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3 of the Biggest Surprises This Week

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Say what you want about the tech sector, but it's never boring. Any given week will keep tech investors flooded with product announcements, earnings surprises, and crazy strategy shifts that absolutely nobody saw coming.

These are three of the most shocking pieces of tech news this week:

1. Rise of the smart watch
Smartphones were the new hotness for a couple of years, and then tablets joined the party. Apple (NASDAQ: AAPL  ) sparked both revolutions with the iPhone and iPad, respectively.

This week, we got a glimpse of the next next big thing. Say hello to the smart watch. Rumor-mongers and leak wranglers just started talking up wrist-bound mobile computing gadgets from both Apple and Samsung.

Apple absolutely needs to come up with something new if it wants to keep the growth fires burning in Cupertino. A high-end TV set was presented as a likely option, but now we're supposed to think about more agile iPhone replacements instead.

Color me surprised. I'm all for innovation and progress, but do we really have the technology yet to make a watch-sized gadget that really works? If nothing else, these things might need a quantum leap in battery technology before becoming viable consumer products.

2. Sensible action on patent trolls
Even Washington makes sense once in a blue moon.

In an online question-and-answer event this week, President Obama called for "smarter patent laws." Specifically, he saw a problem with so-called patent trolls wielding patent claims as bludgeons in a crusade to squeeze money from companies that actually make something useful. Protecting intellectual property is important, Obama said, but "we've got to balance that with making sure that [patents aren't] so long that innovation is reduced."

That's a downright outrageous idea in this age of stretching copyright terms and launching East Texan lawsuits over the flimsiest of patent claims.

Perhaps our president had his arm twisted by large technology companies this time. Google (NASDAQ: GOOGL  ) is a noted friend of the White House, and also a frequent target of trollish lawsuits. You could say the same about Apple, though Cupertino dishes out nonsensical lawsuits as often as it receives subpoenas. And that's just the tip of the iceberg. Name a large technology company, and changes are good that it's the target of several patent troll attacks -- and that it contributes heavily to election campaigns.

Serious reform in this area could turn the economics of patent litigation upside down. Make nuisance lawsuits subject to large fees and serious sanctions when they're struck down, and I think you'll see a whole lot less of these innovation-killing shenanigans. Entire companies would go out of business overnight. I'm looking at you, Vringo (UNKNOWN: VRNG.DL  ) and VirnetX (NYSEMKT: VHC  ) .

It's about time that Washington starts to take this problem seriously. Buying someone else's inventions only to be used as extortion bludgeons shouldn't be a viable business model.

3. Level 3 hit the skids
This earnings season is winding down with a modicum of unexpected results. But a handful of tech stocks still managed to surprise investors in a big way.

I'm thinking of global networking provider Level 3 Communications (NYSE: LVLT  ) , which reported sales in line with Street targets but missed earnings expectations by 44%. The stock plunged 15% the next day.

Level 3 has been dead money for years. A buyout binge left the company buried under a mountain of debt and redundant operations. Management's main task is to reduce bloat and pay down debt, and it'll be difficult to call the buyouts a good deal until they get it done.

So I'm not particularly shocked to see Level 3 struggling. It's the magnitude of this quarter's miss that landed it a spot on this week's list.

There's no doubt that Apple is at the center of technology's largest revolution ever and that longtime shareholders have been handsomely rewarded, with more than 1,000% gains. However, there is a debate raging as to whether Apple remains a buy. The Motley Fool's senior technology analyst and managing bureau chief, Eric Bleeker, is prepared to fill you in on both reasons to buy and reasons to sell Apple and what opportunities are left for the company (and, more importantly, your portfolio) going forward. To get instant access to his latest thinking on Apple, simply click here now.

Read/Post Comments (13) | Recommend This Article (10)

Comments from our Foolish Readers

Help us keep this a respectfully Foolish area! This is a place for our readers to discuss, debate, and learn more about the Foolish investing topic you read about above. Help us keep it clean and safe. If you believe a comment is abusive or otherwise violates our Fool's Rules, please report it via the Report this Comment Report this Comment icon found on every comment.

  • Report this Comment On February 16, 2013, at 12:56 PM, CC33777 wrote:

    AAPL should buy LVLT, this week, while it is still dirt cheap. AAPL could then own LVLT's vast, already built, fiber optic data network, as a platform for their new iTV project.

  • Report this Comment On February 16, 2013, at 3:19 PM, johntres wrote:

    As usual here is the weekly super bearish motley article

  • Report this Comment On February 16, 2013, at 3:37 PM, sammycooool wrote:

    Apple has no idea what time it is, they won't be making a watch. They can't make an OS that has security either.

  • Report this Comment On February 16, 2013, at 4:20 PM, johntres wrote:

    Lang (Vringo) wrote the search patents himself

    VRNG is not a patent troll at all

  • Report this Comment On February 17, 2013, at 9:31 AM, raimodv wrote:

    For the author's edification, Dr. Lang, who is a member of VRNG board, is the actual developer of the patent that Google is infringing on.

    In the article, it discusses an idea that makes sense coming out of Washington. I have one that makes even more sense....."Fair Compensation for One's Own Work". It is down right earth-shattering idea if you ask me. But I am still not clear how that makes one a patent troll when looking to be rewarded for your own work? Two words..."Due Dilligence"

  • Report this Comment On February 17, 2013, at 10:59 AM, JeffParrel wrote:

    What to buy Rolex or iWatch?

    My choise is Rolex.

    I sold my AAPL shares on October 15 per signals by:

    *Morgan Stanley*

    ** I Know First algorithmic system**

    Time to buy AAPl again is not come yet.

  • Report this Comment On February 17, 2013, at 6:07 PM, hashhampton wrote:

    So if Goog steals and uses legitimate patents, such as "Adwords" from a guy named Ken Lang who now works for VRNG, it O.K. because Google makes something useful. Tell me that's not stupid.

    If you steal something from someone you deserve to be punished. VRNG is not a patent troll, it's trying to get back the millions of dollars that Goog took from a guy that should be rewarded for his patents.

    Aren't patents meant to protect the rights of those who patented the ideas of those who spent the money patenting their ideas? Obama is in Goog's pocket. They're liberal like him and he's in bed with them.

  • Report this Comment On February 17, 2013, at 6:12 PM, hashhampton wrote:

    By the way Anders, thanks for showing us that you own Google stock, I hope it tanks when the judge rules against them. They lost the jury trial, good luck getting that verdict overturned.

    By the way, Goog's lawyers violated civil procedure watch the judge throw the book at them this week! Read "Docket 897."

  • Report this Comment On February 18, 2013, at 3:12 AM, Any2ForU wrote:

    hashhampton, you're dead-on. There is nothing inherently wrong with a Company that has deeper pockets stepping in and filling the shoes of a Company that has been infringed upon and can't afford to fight an expensive trial anyway.

    As much as Obama likes to believe he's a dictator, the judicial arm of our Government is equally as strong as the other two branches. The VRNG trial is over. This isn't a case of extortion. GOOG lost at trial and is going to be ordered to pay for their infringement this week. Obama can't do anything to bail out his buddies at Google at this point anyway. I guess Obama was right when he said he said he would run a more transparent administration. His self-serving quid pro quo scams are transparent.

  • Report this Comment On February 18, 2013, at 12:53 PM, kenhaan wrote:

    Dear Mr. O'bama,

    Changing the Patent laws to favor big industry is a huge mistake. Little guys like me would be trampled on and stifled and would have no incentive to come up with Novel ideas. I just filed for a Patent on an innovative idea for a bicycle. I would have no chance against big companies without a Patent. Even so the cost of our court system to defend my patents often is detrimental to the little guy as well. I have a foreign manufacturer right now that has infringed my Patents and brought product into the USA without paying me royalties....that is thievery. Mr.Obama do not support the thieves just because they have lobbyists and give you a President with principals when it comes to Patents and fight for the little guy!

    The greatest ideas get patented by the little people of our country. Huge companies like Google or Apple have the right to buy those companies or license the technology,..Not STEAL the technology like Google is doing do VRNG. Patent trolls exist because they partner with or buy the little guys Intellectual property because they don't have the deep pockets to go after the patent thieves like google and apple. The patent laws don't need to be changed just the expensive court system needs to be changed to make it easier for the little idea guy to protect his rights to his or her invention!

    On another note, I love Mark Cuban on the TV show Shark Tank. He often rants and raves about how he hates patents and trolls, meanwhile he owns 350 million worth of Vrng that is fighting for its life and its Patents against Google. LOL He knows a good investment when he sees one and puts his personal feelings aside when it comes to his prescious money! lol

  • Report this Comment On February 18, 2013, at 1:59 PM, jkarr2 wrote:

    When are you going to learn?? You continue to write hit pieces with little to no understanding that: THERE WOULD BE NO PATENT TROLLS IF THERE WEREN'T PATENT PIRATES!! These uber-rich companies that feel the need to steal others inventions, claim them as their own, then have the audacity to clamor when the true owners, proven in court, refute their claims to said inventions. Get it through your head Anders, these large conglomerates accumulated their wealth often times based on others' technologies. They just assumed that no one would dare to challenge them once they got the "goliath" badge. Mr. Jobs himself often claimed that stealing was easier than inventing. He was a genius, but, he also made no bones about "borrowing" other technologies to be leveraged to his benefit. In court, Apple's own experts/engineers claimed they NEVER looked at previous patents to see if they infringed. (VCH vs Apple) Do a little research and you will quickly (AND EASILY!!) discover who actually owns/created the patents in VHC vs Apple. Geez, how many shares of Apple or Google do you own?? Must be a ton, as all you continuously do is berate companies who defend their intellectual property rights. Please don't bore me with "after the fact" information regarding the timing of the suits. Apple/Google have plenty of resources and manpower, as well as the USPTO, to help research whether these patents were previously in existence. They simply choose not to and hope that no one will notice, or subsequently play the Goliath card and trample the gnat who dares challenge them. Apple/Google STOLE other's ideas, NOW IT'S SIMPLY TIME TO PAY FOR THEM!!! Enough of your hit pieces, they're nonsense.

  • Report this Comment On February 18, 2013, at 3:42 PM, SDTrond wrote:

    VirnetX principals were the ones who actually worked on the inventions while at SAIC. They then formed a company and bought those patents from SAIC, and are now able to prosecute the infringement of those patents.

    Why would you include VHC in the pejorative, "patent troll?"

  • Report this Comment On February 19, 2013, at 5:48 AM, JohnYossarianJr wrote:

    "Buying someone else's inventions only to be used as extortion bludgeons shouldn't be a viable business model." But buying property and then renting it, and evicting tenants who refuse to pay, is a reasonable business model for commercial real-estate companies all over the country? Your article fails to realize that patents are property and the term "patent troll" is part of the war many big companies are waging against small companies like Rambus, VirnetX, and Vringo. These small companies innovate and if the large companies want to use their intellectual property, their patents, the law requires that they pay for their use. How else to support continued innovation that often occurs outside large companies?

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