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Patent litigation has become a global endeavor of late, with several patent-holding companies or "patent trolls" springing to life through mergers with publicly held corporations. With limited overhead and potential judgments in the 100's of millions, these stocks are certainly worth a careful look by investors that can stomach the volatility inherent in speculative assets. Although there are a number of patent plays in 2013, I believe the three outlined in this article are the most compelling because of the potentially large damages being sought relative to each company's current market cap. Without further ado, here are my speculative patent picks for 2013:

1) Document Security Systems (NYSEMKT:DSS). Document Security Systems is a leader in anti-counterfeit, authentication, and mass-serialization technologies, and recently announced a merger agreement with Lexington Technology Group primarily for its patent portfolio. In particular, a subsidiary of Lexington Technology Group, Bascom Research, recently filed a lawsuit in the Eastern District of Virginia against five social medial companies that include the behemoths Facebook (NASDAQ:FB) and LinkedIn (NYSE:LNKD). The lawsuit alleges that four patents ('232, '241, '971, '974) assigned to Bascom broadly describing how to 'link documents together in a virtual network' are being infringed by the defendants. In the complaint, Bascom has requested for injunctive relief, which holds considerable weight given that DSS is a practicing entity. As the lawsuit was only filed last October 3rd, 2012, a Markman hearing, if required, shouldn't occur until next March, giving investors plenty of time to take a position. Even so, DSS is currently trading near its year lows at $2.58 per share due, in large part, to the recent downturn in the equity markets. Given that Plaintiffs tend to win over 70% of the time in the so-called "rocket docket" and DSS has requested an injunction pending a positive outcome, this lawsuit should generate substantial interest in the stock over the next few months. As such, I believe the current PPS represents an excellent entry point for patient investors wanting to beat the crowd. With a low float and market cap, DSS could easily double from these levels on news of a positive Markman ruling, in a manner similar to Vringo (NASDAQ:VRNG).

2) Vringo. Vringo recently won its patent infringement suit against Google et al. in stunning fashion. Specifically, the Eastern District of Virginia jury voted unanimously for infringement on every single claim in the two disputed patents ('420 & '664). For investors with only a passing interest in patent infringement cases, I would like to point out that this is a stunning verdict, and acts to strongly validate Vringo's business model. Despite the positive verdict, however, the market was underwhelmed by the anemic award of $30 million for past damages, causing many speculators to simply pack their bags and head for the exit.

I believe the investors that have left the building, so to speak, have done so at their own investing peril. Vringo is grossly undervalued at $3.47 a share, in my opinion, for two clear reasons. Firstly, the market is behaving as if Judge Jackson will not re-affirm the running royalty rate of 3.5% suggested by the jury in his final verdict. That is the story being spread on message boards by anonymous short sellers, and unfortunately the ruse is working. Based on the fact that Judge Jackson requested the jury to make a recommendation on running royalties and he did not have to do so, there is no logical reason to believe he will now completely ignore the jury's recommendation. I fully expect a confirmation of the recommended 3.5%, especially in light of jury voting for infringement on literally every claim.

Secondly, Vringo filed another lawsuit in Germany yesterday against ZTE (OTCPK:ZTCOY) alleging infringement on their telecommunications patent portfolio, recently acquired from Nokia (NYSE:NOK). The broader investment community is apparently unaware that German courts, especially those in Mannheim where this lawsuit was filed, overwhelming favor the plaintiff and make the rocket docket look pathetically slow. Recent patent infringement cases in Mannheim have wrapped up on average between 6-8 months, and injunction against infringers is frequently granted. The location of this filing is certainly a strategic move by David L. Cohen, Head of Licensing, Litigation, and Intellectual Property at Vringo. Specifically, ZTE is now facing two pending lawsuits against in Europe and a real possibility of an injunction in Germany that would basically cripple their business in Europe. If you think my words are too strong, read this statement directly from the complaint: "Vringo is seeking injunctive relief, rendering of accounts, recall and destruction of allegedly infringing products …" With a positive outcome more than likely for Vringo in this case, ZTE would be wise to take license in the near future. If not, I can only laugh at the real possibility of Germans being paid to break infringing ZTE handsets.

Overall, Vringo has a $600 million plus verdict pending from the Google (NASDAQ:GOOG) et al. lawsuit, has filed two lawsuits against ZTE that will be resolved in the first half of next year, has made it clear they are going to be filing a litany of new lawsuits, and has zero debt per their latest conference call. If you are selling this stock now because it didn't immediately run to double digits, I highly recommend you don't check the price again a year from now. Vringo has now crossed the Rubicon from short-term speculative stock to long-term growth/value stock. Patient investors, in my opinion, will be handsomely rewarded.

3) Worlds Inc. (WDDD). Worlds Inc. filed a patent infringement lawsuit against Activision Blizzard (NASDAQ:ATVI) in the U.S. District Court for the District of Massachusetts on March 30th, 2012. The lawsuit alleges that two of Blizzard Inc.'s massively multiplayer online role-playing games (MMORPG), World of Warcraft and Call of Duty, are directly infringing on World Inc.'s '501, '558, '690, and '856 patents. These patents basically outline how individuals interact in a virtual space, which is the very basis of MMORPG's in general.

The lawsuit was compelling enough that the Houston-based Super Lawyer, Max L. Tribble, accepted the case on a contingency basis. Mr. Tribble has a long and impressive history of winning patent lawsuits in the software and gaming arena. Even so, the current case could be his biggest yet. The World of Warcraft franchise alone has over 10 million online subscribers that pay an average fee of $15 per month. The Call of Duty franchise nevertheless dwarfs WoW in terms of sales. The newly released "Black Ops II", for example, sold over a million copies in the first day alone, and the franchise has sold over a 150M copies to date.

While a quantitative damage estimate is difficult to estimate at this point, my back of the envelope calculations put a minimum damage estimate at approximately $200 million for 5 years of past infringement by both game systems. In an attempt to verify these rough calculations, I called and emailed Mr. Tribble to no avail. But I feel confident the lawsuit does have legs, and any award would be many multiples of Worlds Inc. current market cap of $11.4 million. A Markman ruling is now set in the case for June 27th, 2013, which should be a positive catalyst for WDDD.

In sum, WDDD is a highly speculative patent play with the potential to be a multi-bagger. From my reading of the patents and initial complaint, I believe Worlds Inc. does have a strong case, and should prevail. However, investors should be forewarned that Worlds Inc. is essentially a shell corporation at this point, having largely ceased normal corporate activities. This patent play thus belongs solely in the realm of 'Mad Money' accounts, and should be viewed as nothing less than a flat out roll of the dice.

Source: 3 Speculative Patent Plays For 2013