On August 9, 2012, Vringo (NASDAQ:VRNG) announced that they were acquiring 500 valuable patents from Nokia (NYSE:NOK) which cover over 10 countries. They also announced that David L. Cohen (formerly Senior Litigation Counsel at Nokia) had joined Vringo's management team and will be the Head of Litigation, Licensing and Intellectual Property. It's important to know that prior to joining the Vringo team; David was responsible for Nokia's successful global intellectual property litigation campaign against Apple (NASDAQ:AAPL), which resulted in a reported settlement of $715 million plus ongoing royalties. David will now oversee all of Vringo's IP monetization efforts.
Thursday, November 15, 2012 Vringo announced that its wholly-owned subsidiary, Vringo Germany GmbH, has filed a patent infringement lawsuit against the ZTE Corp, China and its German subsidiary, ZTE Deutschland GmbH (ZTE). ZTE, headquartered in China is a leading global provider of telecommunications equipment and network solutions.
Globally, ZTE reported annual revenue of US $13.7 billion primarily from the sale of telecommunications equipment and handsets. Through its network of operators across 140 countries, the company delivers innovative products and business solutions. It connects global customers via voice, data, multimedia and WLAN. Founded in 1985, ZTE is listed on both the Hong Kong and Shenzhen Stock Exchanges and is China's largest listed telecoms equipment company.
David L. Cohen, in an effort to monetize Vringo's patent portfolio per their scalable business plan commented; "The filing of this action in Germany is the next step in Vringo's global licensing and enforcement program in the telecommunications sector. ZTE has elected not to take a license to patents in Vringo's portfolio relevant to certain international standards, despite manufacturing and selling devices and equipment for a number of years that are said by ZTE to be compliant with those standards." Furthermore, "We believe that ZTE is aware that it requires licenses to all patents that are essential to relevant standards. Further, we believe that ZTE is familiar with systems for declaring patents to standards-setting organizations and the relevant intellectual property rights policies for those organizations, having itself declared hundreds of patents to international standards."
The lawsuit, filed in the District Court of Mannheim, alleges infringement of the German part of European Patent 1,212,919. Declarations have been filed at the European Telecommunications and Standards Institute (ETSI) that cover the patent. ZTE's accused devices are believed to fall within the scope of the patent. Vringo's complaint brief is to be served on ZTE.
In this case, which is the second one vs. ZTE since the merger with Innovative/Protect that closed about four months ago, Vringo is seeking injunctive relief, a rendering of accounts, recall and destruction of allegedly infringing products as well as monetary damages.
Alexander R. Berger, Chief Operating Officer at Vringo in response to this new filing stated; "As we have said before, ZTE's liability will continue to increase as long as the issue remains unresolved. We hope that ZTE will work with us to resolve this matter in a positive and productive manner."
The first ZTE lawsuit announced on October 8, 2012 was filed in the UK High Court of Justice, Chancery Division, Patents Court, that alleges infringement of European Patents (UK) 1,212,919; 1,166,589; and 1,808,029. Declarations have been filed at the European Telecommunications and Standards Institute (ETSI) that cover the patents. ZTE's cellular network elements fall within the scope of all three patents, and ZTE's GSM/UMTS multi-mode wireless handsets also fall within the scope of the '029 patent.
As it stands, the two alleged infringement lawsuits only cover European Patents numbered 1,212,919; 1,166,589; and 1,808,029. One was filed in the UK and one was filed in Germany. What about the other 497 or more additional patents that were recently purchased in the Nokia portfolio? I suspect that the company has a war room set up with several strategic targets to attack next. My gut tells me that we might continue to see a steady stream of additional global patent lawsuits coming from Vringo on a regular basis.
For those of you who may recall, ZTE has already found themselves in hot water earlier this year with the U.S. House of Representatives Intelligence Committee. They announced in a report on October 8, 2012 following an 11-month investigation, which stated that U.S. telecommunications operators should not do business with China's top network equipment makers ZTE and Huawei. Their reasoning was because of potential Chinese state influence on the companies that could pose a "security threat" to the United States. Huawei and ZTE, which are both based in Shenzhen, China, are rapidly becoming "dominant global players" in the world-wide telecommunications market.
Prior to this Intelligence Committee news, and similar to the announcement on Thursday that ZTE is not paying Vringo for licenses, there was a lawsuit filed by mobile equipment giant Ericsson against ZTE going back to 2011. In this lawsuit, the equipment manufacturer alleged that ZTE had infringed on their patents and also refused to sign a licensing agreement. Does this sound familiar?
In January 2012, news was announced that ZTE had settled a patent dispute with Stockholm, Sweden-based Ericsson for $647 million. ZTE denied that it was ordered to pay $500 million euros ($647 million) to Ericsson and was banned from entering the European market. Interesting enough, Ericsson said in a separate statement to the press that the two parties had agreed to drop all litigation and signed a global cross-licensing agreement.
Disclosure: I am long VRNG. I wrote this article myself, and it expresses my own opinions. I am not receiving compensation for it (other than from Seeking Alpha). I have no business relationship with any company whose stock is mentioned in this article.