a result of an enhanced directory assistance inquiry or local search, where the results can be provided to consumers via many mobile channels, including voice," said Heath Clarke, Chairman and CEO, Local.com.

"We encourage directory assistance and free 411 companies that are interested in using our intellectual property to enter into licensing agreements with Local.com." He made the same comment about the first patent.

In other words, which, with a 40% run-up so far today to a 52-week high of $10 and a market cap of $89 million intends to become an intellectual property licensing company. Based on the company’s falling annual revenue and an operating loss of $13.6 million in 2006, the new model may be a good idea.

But, the patents are almost certain to be challenged in court, so Local may want to raise a legal fund.

Douglas A. McIntyre can be reached at [email protected].