Might you be interested in a stock that gained 576% in 2007, nearly 100% in 2009, and more than 400% in 2010? I thought so. I'm referring to VirnetX Holding (AMEX: VHC), a company holding patents related to LTE 4G security technology. (LTE 4G offers fast transmission and is serving smartphones well.)

You wouldn't be alone in being intrigued by the company, but it has a lot of detractors, as well. Let's explore whether you might want to buy, sell, or hold it.

Buy
Its main appeal for investors lies in its technology patents, which focus on securing real-time communications, among other things. These patents can be licensed to other companies and they can also provide some revenue when other companies infringe on them, are sued, and end up forking over millions. As of May, the company held 100 patents and had 32 more pending.

For example, VirnetX benefited from a big patent infringement win against Microsoft (Nasdaq: MSFT), where the software giant lost, and then ended up settling for $200 million. A chunk of that went to SAIC, and about $24 million was paid out to VirnetX shareholders as a special dividend (representing a whopping 8% yield). Meanwhile, there are suits against Cisco Systems and Apple, among others. A glance at its news archive shows many notices of lawsuits.

It's not inconceivable that some technology giant might acquire VirnetX for its patents, and possibly to avoid future lawsuits.

Another reason to consider buying is because so many investors are bearish on the company, with 24% of the stock's float having been shorted. If you go long on VirnetX and the stock rises, over time those shorters will decide to throw in the towel and get out. To do so, though, they'll have to buy back shares on the market and will thereby drive the share price up further, benefiting you. (This is a "short squeeze.") But then...what if the shorters are right?

Sell
So why are the shorters so negative on VirnetX? Well, some take issue with the company's litigiousness, suggesting that they'd rather see the company more focused on developing new technologies.

In looking over a management presentation, I was a little dismayed to see that the first three slides in the initial "Performance Recap and Highlights" section focused solely on stock gains instead of more operational achievements. After all, a stock that has quadrupled hasn't necessarily deserved to quadruple, and may not quadruple in the future.

You might also sell if you don't like volatile stocks. Remember those heady gains I mentioned at the beginning of this article? Well, I left out 2008, when VirnetX's stock plunged 75%. Can you handle moves like that? This stock isn't for the faint of heart.

Hold
If you're uncertain how you feel about VirnetX, you may want to hold on to your shares, or hold off on buying new ones. There is considerable uncertainty. Defending patents in court can be quite lucrative, but it's also far from a sure thing. VirnetX won't always win in court, and legal wrangling can be expensive. The suit against Microsoft cost $40 million.

You might also wait to see if VirnetX's technology really is, or becomes, a standard in the industry. Be wary of hype leading to great expectations that may not materialize. While you wait, you can add VirnetX to My Watchlist, which can help you zero in on all of our Foolish analysis on it -- and other stocks.

The verdict
I'll be passing on VirnetX, as there are clearly other promising stocks with less risky propositions. If you're really taken with the idea of technology licensing companies, two possibilities to consider are Universal Display (Nasdaq: PANL) and InterDigital (Nasdaq: IDCC), both of which are profitable. Universal specializes in organic light-emitting diodes (OLED) technology and collects a small fraction of revenues from Samsung televisions, and a similar long-term contract with LG is likely also in the works. InterDigital has been growing briskly and enjoys fat profit margins, but it's also interested in being acquired, which can limit its ultimate upside for investors. Still, both are well worth a look.

If you're in the market for another portfolio candidate in the wireless connectivity field, check out -- for free -- our special report, " The Next Trillion Dollar Revolution ," which details a company set to benefit strongly from the mobile revolution.