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When I think of VirnetX (NYSEMKT:VHC) and their ongoing dispute with Apple (NASDAQ:AAPL) I am reminded of a particularly intense scene played out in the AMC hit series "Breaking Bad" from season 5 - episode 7. In this scene Walter White, the high school chemistry teacher turned methamphetamine maker extraordinaire, forces a well established and successful rival drug chief to not only take his terms but also makes him submit and say his name - not by physical force but because his product is so pure and so perfect that the rival chief realizes nobody else can make it. The rival chief has no practical choice but to take White's terms and distribute his superior product or risk losing significant business.

I can hear it now... meth dealers? Let's get past that and focus on the analogy - VirnetX is Walter White and Apple is his chief rival. In November of 2012 a jury awarded VirnetX a $368M judgement from Apple for past infringement on VirnetX patented technology. VirnetX secure communication solutions are so elegant, so perfect, so secure, and so rock-solidly patented that Apple has not been successful in working around them to avoid future and continuing infringement. VirnetX patents have been and are continuing to be subjected to multiple prior art attacks and re-examinations and not one claim has received a final non-appealable rejection. Not one claim. In fact, on August 6th VirnetX announced it had been granted two new secure communication patents by the USPTO - U.S. Patent No. 8,504,696 ("'696 patent") and U.S. Patent No. 8,504,697 ("'697 patent"). In his most recent article fellow SA contributor Dustin Moore reveals that VirnetX also has additional, soon to be released, patents - some of which are closely related to patents currently under re-examination. This would seem to bode well for VirnetX in those re-examinations.

VirnetX has secured licensing agreements from Mitel (NASDAQ:MITL), NEC, Siemens (SI), Microsoft (NASDAQ:MSFT), Aastra, and most recently Avaya. These agreements have all been consistent with the VirnetX published licensing program found here. According to an April press release VirnetX has now identified 18 specifications or developing specifications in the 3GPP LTE, SAE project to which its patents and patent applications are or may become essential.

"We believe that VirnetX invented technologies are essential to securing the rapidly growing 4G/LTE networks," said Kendall Larsen, VirnetX CEO and President.

Upcoming Catalysts:

VirnetX v. Apple Future Royalty Hearing - The initial jury award of $368M was for past infringement by Apple. The good judge in this case, The Honorable Leonard Davis, has set a hearing date of August 15th to hear arguments regarding setting an appropriate future running royalty rate that Apple must pay VirnetX for the ongoing infringement of its patented secure communication technology. The judge's decision here will likely dwarf the $368M jury award. It is entirely possible that Judge Davis could rule from the bench regarding the running royalty since it has been nearly 10 months since the end of the trial. Many are expecting that once Judge Davis determines the royalty rate that will be exacted upon Apple it will open the door to possible VirnetX non-litigation licensing agreements with Android operating system players like Samsung (OTC:SSNLF) and Google (NASDAQ:GOOG) - consider that Android has nearly 80% of the smart phone market.

VirnetX v. Cisco Motion for New Trial and Damages - In April of 2013 VirnetX went to jury trial against Cisco for infringing on VirnetX patents for secure communications. The jury determined that while VirnetX patents were valid, Cisco did not infringe on them. VirnetX promptly filed a motion for a new trial accusing the Cisco legal team of an intentional campaign of confusion, distortion, and misdirection:

VirnetX makes this request because the verdict is the result of Cisco's campaign of confusion - in which Cisco's counsel repeatedly adulterated the Court's instructions, distorted the Court's claim constructions, and misdirected the jury with incorrect legal argument.

The Cisco trial was presided over by the same Judge Davis who heard the arguments for and against this motion over 3 months ago and still has not ruled prompting many to speculate this motion has a better than average chance of succeeding. Here is an excellent article by fellow SA contributor Tom Shaughnessy detailing this still unresolved motion.

Favorable Climate:

United States Government Secure Communications - Over the last year the U.S. Government decided to implement secure smartphones and has been qualifying manufacturers and operating systems.

4G LTE-Advanced Network Roll-Out - Remember, for network providers, chip makers, and handset manufactures to be compliant with LTE-Advanced standards they must incorporate VirnetX essential technology. These networks are starting to roll out. Handset makers, including Samsung, are making LTE-Advanced phones such as the new Galaxy S4.

Samsung - Samsung has recently been stung by an Obama Administration veto of a favorable ITC ruling banning the sale of infringing Apple devices - the first veto of its kind since 1987. In a separate ITC ruling in Apple's favor Samsung had several of its devices banned - but there was no veto for Samsung. Both of these setbacks for Samsung lead me to believe that Samsung would benefit greatly by licensing, outright buying, or creatively partnering with VirnetX to improve the Samsung secure communications capability, comply with VirnetX essential patents, and to stick a thumb in Apple's eye.

Based on the above factors I believe VirnetX is well positioned to see a significant increase in licensing revenues over the next 12 months - all of the factors listed above should compel investors to put VirnetX on the radar and start researching this secure communications technology leader.

Disclosure: I am long VHC. 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.

Additional disclosure: This article is informational and intended to spur thought and discussion. This article is NOT a substitute for your own extensive due diligence and does NOT qualify as investment advice. DO NOT BUY OR SELL STOCKS BASED ON THIS ARTICLE. I do not short stocks nor do I invest in options.

Source: VirnetX: Put This Secure Communications Company On Your Radar