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"Let's Try This Cisco Thing Again," Says VirnetX

A Texas jury found Cisco Systems (NASDAQ: CSCO  ) not guilty of infringing on the patented security innovations of VirnetX (NYSEMKT: VHC  ) last month. VirnetX shares have been falling ever since, and the stock price is less than half of what it was before that crucial Cisco verdict. Meanwhile, Cisco investors hardly noticed the event at all.

VHC Chart

VHC data by YCharts.

The company isn't appealing the Cisco decision to the next judicial level. Instead, VirnetX is asking for a whole new trial. The market response isn't positive; VirnetX lost another 2% of its value this morning.

The action smacks of desperation. Here's how CEO Kendall Larsen justifies this choice: "VirnetX fully believes in the jury system. We hope that with a new trial, a jury can decide the issues of infringement and damages based on the judge's instructions and the merits of our claim."

Well yes, a jury can indeed decide the issues based in case merits and the judge's instructions. In fact, that's what they just did. Larsen may not like the outcome, but he's asking for a remedy that looks a lot like the alleged disease.

Didn't Albert Einstein quip that insanity is "doing the same thing over and over again and expecting different results"? I think that witticism applies to VirnetX today. I see no reason why another jury would reach a different verdict in this case.

The wider powers of the appeals bench might change the outcome, but VirnetX isn't going there.

The motion will in no way affect VirnetX's ongoing damage-collecting process against Apple, which was found to trample on some of the same patents seen in the Cisco case. It also won't derail the company's "licensing efforts to the 4G LTE mobile markets."

Not that those licensing efforts have been keeping Larsen up all night or anything. His company may be doing research and certainly spends a lot of time in courtrooms, but the business outcome of this activity is negligible. Actual revenues are measured in the thousands, supplemented by court-ordered payments. If the lucrative courts are turning against VirnetX, the business is sure to collapse in short order.

This $877 million market cap floats on a sea of red ink, clinging to dreams of a 4G-powered paycheck that may never come. Gamblers can play around with poker chips like VirnetX, but serious investors should stay far away. My bearish CAPScall on the stock has served me well so far.

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Read/Post Comments (6) | Recommend This Article (3)

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 April 04, 2013, at 6:39 PM, asdasdasdasdasd1 wrote:

    My article regarding VirnetX's legal motion, for another viewpoint on the topic.

  • Report this Comment On April 04, 2013, at 6:56 PM, vhcstrong101 wrote:

    You might find that you get all the true facts with toms119 article.

  • Report this Comment On April 04, 2013, at 8:10 PM, BlyndDaDoush wrote:

    Question. This news of filing motions for a new CSCO trail was released yesterday. April 3rd.

    Yesterday the stock closed positive and had a massive intra-day reversal BEFORE the news was even released.

    Today, April 4th... The stock again closed positive, yet you say the stock lost another 2% "on this news" when this news was not from today.

    So your article seems to have quite a bit of bias, then followed by your recommendation to purchase shares of CSCO.

    Work on getting your facts straight when writing articles like this and maybe you'll actually have a future with a half way decent income.

  • Report this Comment On April 04, 2013, at 8:52 PM, CallMeSizzle wrote:

    "I see no reason why another jury would reach a different verdict in this case."

    REALLY? Didn't juries in the MSFT case AND the AAPL case reach different verdicts? Are you really so obtuse that you 'see no reason' why a jury might come to a different conclusion than the one that was reached only 1 in 3 times in cases based on very similar charges?

    Have you even read VirnetX's motion for another trial? You're a hack, bro.

  • Report this Comment On April 04, 2013, at 9:09 PM, RHDNYC wrote:

    I shall attempt to delete expletives from my view of this incredibly incompetent, incomplete, biased, inarticulate, fact-free view of the actual VHC motion and business position. I am pleased that the author found it necessary to be self-congratulated on his "prescient" call; I believe it, and this article to be ghost-written by J.D Salinger, in his lighter moments.

  • Report this Comment On April 05, 2013, at 9:06 PM, jimlin1 wrote:

    Mr. are indeed an amateur @ writting articles for Motley Fool. You failed to inform the readers of one important reason as to why the retrial was requested and, indeed, necessary in that the illustrious atty. for the defense played the race card in his opening arguments comparing VHC vs CSCO to Romney vs Obama to a jury which contained an African-American juror. Although "shame on him" is in order for attempting to sway a member of the jury, a new trial must take place to rectify that situation alone. As you so amptly pointed out, CSCO "trampled on" the same patents as APPL did so do you think the jury just didn't get it? Of course they didn't! VHC's main thrust is not to win court battles and garner money being a "patent troll" is to create revenue streams for use of it's 4G LTE+ intellectual portfolio patents. That said, companys who "trample on" others patents must be held accountable for their wrongful actions...CSCO's guilty as sin of this and, hopefully, just like Microsoft and Apple, will be held responsible for the inappropriate actions in the upcomming retrial. In the meantime...try doing a little more homework before you bash one company and then recommend another.

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