Already Down 50%, Should GoPro's Stock Price Be Even Lower?

Devonshire Capital Funds: Fund I
An analysis of GoPro
January 2015
For Public Release
-For Public Release-
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For Public Release
Fears over Apple entering GoPros market, backed up by IP

filings, sent GoPro shares tumbling 12.17% on Tuesday
Basic info
US 8934045 B2 (2015): Digital camera system having remote control

Original applicant: Eastman Kodak
Inventors: Kazuhiro Joza, Marc Krolczyk, Keith Stoll Karn
Description
A digital camera system contains an image capture module, which consists

of an image capture system and a wireless communication system, and a
remote control module, which includes a battery, status display elements,
user controls, a wireless communication system, and a power
management system
Exemplary claims
(1) A digital camera system, comprising:
An image capture module including:
A first image capture system including:
A first image sensor for capturing a digital image; and
A first optical system for forming an image of a first
portion of a scene onto the first image sensor; and
A first wireless communication system; and
a remote control module including:
A remote control status display including one or more remote
control status display elements for displaying status information
pertaining to the image capture module;
A battery-operated power supply;
One or more remote control user controls;
A second wireless communication system for communicating
with the first wireless communication system using a wireless
interface; and
A power management system providing a normal-power state
where the remote control status display and the second wireless
communication system are active and a low-power state where

the remote control status display and the second wireless
system are inactive
Wherein when none of the remote control user controls have been
activated for a predefined first time interval the power management
system sets the remote control module to operate in the low-power state;
And wherein when a user activates one of the remote control user
controls while the remote control module is in the low-power state:
The power management system sets the remote control module
to operate in the normal-power state:
The remote control module sends a status inquiry to the image
capture module using the second wireless communication
system, and in response the image capture module sends status
information back to the remote control module using the first
wireless communication system; and
The status information is displayed using the remote control
status display elements of the remote control status dusplay
Other bibliometric data
Patent application that resulted in this patent was re-assigned from Eastman Kodak to Apple on February 11, 2013
Cites over 56 patents, including previous work by Ricoh, Canon, Kodak, Minolta and other leading electronics and camera companies on camera remote
controls, image sensors, low-power capture modes, etc.; out of the 56 foundational camera and electronics patents that Apple cites, only one
is also cited by GoPros portfolio of 50 granted patents
For Public Release
$48.00
20150113T153001
20150113T153431
20150113T153843
20150113T154358
20150113T155335
20150113T155955
20150113T160429
20150113T161017
20150113T161735
20150113T162319
20150113T162628
20150113T163424
20150113T163851
20150113T164431
20150113T164843
20150113T165404
20150113T170015
20150113T170736
20150113T171652
20150113T172135
20150113T172817
20150113T174151
20150113T174535
20150113T175016
20150113T175417
20150113T175808
20150113T180321
20150113T180730
20150113T181041
20150113T181403
20150113T182001
20150113T182343
20150113T182701
20150113T183031
20150113T183209
20150113T183330
20150113T183435
20150113T183553
20150113T183742
20150113T184031
20150113T184330
20150113T184647
20150113T185038
20150113T185704
20150113T190318
20150113T191242
20150113T192006
20150113T192844
20150113T193640
20150113T194218
20150113T194749
20150113T195312
20150113T195617
20150113T200122
20150113T200607
20150113T201114
20150113T201332
20150113T201541
20150113T201726
20150113T201946
20150113T202247
20150113T202500
20150113T202735
20150113T203037
20150113T203458
20150113T203924
20150113T204357
20150113T204708
20150113T205157
20150113T205631
20150113T210152
20150113T210958
20150113T211819
20150113T212632
20150113T213304
20150113T213950
20150113T214539
20150113T214950
20150113T215227
20150113T215621
20150113T215909
One patent erased $880 million dollars from GoPros market cap
in six-and-a-half hours
GoPro Share Price (01/13/2015, by tick)
$58.00
$57.00
$56.00
$55.00
$54.00
$53.00
15.47%
$52.00
$51.00
$50.00
$49.00
How many other patents exist that can do the same?
For Public Release

4
Executive Summary
1
GoPro has soared upwards from an initial share price of $24 during its June IPO,
propelled by impressive revenue growth and a wave of investor enthusiasm
For Public Release
Go-Pro offers an example of a traditional consumer

electronics growth revenue curve
Revenue
Forecast
Estimated
$1600
Units
sold
5000
4500
1400
4000
1200
3500
1000
3000
800
2500
2000
600
1500
400
1000
200
500
0
2002
Nick Woodman
founds GoPro as
Woodman Labs after
he is unable to find
suitable camera gear
for a surf trip
2003
2004
Company releases its

first product, a
camera system using
35mm film, in
September 2004
R&D stage
2005
2006
2007
GoPro introduces its

first digital camera,
the Digital HERO, with
10-seconds of
recording capability
2008
2009
Digital HERO 5 is
released, the first
with a 170-degree
view angle, ultra-wide
lens (December 2008)
2010
GoPro releases its

first HD camera, the
HD HERO, shooting in
1080p at up to 60fps
Consumer electronics co.
For Public Release
2011
2012
2013
GoPro releases the

HERO3, with Wi-Fi
connectivity and the
ability to shoot in 4k
resolution
2014
GoPro sells 17.8M

shares in its IPO,
valuing it at $2.95B
(June 2014)
Media co.?
Within four years, GoPro has found a way to successfully

turn a profit and to grow its earnings
Income Statement;
For the Fiscal Period Ending
Dec-31-2010
Dec-31-2011
Dec-31-2013
Dec-31-2013
LTM Restated
Sep-30-2014
Revenue
$64.5
$234.2
$526.0
$985.7
$1,121.7
Total Revenue
64.5
234.2
526.0
985.7
1,121.7
31.7
111.7
298.5
624.0
646.8
32.7
122.6
227.5
361.8
474.9
19.5
74.8
137.8
189.0
259.5
13.2
64.4
116.9
157.8
not available
6.3
10.8
20.9
31.6
not available
1.4
8.6
36.1
73.7
131.2
Other Operating Expense, Total
20.9
83.5
173.9
262.8
390.7
Operating Income
11.9
39.1
53.6
99.0
84.2
$11.6
$24.6
$32.3
$60.6
$49.6
Cost of Goods Sold

Gross Profit
SG&A Expense
Selling and Marketing

General and Administrative
R&D Expense
Net Income
Balance Sheet;
As of
Cash And Equivalents
Dec-31-2010
Dec-31-2011
Dec-31-2013
Dec-31-2013
Sep-30-2014
$-
$29.1
$36.5
$101.4
$237.7
Short Term Investments
1.2
2.0
1.6
Total Cash & ST Investments
29.1
37.3
103.5
239.3
Total Assets
104.4
246.7
439.7
589.1
$-
$37.4
$249.3
$367.8
$238.4
Net Debt
not available
$(28.7)
$91.7
$10.2
$(239.3)
Quick Ratio
not available
1.5x
0.9x
0.8x
1.5x
Inventory Turnover
not available
not available
7.6x
7.2x
5.8x
Total Liabilities
For Public Release
GPRO is 94th percentile in

the NASDAQ in 1-year
revenue growth, and 98th
percentile in 3-year
revenue growth
GoPro has managed to
keep its gross margin over
35%, and as high as 50
Faced with stronger
competition from HTC,
Polaroid, and Sony, GPRO
has raised R&D exp. from
2% of revenue to 12%
GoPros large cash holdings

have been bolstered by its
recent secondary offering
GoPro may take advantage
of its low long-term debt to
make acquisitions in the
near-term
1.5x quick ratio
underscores GoPros strong
cash position; it could pay
off all liabilities with its cash
and short-term investments
Executive Summary
1
GoPro has soared upwards from an initial share price of $24 during its June IPO, propelled by
impressive revenue growth and a wave of investor enthusiasm
GoPros publicity engine has hyped the stock ever since its IPO, but some
investors and activists remain concerned
For Public Release
GoPros valuation in December was abnormally high, especially

when looking at companies with comparable PE/PB ratios
Revenue
1-Yr Rev.
Growth
Net
Income
P/E (LTM Norm.): 214x
Revenue
1-Yr Rev.
Growth
Net
Income
1-Yr Rev.
Growth
Net
Income
$6,500
11.3%
($43)
$8,155
8.7%
($169)
4th-largest cable provider in US, with

27.6M subscribers and $961M in
operating income
Revenue
1-Yr Rev.
Growth
Net
Income
87.4%
$60.6
P/E (NTM): 74.69x
Owns, operates, or leases 298 leading

entertainment and other venues
globally; 150M+ ticket sales per year
Revenue
$985.7
$17,857
6.9%
$162
Major South Korean conglomerate with

holdings across an impressive span of
industries
Revenue, net income from 2013 ($M)
Revenue
1-Yr Rev.
Growth
Net
Income
P/BV: 80x
$14,474
45.8%
($964)
Leading international cable company,

with 14x GoPros revenue and
impressive revenue growth
Revenue
1-Yr Rev.
Growth
Net
Income
$3,022
24.2%
$90
Largest provider of wireless

infrastructure in US; signed large tower
leasing agreement with AT&T in 2013
Revenue
1-Yr Rev.
Growth
Net
Income
$2,300
27.1%
$162
Ascendant athletic wear company with

major long-term supply deals and a
significant addressable market
For Public Release
Revenue
1-Yr Rev.
Growth
Net
Income
$2,972
8.8%
$804
Key rating institution with over $839M

in levered FCF in 2013 and $2.1B in
cash
Revenue
1-Yr Rev.
Growth
Net
Income
$5,591
(0.5%)
$558
Leading American consumer and

products brand with $5.6B in revenue
and consistent 40+% gross margins
Revenue
1-Yr Rev.
Growth
Net
Income
$6,170
5%
$913
British multination clothing, footwear,

and home products retailer with sold
net income and $6B in revenue
Multiples based on avg. for quarter ending 12/8/2014
In December, GoPros market cap ($9.2B*) placed it alongside

the worlds largest consumer goods, media, and tech companies
Company & Mkt. Cap*
Revenue ($M)
$7,500
Net income ($M)
$449
$10.14B
Rev. growth, 1-yr.
Description
18.8%
Manufactures and sells automation equipment and

systems and medical equipment
One of Top 100 Global Innovators in 2013,
per Thomson Reuters
Leading technology
innovator
5.48%
Multinational manufacturer of consumer, home,

and automotive electronics
Ranked in top 50 Most Innovative
Companies in 2014 by BCG
0.09%
$9.87B
French telecommunications equipment company

Industry Group Leader for Technology Hardware
in Dow Jones Sustainability Indices review
One of Top 100 Global Innovators for 4th
year in a row
$9.18B
$55,070
$9.55B
$167
One of worlds top

electronics brands
$19,800
($1,790)
$449
(3.57%)
American multinational media company

Holds Down Jones & Co., the NY Post, Harper
Collins, and other publishing and newspaper
assets
$74,488
($3,100)
(2.45%)
Europes second-largest car manufacturer by

volume; global deliveries of 2.82 million
Rapidly expanding in Chinese market
$23,100
$620
(5.19%)
Office supply chain with 2,000 stores worldwide

and over 90,000 employees
$8,500
Earned off of its broad content

and media holdings
$10.34B
$9.2B
For Public Release
*all market caps as of 12/5/2014
10
Analysts have hyped GoPros stock since its IPO, but skeptics
have raised doubts
What GoPros media hype engine says
what critics say about GoPros situation
GoPro has continued to see stellar revenue growth;

GoPros should be among the key gifts this holiday
season, as it has top billing at Amazon and Best Buy
GoPro will need to ship 15M to 20M devices annually to grow

into valuation; long-term projections of annual GoPro sales are
closer to 10M to 12M
Unlike Apples iPod, GoPro cameras appeal to a much smaller
addressable market, which is already showing signs of saturation
The majority of proposed synergies benefit GoPro above all; GoPros

specialization is not near-term relevant to Google Glass
Google paid $9.5B for Motorola and received 4,500 patents
and was able to bolster Android; $9B for a camera company with
limited IP appears high
Google may look to acquire GoPro in 2015
GoPros intended shift towards a media / content

company means it should be valued as such; it has
one of the top 10 YouTube brand channels
GoPro has yet to generate any significant revenue from its

YouTube channel or media efforts, yet it has the same market
cap as News Corp
GoPro doesnt necessarily own content shot on its devices
GoPros cameras feature industry-leading technology

that its competitors cant match, which will allow it to
sustain margins
GoPros cameras are not significantly better than those of its

competitors, nor are its chipsets differentiated or particularly unique
In fact, GoPro faces increasingly intense competition from
Sony, HTC, and Polaroid, among others
GoPro offers 4% net profit margins and $110M in

positive levered free cash flow generated each year;
momentum / enthusiasm of retail investors keeps
bumping it higher
Picking and choosing out of a basket of metrics is dangerous; any

look at the fundamentals should focus on its sky-high price-tobook, forward P/E, and price-to-sales ratios; mob mentality is
not a long-term viable valuation method
GoPro plans to release its own line of consumer drones

in late 2015, expanding its product offering into what
may be the next hot consumer product
Leading drone manufacturers have already begun selling

drones with cameras sourced in-house
GoPro is four years behind industry leaders, and may be shooting
itself in the foot since many drone manufacturers market their
drones for use with GoPro cameras
For Public Release
11
Executive Summary
1
The crest of this wave of Wall Street hype is evident in frothy media coverage of GoPro and
surprising, if not outright worrying, valuations metrics
But as the valuations have grown, so have questions about GoPros future success
For Public Release
12
Not everyone believes the hype surrounding GoPro, and

some have made their opinions known
Accounting
issues
Copperfield Research
Wall Street
market-making
Weak
fundamentals
Citron Research
Kerrisdale Capital
We believe $GPRO has used accounting gimmickry to overstate EBITDA by at least

10%. Very aggressive
$GPRO is not what it seems. Great product, great chartbut accounting has yet to be fleshed out
well.
GoPro is a tech hardware company. Yet it has spun a story, which is a very convenient
fiction, for Wall Street to parrot: that it can become a media company. Why? Because
users are uploading some of their videos to YouTube?
The clearest comparison to GoPro is Beats HeadphonesApple bought Beats for 2x revenueAt
the time of the acquisition, much of the media opined that 2x sales was high for a product
in a commoditized industry.
We have never seen analysts on consumer electronics gear company resort to social media
eyeballs metrics to justify valuationsIn Wall Streets compulsion to fabricate a story where
a story does not exist, you see its fingerprints on GoPro media.
Media strategy is unlikely to bear fruit; although GoPro has millions of YouTube subscribers
and hundreds of millions of views of its videos, the idea of the company obtaining significant
amounts of revenue from YouTube or a cable TV station is ludicrous
Some investors have compared GoPros camera to Apples iPod, but unlike the iPod it does not
have an ecosystem and is not materially superior to its competition
For Public Release
13
Is GoPro the next Flip Cam?

Introduction
History
Flip Video cameras were a popular

product line sold from 2006 to 2011 by
Pure Digital Technologies
Hailed as the future of journalism video, Flip Cams were one
of the most significant electronics products of [2008],
according to New York Times tech writer David Pogue
Over seven million were sold between 2006 and 2011; at times it
represented over 35% of the camcorder market
In 2011, however, Cisco, which had acquired Flip for $590M,
shuttered the business, seeking to exit the low-margin,
increasingly competitive consumer camera market while
retaining Flips valuable intellectual property portfolio
Previous hype surrounding Flip

Flip is looking at a younger audience, 14-25 or 28, wholl just slip
it into their pocketThis particular product is a subsector
were creating
Ray Sangster, Flip Videos European president
e-tailers moved very quicklytheyre the guys with the fingers

on the pulse.
Ray Sangster, Flip Videos European president
The Flip Ultra was released on September

12, 2007, quickly becoming the best-selling
camcorder on Amazon; within a year it had
captured 13% of the camcorder market
The Flip Mino HD, Pure Digitals first HD

camera, was released on November 11, 2008
Cisco Systems acquired Pure Digital on May

21, 2009 for $590M in stock
On April 12, 2011, Cisco announced it was shuttering Flip,

laying off 550 employees and writing off its $590M purchase;
the unit was considered a drag on margins and was facing
increased competition from traditional camcorder players
Pure Digital reveals YouTube-friendly Flip Video Ultra
Engadget
Flip Sales ($M)
The Flip Ultra is part of the modern reporters toolkit
400
400
2009
2010
Rory Cellan-Jones, BBC tech correspondent
A Reporters Toolbag: Reduced to Two Flip Camera and

iPhoneThe Flip video cameras simple, one-red-button
design makes it perfect for capturing quick video pieces
Nieman Reports
340
150
1
21
2002
2003
2004
2005
2006
50
2007
2008
2011
Cameras are still a rapidly commoditizing, replaceable piece of consumer

electronics
For Public Release
14
Estimated on analyst consensus
Executive Summary
1
While many of the previous points are concerning, we are asking a more
fundamental question: how much technology does GoPro actually own?
For Public Release
15
Most analysts, whether long or short, value GoPro as a technology

companybut how much technology does GoPro own?
Examining camera-specific patent portfolios of leading manufacturers
4.8
Panasonic
4.6
4.4
R&D spending, latest annual, $B
4.2
4.0
3.8
Direct Competitors in Action Cam Market
3.6
Leading Digital Camera Manufacturers
3.4
Size scales with patent portfolio
3.2
3.0
2.8
Canon
2.6
2.4
2.2
2.0
1.8
1.6
1.4
Garmin has a small

camera IP portfolio, but it
also has 350 other patent
families covering its core
products
FUJIFILM
Toshiba
1.2
1.0
Garmin
0.8 Polaroid
Nikon
HTC
0.6
0.4
Olympus
0.2
JVC
0.0
0
5,000
10,000
GoPro
Sony
15,000
20,000
25,000
30,000
35,000
40,000
45,000
50,000
55,000
60,000
65,000
70,000
75,000
80,000
Revenue, FY2013, $M
Among leading camera makers, GoPro has the lowest R&D spend and the
2nd smallest patent portfolio
For Public Release
Within last 20 years; US/Europe/JP INPADOC families

Conservative estimates based on point of last certainty
16
GoPro CEO Nick Woodman and S-1 filings have hinted at

this problem before, as recently as August 2014
We relied on the engineering departments of our contract manufacturers for
innovation at their pace of innovation. [But now] weve got a ton of brilliant products in
the pipeline, and weve developed a ton of brilliant intellectual property
Nick Woodman, GoPro Founder and CEO
Risk factors
Many of our existing and potential competitors enjoy substantial competitive advantages, such
as
larger intellectual property portfolios
Our intellectual property rights and proprietary rights may not adequately protect our
products.
Our business may suffer if it is alleged or determined that our technology or another
aspect of our business infringes the intellectual property rights of others.
If we are unable to maintain or acquire rights to include intellectual property owned

by others in the content distributed by us, our marketing, sales or future business
strategy could be affected or we could be subject to lawsuits relating to our use of
this content.
GoPro S-1
For Public Release
Source: Bloomberg phone call, August 2014
17
Executive Summary
1
While many of these attacks are concerning, none of them are the attack we are presenting
today; GoPros core problem is far more significantit hardly owns any technology
GoPro appears to have gone to market with a technology product before it owned
any technology
For Public Release
18
In January 2014, GoPro was granted its 5th patent family, but
had already sold over 8.1 million cameras this matters
If you infringe and sell products in the past, you can be
held liable in the future:
35 U.S. Code 281
A patentee shall have remedy by civil action for infringement of his patent.
35 U.S. Code 283
The several courts having jurisdiction of cases under this title may grant injunctions in
accordance with the principles of equity to prevent the violation of any right secured by patent, on
such terms as the court deems reasonable.
35 U.S. Code 284
Upon finding for the claimant the court shall award the claimant damages adequate to
compensate for the infringement, but in no event less than a reasonable royalty for the use
made of the invention by the infringer, together with interest and costs as fixed by the court.
When the damages are not found by a jury, the court shall assess them. In either event the
court may increase the damages up to three times the amount found or assessed.
35 U.S. Code 286
Except as otherwise provided by law, no recovery shall be had for any infringement committed
more than six years prior to the filing of the complaint or counterclaim for infringement in
the action.
For Public Release
19
Recapping GoPros revenue and unit sales timeline

underscores that its products predate its granted patents
GoPro Patenting vs. Sales
35
30
Units Sold
25
Design Patents
20
15
Utility Patents
Potential for lookback

24
15
GoPro had sold almost two

million cameras before it had
a single US granted patent
10
5
5
3
0
2004
2005
2006
2007
2008
2009
2010
Revenue
25
Design Patents
20
Utility Patents
10
2
2012
1
0
2014
1.2
24
1.0
0.8
15
10
3
2005
2013
15
2004
10
1.4
Revenue / utility patent
2011
GoPro Patenting vs. Revenue
35
14
2006
2007
2008
2009
2010
6
2
2011
14
0.4
10
2
2012
5
2013
0.6
10
Revenue ($M)
Granted Patents
40
30
Units Sold (M)
Granted Patents
40
0.2
0.0
2014
GoPro Revenue / Utility Patent ($M)
250
200
Revenue / Utility Patent
150
197
132
100
134
78
50
0
2004
2005
2006
2007
2008
2009
2010
For Public Release
2011
2012
2013
US/Europe/JP grants
Units sold est. 2004-2010, proj. 2014
Revenue est. 2007-2008, proj. 2014
2014
20
Each successive iteration of GoPro has introduced new features reliant on new
technology but does GoPro own the technology its cameras utilize?
Water- Frame- Resol- Power Storage Key

proof to rate
ution source medium feature
Digital HERO
Digital HERO 3
Digital
Digital HERO 5
Video with audio
Internal flash
memory
HD HERO
HD HERO 960
170 lens
HD HERO2
HD
120 fps
Internal / external flash memory
HERO3+
Wi-Fi
HERO4
4K
External SDHC flash

1,100 mAh Li-ion battery + optional Battery BacPac (not compatible with HD
HERO 960)
AAA batteries
512x384
1080p
30fps
30
HERO3
960p
60fps
100
197
For Public Release
1080p
4k
120fps
240fps
131
21
Majority of the IP that GoPro owns appears to cover the

design of its products, not its core technology
Design Patents
Battery
Camera
Housings
Expansion
Modules
Lens Covers /
Windows /
Adapters
Mounts
USD682778S1
USD646313S1
USD657808S1
USD674429S1
USD702276S1
USD702747S1
USD699277S1
USD674428S1
USD699276S1
USD702277S1
USD710922S1
USD710921S1
USD698791S1
USD691608S1
USD698790S1
USD691609S1
USD692472S1
USD699275S1
USD702755S1
USD702754S1
USD657811S1
USD644679S1
USD689537S1
USD688726S1
USD698851S1
USD677748S1
USD687112S1
USD697570S1
These cover form,

not function
Ornamental design for a GoPro lithium ion battery

Describes housing for GoPros Hero cases
Design for a camera housing
Design for camera housing with three lens windows
Design for square camera housing with latch
Design for housing with square lens cover
Design for housing for Dual Hero system
Design for housing for Dual Hero system
Design for a square camera housing
Design for a square camera housing
Design for a square camera housing with LCD viewing pane in back
Design for a camera housing with square lens cover
Ornamental design for a BacPac expansion module
Ornamental design for a GoPro Battery BacPac
Ornamental design for a BacPac expansion module
Ornamental design for a GoPro Battery BacPac, with fewer ports
Design for a lens adapter
Design for a lens adapter
Design for a cylindrical lens cover
Design for lens cover with cover for button as well
Design for spherical lens window on GoPros waterproof cases
Covers the specific design of the lens window of GoPros waterproof cases
Design for a flat lens camera assembly; resembles Dive Housing
Design for a suction cup mount
Design for a suction cup mount
Design of a mounting system for a sports board
Covers basic battery design

Covers existing GoPro case shape
Doesnt appear to map to current
product
Could protect stereoscopic camera
housing designs
Protects Blackout Housing in multiple
iterations
Utilize GoPros proprietary port to
protect copycats
Interchangeable lenses seem to be
mostly pushed by external brands
Are lens covers a core GoPro
accessory?
Important to note that most GoPro
competitors have waterproof bodies,
not cases
Some prior art surrounding suction
mount iterations
Covers design, not function of
mounting system
Important to note that, surprisingly, many of GoPros competitors have

used very different design language in their offerings
For Public Release
22
while GoPros utility patents predominantly focus on

various housings, mounts, and harnesses
Utility Patents
Broadcasting
Camera
Housings
Compression /
Image
Manipulation
Post-Alice decision,
these patents
deserve further
examination
Mounts /
Harnesses
Given prior
patenting and
potential prior art,
these may not
survive IPR
US8606073B2
Method for managing multiple video streams of a broadcast
US8837928B1
Housing with laterally-mounted latch mechanisms
US8325270B2
Camera housing with integrated expansion module and cable from module to camera
US8638392B2
US8199251B2
US8644629B2
Decompression of images captured by Bayer-style camera
US8718390B1
Two operating modes of accessing and decoding image plane data
US8538143B2
Compressing RGB images from single-sensor imager by separating into planes
US8345969B2
Method of compressing color imagery of video from Bayer sensor
US8879861B2
A method of accessing / decoding image planes to re-construct an image

Separating image into independent color channels and encoding / compressing them,
storing them, and re-combining into full-color display
Image sensor, frame controller, and processor system to reduce rolling shutter
US8014597B1
US8830367B1
Not applicable to existing business

model; prior use?
Much extant IP in this area
May be susceptible to prior art
Certain of these appear to be

susceptible to prior art / practice;
while this family has received
consistent attention from GoPro,
questions about its strength remain
Use of frame buffer predates this
Potential for high throughput apps
US8879858B1
Storing compressed image data in multiple band states
US8687086B1
A method of compressing image data before sending to a digital signal processor
US8014656B2
Two-piece mount for attaching camera to sports board
US8870475B1
Detachable buckle component for mounting on a sports board
US8857775B1
System with a spring clamp for mounting a camera to various equipment
US8150248B1
Two-piece mount for attaching camera to sports board
EP2341389B1
Strap that allows for two secured positions of camera
US8079501B2
Harness for attaching camera to a human user
How limited is applicability / use?
EP2357525B1
EP1611480B1
How limited is applicability / use?

Language may have workarounds
Deserving of prior art search; narrow?

Important concerns over decades of
prior art in this field; relatively narrow
claim construction
Superseded by new mounts
Some of these patents refer to technology for which prior patenting and
prior art records are extensive
For Public Release
23
The heart of GoPros IP is the process of mounting cameras onto

surfboards
Footage likely shot at Sunset Beach on Oahu, no later than 1962; TV

show Adventures in Paradise aired on ABC from 1959 to 1962
Over the years, [Preston Pete Peterson] got interested in photography. In a direct line from Tom Blake
to Doc Ball, Pete produced several prototype camera housings for his own use and experimentation.
His most notable experiment was an underwater housing that George Downing mounted
on his board and on his back like a butt pack, wrote Craig Lockwood, based on what Petes son
John told him. Shot at Makaha in the mid-1950s, these may be the first-ever shots of a
board taking off underwater.
For Public Release
Source: Legendary Surfers, Malcolm Gault-William

Retrieved from YouTube
24
Executive Summary
1
In fact, GoPro made a name for itself as a tech company well before it had one, single
granted patent
Does GoPro have necessary technology it needs to drive its ambitious future
growth strategies?
For Public Release
25
GoPros corporate strategy, outlined in its reports and calls,

references many technology areas with significant IP activity
Forward-looking GoPro strategies
GoPro patenting
Industry patenting
Manufacture and sell consumer drones
~1,400
Become a media company
~15,900
Pursue image stabilization
~2,600
~860
~300
Improve waterproof cases/bodies
Add GPS location to camera
For Public Release
26
Enthusiasm over GoPros strategy to enter drones should

be tempered by competitors patenting levels
Assignee network
Honeywell has a
particularly strong
portfolio around the
use of cameras with
drones
Small clusters of
inventorship have started to
appear, although citation
network is still fledgling
Parrot SA, which

jumpstarted
consumer drone
market, has a strong
portfolio
Early work led by
American defense
corporations
Granted Patents
250
200
Patenting on UAVs
150
100
50
0
UAV / UAS Patenting

Foundational work
re. hobbyist drones is
from early 1990s
11
14
13
21
13
1994
1995
1996
1997
1998
1999
207
207
2013
2014
173
115
24
29
2000
2001
48
49
42
51
62
57
65
2002
2003
2004
2005
2006
2007
2008
For Public Release
81
86
2009
2010
2011
2012
US/JP/EP grants, 94 to 14
27
GoPros competitors own the software, hardware, and

methods of content management and distribution
Assignee network
Digimarc also shows well in
this space, with key
watermarking technology,
image processing, and
second screen IP
HTC, another GoPro HERO

competitor, has a strong
portfolio on handling and
managing multimedia
broadcasts
Nielsen Co also boasts a

strong portfolio,
unsurprisingly
GoPro does not appear on

this citation network, which
only features portfolios of
over eight patents
Key GoPro competitor Sony

rests at the center of the
broadcast communication
citation network, with well
over 1,100 patents
Googles portfolio includes
estimating demographic
compositions, data collection
on users and dynamic data
delivery
1,346
Granted Patents
1,400
Broadcast Communications Patenting
1,200
Patenting on broadcast communications
1,000
800
600
400
200
0
346
356
397
1995
1996
1997
563
603
566
532
548
1998
1999
2000
2001
2002
628
684
2003
2004
755
1,148
897
919
942
2006
2007
2008
1,220
1,097
1,119
2012
2013
1,186
21
1994
2005
For Public Release
2009
2010
2011
2014
28
Attempts by GoPro to include image stabilization in its products may be

hemmed in by its competitors (especially Sonys) patenting
Assignee network
Small group of Irish /
European optics and
photography companies
Sony Corp has a strong,
relatively distinct, portfolio;
this is no surprise given the
success of its imagestabilized action cameras
Nikon and Canon represent
the center of image
stabilization patenting, with
consistent transfer of
knowledge between the two
Even smaller competitors,

such as Minolta and Casio,
have strong portfolios
surrounding image
stabilization
Granted Patents
300
250
Image Stabilization Patenting
Patenting on image stabilization
200
150
82
100
50
0
17
1994
1995
33
1996
48
1997
1998
36
45
44
1999
2000
2001
101
103
2002
2003
121
2004
214
151
153
168
2006
2007
2008
255
235
223
2010
2011
272
252
88
2005
For Public Release
2009
2012
2013
2014
29
Kodak, Sony, and Ricoh have been patenting around

waterproof cameras since the mid- to late-90s
Assignee network
Very isolated citation

network; little work between
secondary players
US Navy and US Army have

each contributed to the field,
focusing on underwater
cameras for submarine
detection
100
Granted Patents
Key cluster includes Kodak,

Ricoh, Sony, Olympus, Fuji,
and Minolta with research
occurring predominantly
from 1994 to 2004
80
Waterproof Camera Patenting
Patenting on waterproof cameras
60
40
40
22
20
0
15
21
24
1997
1998
41
32
29
2000
2001
40
33
39
39
2006
2007
47
53
61
61
2010
2011
72
79
86
25
1
1994
1995
1996
1999
2002
2003
2004
2005
For Public Release
2008
2009
2012
2013
2014
30
GoPro has located a niche in the GPS / camera space, but

its application is narrow
Assignee network
Apple and Samsung both
have patents in this
technology space, with Apple
focusing more heavily on the
camera side
Fujifilm describes image

capturing devices with maps
and an apparatus for
identifying images
Digimarc uses GPS to

digitally watermark images
and videos with location
data
GoPro / Woodman Labs

claims an integrated
expansion module that may
include a GPS unit (it is not
internal to the camera)
Nokia (5) and Sony Ericsson
(13) both have portfolios
surrounding this technology
Granted Patents
50
40
GPS and Camera Patenting
Patenting on GPS in cameras
47
2013
2014
36
32
30
49
26
20
20
10
0
1994
1995
1996
1997
1998
1999
2000
2001
2002
2003
10
2004
14
7
2005
For Public Release
2006
17
2007
2008
2009
2010
2011
2012
31
Executive Summary
1
In fact, GoPro made a name for itself as a tech company well before it had one, single
granted patent
Despite its recent attempts to improve its IP, GoPro still does not have the intellectual property
it needs to control its future
If GoPro has infringed others technology, it may be liable for hundreds of millions
of dollars in damages looking backward and hundreds of millions of dollars in
royalties looking forward
For Public Release
32
Past companies have demonstrated how costly technology can be to

acquire retroactively
DuPont was ordered to pay Monsanto $1 billion dollars after losing a patent verdict in August 2012
This was followed by a new licensing deal in March 2013 that threw out the earlier verdict but
required DuPont to make at least $1.75 billion dollars in royalty payments over the next several
years
($1,750M)
Marvell Technology was found in December 2012 to have intentionally infringed two Carnegie Mellon
University patents and was ordered to pay $1.17 billion dollars in damages
Marvell has chosen instead to continue to appeal; in the meantime, as of April 2014, the verdict has
reached $1.54 billion dollars
($1,540M)
W.L. Gore & Associates was ordered by the Federal Circuit in January 2015 to pay C.R. Bard Inc.
$1.06 billion dollars after it willfully infringed Bards blood vessel graft patent
($1,059M)
Intel faced the music several times in the early 2000s, paying Intergraph Corp $300 million dollars
in April 2002 for infringing Intergraphs patents with its Pentium chips, an additional $150 million
dollars for infringing with its Itanium chips, and following those up with a March 2004 settlement of
$225 million dollars to close all outstanding patent litigation between the two companies
($675M)
In late 2002, RIM was found guilty of infringing NTPs patents on wireless email and ordered to pay
$53 million dollars
Instead, RIM continued to appeal until March 2006 when, hit with a stern warning from the presiding
judge, it agreed to pay NTP $612.5 million dollars
($612M)
EchoStar Corporation settled its patent litigation with TiVo in May 2011, signing a license deal and
agreeing to pay TiVo $500 million dollars
($500M)
SAP was found in 2009 to infringe a business method patent held by Versata Software and was
ordered to pay $139 million dollars; after a new trial, this amount grew to $391 million dollars
($391M)
After a 2010 verdict, Microsoft agreed to pay VirnetX Holding Corp $200 million dollars to license
its patents on secure network communications
($200M)
33
For Public Release
Case information
Accused products
Patents in suit
Canary in the coal mine? Some companies think GoPro is

infringing their IP
US5,742,737 Method For

Recording Voice Messages On
Flash Memory In A Hand Held
Recorder
Hero
Hero2
Hero 3
Venue: CA Southern District

Filed: 12/5/2012
Latest Docket Entry: 1/27/2014
Status: Open in Scheduling
Z-Dimensional, LLC
VStream Technologies,
LLC
US7,729,530 Method and

Apparatus for 3-D Data Input to
a Personal Computer with a
Multimedia Oriented Operating
System
US8,602,662 Camera and

Accessories Clamping Mount
US6,690,731; US8,179,971;
US6,850,647; US7,627,183;
US7,489,824 Five patents
relating to compression /
decompression of video data
Hero3+ Black Edition

Dual / 3D Hero System
Jaws flex clamp
Digital video cameras
Venue: TX Eastern District

Filed: 4/15/2014
Status: Closed in Initial Pleadings
Venue: Colorado District Court

Filed: 1/21/2014
Latest Docket Entry:
11/19/2014
Status: Closed in Claim
Construction (Settled)
Venue: CA Southern District

Filed: 12/5/2012
Status: Open in Scheduling
As a direct result of its relationship with Dinkum, GoPro became intimately aware of the ActionPod Products, including
product components and the manufacturing process, and Dinkums desire to grow its business through sales of these products
In October 2013, GoPro release the Jaws Flex Clamp, a clamping monopod mount as an accessory to its camera line that is
substantially similar to the ActionPod Products
Upon information and belief, GoPro developed the Jaws Flex Clamp at the same time it was promoting the ActionPod Products
Upon information and belief, GoPro intentionally kept secret from Dinkum its development of the Jaws Flex Clamp
By copying the ActionPod Products to create the Jaws Flex Clamp, GoPro misappropriated the skill and labor of
Dinkum
For Public Release
34
Many of GoPros key features appear to be referenced by earlier

patents assigned to competitors
US5481303A Nikon
US7327122B2 Mathews Associates

US6002240A Dell
US5475539A Casio
US5438363A Nikon
US7123935B2 Canon
US6574433B1
Frank Stuempfl
US6987527B2 Philip Kossin
US7714925B2 Samsung
US6285471B1 Siemens
US7924323B2 Walker Digital
US6864911B1 HP
US6624842B2 Diversified Patent
US6462508B1 Kinpo Electronics
These are just a few of the patents that engineering analyses

commissioned by Devonshire Capital Funds suggest GoPro may infringe
For Public Release
35
Many companies with strong track records of defending IP

appear to hold patents related to GoPro products
For Public Release
36
Thank you
Matt Stack, Fund Manager

Devonshire Capital Fund
info@devonshirecapitalfunds.com
For Public Release
37
Full Legal Disclaimer

As of the publication date of this report, Devonshire Capital LLC ("Devonshire") has a short position in the stock of the company covered herein (GoPro, Inc.) and
stands to realize gains in the event that the price of the stock declines. Following publication of the report, Devonshire may transact in the securities of the
company covered herein. All content in this report represent the opinions of Devonshire. Devonshire has obtained all information herein from sources it believes to
be accurate and reliable. However, such information is presented as is, without warranty of any kind whether express or implied. Devonshire makes no
representation, express or implied, as to the accuracy, timeliness, or completeness of any such information or with regard to the results obtained from its use. All
expressions of opinion are subject to change without notice, and Devonshire does not undertake to update or supplement this report or any information contained
herein.
This document is for informational purposes only and it is not intended as an official confirmation of any transaction. All market prices, data and other information
are not warranted as to completeness or accuracy and are subject to change without notice. The information included in this document is based upon selected
public market data and reflects prevailing conditions and Devonshires views as of this date, all of which are accordingly subject to change. Devonshires opinions
and estimates constitute a best efforts judgment and should be regarded as indicative, preliminary and for illustrative purposes only. Any investment involves
substantial risks, including, but not limited to, pricing volatility, inadequate liquidity, and the potential complete loss of principal. This reports estimated
fundamental value only represents a best efforts estimate of the potential fundamental valuation of a specific security, and is not expressed as, or implied as,
assessments of the quality of a security, a summary of past performance, or an actionable investment strategy for an investor.
This document does not in any way constitute an offer or solicitation of an offer to buy or sell any investment, security, or commodity discussed herein or of any
of the affiliates of Devonshire. Also, this document does not in any way constitute an offer or solicitation of an offer to buy or sell any security in any jurisdiction in
which such an offer would be unlawful under the securities laws of such jurisdiction. To the best of Devonshires abilities and beliefs, all information contained
herein is accurate and reliable. Devonshire reserves the rights for its affiliates, officers, and employees to hold cash or derivative positions in any company
discussed in this document at any time. As of the original publication date of this document, investors should assume that Devonshire is short shares of GoPro,
Inc. and stands to potentially realize gains in the event that the market valuation of the companys common equity is lower than prior to the original publication
date. These affiliates, officers, and individuals shall have no obligation to inform any investor about their historical, current, and future trading activities. In
addition, Devonshire may benefit from any change in the valuation of any other companies, securities, or commodities discussed in this document.
The information contained in this document may include, or incorporate by reference, forward looking statements, which would include any statements that are
not statements of historical fact. Any or all of Devonshires forward-looking assumptions, expectations, projections, intentions or beliefs about future events may
turn out to be wrong. These forward-looking statements can be affected by inaccurate assumptions or by known or unknown risks, uncertainties and other factors,
most of which are beyond Devonshires control. Investors should conduct independent due diligence, with assistance from professional financial, legal and tax
experts, on all securities, companies, and commodities discussed in this document and develop a stand-alone judgment of the relevant markets prior to making
any investment decision.
For Public Release
38

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Devonshire Capital Funds: Fund I

For Public Release

-For Public Release-

For Public Release

-For Public Release-

Fears over Apple entering GoPros market, backed up by IP

US 8934045 B2 (2015): Digital camera system having remote control

A digital camera system contains an image capture module, which consists

communication system are active and a low-power state where

Other bibliometric data

For Public Release

-For Public Release-

How many other patents exist that can do the same?

For Public Release

-For Public Release-

For Public Release

-For Public Release-

Go-Pro offers an example of a traditional consumer

Company releases its

GoPro introduces its

GoPro releases its

Consumer electronics co.

For Public Release

GoPro releases the

GoPro sells 17.8M

-For Public Release-

Within four years, GoPro has found a way to successfully

Other Operating Expense, Total

Cost of Goods Sold

Selling and Marketing

Short Term Investments

Total Cash & ST Investments

For Public Release

GPRO is 94th percentile in

GoPros large cash holdings

-For Public Release-

For Public Release

-For Public Release-

GoPros valuation in December was abnormally high, especially

P/E (LTM Norm.): 214x

4th-largest cable provider in US, with

P/E (NTM): 74.69x

Owns, operates, or leases 298 leading

Major South Korean conglomerate with

Leading international cable company,

Largest provider of wireless

Ascendant athletic wear company with

For Public Release

Key rating institution with over $839M

Leading American consumer and

British multination clothing, footwear,

-For Public Release-

In December, GoPros market cap ($9.2B*) placed it alongside

Net income ($M)

Rev. growth, 1-yr.

Manufactures and sells automation equipment and

Multinational manufacturer of consumer, home,

French telecommunications equipment company

One of worlds top

American multinational media company

Europes second-largest car manufacturer by

Office supply chain with 2,000 stores worldwide

Earned off of its broad content

For Public Release

Already Down 50%, Should GoPro's Stock Price Be Even Lower?

Already Down 50%, Should GoPro's Stock Price Be Even Lower?