Why Vringo Shares Took Off

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What: Shares of small patent licensor Vringo (UNKNOWN: VRNG.DL  ) have gained over 10% today -- and had been up to 21% higher earlier in the day -- as investors digest the news of a major patent ruling in Vringo's favor.

So what: Yesterday afternoon, Vringo announced that the U.S. Patent and Trademark Office has affirmed the validity of its "420 patent." This and one other patent had been the subject of a contentious court battle won by Vringo subsidiary I/P Engine late last year against Google (NASDAQ: GOOGL  ) , AOL, IAC/InterActive, Gannett, and Target. Following its loss, Google had specifically challenged the validity of the 420 patent's key claims. Today's ruling ends any effort to contest the ruling, and opens the way to royalties, licensing fees, and potential damages beyond the $30.5 million originally granted to Vringo last year.

Now what: The patent, acquired from search pioneer Lycos, claims invention of "relevance filtering," one of Google's key search technologies. The original suit appears to claim that every time Google and its search partners algorithmically analyze a search string in order to tie the proper ad to its results, they are taking advantage of patented technology and thus should owe royalties.

To my admittedly untrained eyes, this does appear to be an example of patent trolling, since Lycos would have done much better had it actually developed this technology rather than simply thought about developing it. One commentator on Seeking Alpha believes that this might become a billion-dollar problem for Google, and that remains possible -- but any investment in Vringo based on this ruling is simply a bet on the outcome of a court case. Make sure you have a deep understanding of the legal issues before diving in.

Want more news and updates? Add Vringo to your watchlist now.

Will this patent suit be big enough to change the balance of power at the top of the tech world? It won't topple Google, as it's one of an elite group of companies shaping our digital and technological lives -- but yesterday's loss could give its enemies a leg up. Find out "Who Will Win the War Between the 5 Biggest Tech Stocks?" in The Motley Fool's latest free report, which details the knock-down, drag-out battle being waged by the five kings of tech. Click here to keep reading.

Read/Post Comments (4) | Recommend This Article (3)

Comments from our Foolish Readers

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  • Report this Comment On July 26, 2013, at 6:01 PM, Lowcap wrote:

    The case has already been won at the District Level and the filed appeal is now dead in the water (Courtest the USPTO). All that remains is 3.5 to 7% royalty decision.

  • Report this Comment On July 26, 2013, at 6:31 PM, Figlus wrote:

    Wow... "The original suit appears to claim..."

    "APPEARS TO CLAIM?" Did you do ANY research for this uninformed piece? By the way, the United States Patent and Trade Office (USPTO) just completely VALIDATED Vringo's (VRNG) patents, upon which Google (GOOG) was found guilty of infringing by a UNANIMOUS jury in a U.S. District Court. A nice piece of irony; GOOG requested the review. So, your assessment of Vringo as a "patent troll" is absolutely ludicrous. The USPTO determination of validity makes GOOG's chances on appeals that of a snowball's chance in hell.

    And just to round your education, MICROSOFT (MSFT) already settled ($1M and licensing VRNG six undisclosed MSFT patents) with Vringo on the same patents; and that was BEFORE the USPTO even validated the patents.

    As a side note, there is also a pending litigation case by VRNG against China's Zhong Xing Telecommunication Equipment Company Limited (ZTE), its largest and another infringer, who has a propensity for settling.

  • Report this Comment On July 29, 2013, at 9:31 AM, hashhampton wrote:

    Come on Alex, do your homework before you write anything. The USPTO proved the validity of patent 420 and that literally means that GOOG has lost again. They thought they'd win the jury trail, but they lost. They thought they'd win this USPTO rexam, but they lost. GOOG hasn't got a leg to stand on and soon the judge will award VRNG a running royalty, the amount is all that remains to be determined. With all of the monkey business that GOOG has pulled, I hope the judge doubles VRNG's award.

  • Report this Comment On August 16, 2013, at 6:28 AM, taishiba wrote:

    BUY DSS before their markman against facebook and linkedin on october 2nd. only 27 million market cap! can be worth easily 100 million in early october after markman. loaded the truck!

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