Vringo’s Potential $1b in Google-AOL Patent Case is not Yet a Win

While the court’s decision to enhance damages last week is a big positive, Google is unlikely to accept defeat without a fight.

Vringo, Inc.’s shares shot up 20% last Wednesday after a district court ruled that the result of the enhanced damages calculation on its AdWords infringement case involving AOL and Google could exceed $1 billion. The  stock was trading is less lofty heights by Friday when investors had time to take stock.

The court’s “Memorandum Opinion and Order” set the appropriate ongoing royalty rate for continued infringement of its patents is 6.5% of the 20.9% royalty base previously established. All told, the new rate and past awards, reports the Motley Fool, are collectively worth around $1 billion for Vringo.  

Mark Argento who follows Vringo (VRNG) for Lake Street Capital said, “We estimate this royalty rate could result in an incremental $1.2 billion in future royalties based on out estimates of Google’s AdWords business gogdollardomestically over the life of the patents. The $1.2 billion would be incremental to the damages the jury awarded and the Judge calculated for past and supplemental damages of approximately $47 million.”

Maulin Shah of Envision IP told me that he was surprised of the District Court awarded a 6.5% ongoing royalty, which pretty close to the 7% I/P Engine, Vringo’s IP subsidiary, had asked for based on a willful infringement argument.

“As for the royalty base,” he said, “I/P Engine has asked for the 20.9% figure, and I do not believe Google made any arguments during trial for a lower base. Google’s post-trial argument for a 2.8% royalty base was reverse engineered from the jury award.  While it appears high, without any substantive arguments from Google, it seems reasonable to me that the judge used I/P Engine’s figure.”

*****

While last Wednesday was a very good day in court for Vringo, investors would be wrong to believe that Google and AOL will be writing a check for $1b or more anytime soon, if at all. Vringo must continue to pursue its case against these infringers, while managing its other IP assets and investor expectations. The company had announced on New Year’s Day that it had singed a deal to divest itself of its ringtone operating business. 

The pull-back of VRNG’s shares to mid-day Monday to $4.11, or only about 4% above the price prior to the court’s decision, and well below their big move last week, may be an indication that investor expectations are becoming more realistic when it comes to the patent “home run” derby, despite the bold headlines.

A previous dispute involving VRNG and GOOG had been estimated as resulting in $700m in damages. The court capped the award at $31m. It’s being appealed, as is a decision reported in today’s IP Law 360 that one of the Vringo Inc. patents that Google Inc. was recently ordered to pay an ongoing royalty for infringing has been preliminarily rejected by the U.S. Patent and Trademark Office. Vringo said Friday, adding that it was confident the decision would be reversed.

It is still too early to tell whether or not the pull-back in VRNG shares is a sign that interest in public IP companies is maturing appropriately, and that PIPCOs as a group are starting to be regarded as ongoing businesses worthy of industry status. 

Image source: emerging growth.com; mentecritia.net 

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About Bruce Berman

IP trend spotter, consultant and editor.

2 Responses to “Vringo’s Potential $1b in Google-AOL Patent Case is not Yet a Win”

  1. well said Bruce – there’s a lot of irrational exuberance here

    ________________________________

    • Much of the optimism among public ip companies is well deserved. However, it needs to be put into context. Patent litigation has become increasingly expensive and difficult – and big wins further and fewer between. That said, there still are huge opportunities for the right IP holders.

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