Simply put Google states that they now possess a workaround to the hotly contested search patents. This latest disclosure could prove extremely difficult for Vringo to overcome, as it pursues efforts to win hundreds of million of dollars in damages. I recently opined in my article "Vringo's Billion Dollar Win at Hand" that Google has the ability to create a new platform for their Adworks business, therefore eliminating the infringement penalties of the Lang patents. This effectively limits the verdict to under $50 million in damages. Naturally this is exclusive of the appeals motions filed by Vringo and Google.
Is Google bluffing?
Read the statement from the Goggle motion filed April 16, 2013.
PACER DOC #924: UNITED STATES DISTRICT COURT
EASTERN DISTRICT OF VIRGINIA
I/P ENGINE, INC.
"Ex. 1.) Defendants informed Plaintiff that Google will be launching a change in the operation of AdWords that would remove the functionality that Plaintiff has pointed to for infringement of the filtering step, and would not infringe under Plaintiff's theories. Defendants offered to provide discovery into this functionality in order to avoid wasteful, additional motion practice. (Id.)"
Is this a bluff? Many would agree that it couldn't be more well placed and well timed in its delivery. Contained within Google's motion are other requests related to Google's attempt to buy more time. Specifically, Google requests a previously agreed upon deposition of the infamous Dr. Becker testimony. However, the elephant in the room is whether Google is indeed telling the truth about possessing this workaround. Dr. Becker's testimony becomes a minor issue beyond that finding. What are the ramifications? Vringo is left without the benefit of future royalties and subsequently a vastly diminished revenue base. With an anticipated base reward of somewhere between $500 million and $1 billion, Vringo is left with an award in the $50 million dollar range. Unfortunately this would be disastrous to Vringo shareholders, especially those looking for the big hit that the jury promised back in November of 2012.
Google is not bluffing
I believe that Google possesses the software technology to derail the Vringo patents, further they have every intention of implementing in the most expedient possible manner. Google from the beginning has taken a stance that NPE's patent trolls are to blame for much of what is wrong with the efforts to detract innovation, thru excessive, punitive financial awards. Vringo has always been a thorn in the side of Google and to tackle this problem would dissuade several more copy cats from arising.
Personally, I have always maintained a strong belief that Vringo's core patents are indeed beneficial and profitable. Presented in a different way, at a different time, Google may have been more receptive to a deal. However, hindsight is always perfect vision and as stockholders we are faced with fleshing out the value. In light of today's disclosure this equation now becomes more complex.
Conclusion: Microsoft is a possible licensee of Vringo search patents
By creating new software that bypasses Vringo's patents, Google establishes Vringo's search patents as valid, profitable and fully enforceable. Google has only Lang to thank for the years of profits that were attributable to Vringo patents, but by doing so they establish worth and value to Microsoft (NASDAQ:MSFT) as a buyer or licensee. What would Microsoft be willing to pay for a Vringo search patent license? This becomes a very instrumental discussion to the value of Vringo. Executive leadership at Vringo must now make some very strategic decisions to ensure the value of the enterprise. Stockholders will begin to understand and digest Google's comments and the first reaction would be perceived as negative. Many will feel the value for the risk is just not there. It could be damage control time at Vringo.
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.