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Google (NASDAQ:GOOG) lost by jury trial against Vringo (NASDAQ:VRNG). We strongly believe due to a number of legal precedents in the IP Patent Law Space that Google is now between a rock and a hard place in its quest to appeal its loss in court against Vringo. We are going through a host of legal facts which will explain simply to non-lawyers what is going on through a number of cases. Interestingly as we predicted in our prior article, one of the main legal precedents in this endgame, is the Verizon Case.

We believe it is getting more likely that Google will throw in the towel soon. Why? Judge Jackson increasing the running royalty rate is getting much more likely if the parties fail to come to an agreement soon.

There are strong legal arguments by Vringo based on a number of appellate precedents from over the past twenty years or more. Vringo is proffering the George Pacific approach which means the following:

"The Georgia-Pacific approach first requires an assumption that, at the time of the hypothetical negotiation (which is when the actual infringement begins even if damages do not start then), both parties agree that the patent is valid and infringed. Because this assumption almost never exists in any real-world licensing negotiation, this is a further reason that the infringer must be careful in presenting a damages defense based on what the parties might have actually negotiated prior to the infringement and the subsequent lawsuit. Indeed, the Federal Circuit has affirmed "reasonable royalty" rates based on the Georgia-Pacific approach that are in excess of anything the parties would have actually agreed upon as a result of licensing negotiations prior to the infringement. For example, in Deere & Co. v. International Harvester Co., 710 F.2d 1551, 1554-58 (Fed. Cir. 1983), the Federal Circuit affirmed a damages award of a 15% royalty when patent-in-suit had been licensed and offered for license at 1%. Similarly, in other cases, the Federal Circuit has affirmed damages royalty rates of 20%, 33%, and 40% of the infringing sales, as well as other similar high rates that exceeded any actual rate in the particular industry, see e.g., Bio-Rad Laboratories, Inc. v. Nicolet Instrument Corp, 739 F.2d 604 (Fed. Cir. 1984); Biotec Biologische Naturverpackungen GmbH & Co. KG v. Biocorp, Inc., 249 F.3d 1341 (Fed. Circ. 2001); Minco, Inc. v. Combustion Engineering, Inc. 95 F.3d 1109 (Fed. Cir. 1996)."

We found it very interesting that in our legal research we came up with the following about negotiations of royalties:

"First of all, nearly all courts give the parties an opportunity to negotiate an ongoing royalty, following the Federal Circuit's suggestion in Paice.

However, in the reported cases, such negotiated ongoing royalty discussions to not often succeed. In one case the district court, anticipating the likelihood that the parties might not agree, directed them to negotiate but advised them that if they fail, the ongoing royalty awarded by the Court was likely to be higher than the amount found by the jury."

Judge David Folsom is a guiding light as to what it is probable in this case. We are also very curious as to which legal precedents Google will use before eventually throwing in the towel. The list of cases which set the precedent for a strong Vringo win legally moving forward are as follows:

Affinity Labs of Texas, LLC v. BMW North America, LLC, 783 F. Supp. 2d 891 (E.D. Tex. 2011):

"(applying the two additional steps to determine the appropriate post-judgment royalty rate). A "modified" the dynamics of a post-judgment hypothetical negotiation would differ from those of a prejudgment hypothetical negotiation, for example, (1) the parties' "changed legal status" and (2)the "different economic factors [that] are involved."

Adamo v. Microsoft (NASDAQ:MSFT):

"Turning to the particulars of the district court's determination, the Federal Circuit noted that this case arose in circumstance different from Paice. Paice involved ongoing damages in an environment when the district court had concluded no injunction should issue. In Adamo, Microsoft was enjoined, but permitted to continue to infringe based on the court approved stay of the injunction. The court noted that the district court had trebled the pre-suit damages based on willfulness."

Paice LLC v. Toyota Motor Corp. (NYSE:TM):

"The Federal Circuit made clear that on remand the court should not simply defer to the jury, but instead that "the court may take additional evidence necessary to account for any additional economic factors arising out of the imposition of an ongoing royalty." Id. It also noted that parties presumably would be given the opportunity "to negotiate their own rate," but that in the absence of such an agreement, the court could award a royalty for ongoing infringement in appropriate circumstances. Id. at 1314-16."

ActiveVideo Networks, Inc. v. Verizon Communications (NYSE:VZ):

"This Court rejected Verizon's argument reasoning: [t]hat once a verdict of infringement and validity issues, the bargaining position of the parties differs greatly than it would in a pre-judgment calculus. With respect to the relevant patents, ActiveVideo is in a better "bargaining position" with Verizon than it would have been with Cablevision in 2009. It would be improper to base a royalty rate on an agreement ActiveVideo reached two years prior to the jury's verdict when their bargaining position in any hypothetical negotiation post-verdict has clearly improved."

The prevailing standard methodology for this process is based on Judge David Folsom:

"Judge Folsom's methodology, perhaps modified in some fashion, are pertinent to the calculation of ongoing royalties are all mainstays of ongoing royalty analysis in nearly every court. has been widely followed in subsequent cases. In particular, the notion that post-judgment royalties are necessarily different from prejudgment royalties, that some way must be found to account for the changed status of the defendant after the jury verdict."

In conclusion, we believe there is tremendous upside for Vringo as a stock and as a company moving forward. Why? Legal precedents are what matter in these cases being in courts of law. Judge Jackson must abide by precedents. Vringo is still undervalued and has more room to run long-term.

Source: Will Google Throw In The Towel In The Endgame Against Vringo Due To Legal Precedents?