Paying to leave

REFR filed a very interesting 8-K last night. Longtime licensee NV Baekert, who inherited their license with REFR via their buyout of Material Science Corp. in 2001, had decided to clean house and terminate their license. The license, which was originally drafted in 1997, never resulted in a developed product, much less a product sale.

But what makes this an item of interest is the disclosure that Baekert was required to pay a "substantial" royalty as a condition of the termination. The actual amount was not disclosed (naturally), and, given the scale of REFR's revenue stream, anything from six figures upward might well be considered "substantial".

But if this termination clause is common among license agreements, and the exit fee is many times the annual mininums the licensees are committed to, that would certainly go a long way towards explaining why companies remain licensees for such a long time after they have clearly lost interest in the technology, and why REFR has managed to maintain a trickle of revenue even in years where it was literally impossible for them to have had business activity.

Grim jokes are already being posted to the effect that REFR might finally attain profitability on this new "license cancellation" business model. Of course, pretty much every stock's shareholders have something of a gallows mood these days. It's a strange world we live in, and stranger still that REFR still manages to exist in it.