We like to keep track of various technologies and patent cases to become a better, more informed investor. Google (NASDAQ:GOOG) recently released new search algorithms which may have a major impact in Google's ongoing case against Vringo (NASDAQ:VRNG).
We will go through what the potential changes are in the Google algorithms and what effect said algorithms may have on the ongoing litigation between Vringo and Google.
We believe certain articles such as "Vringo's Appeal Could Be Worth A Half Billion Dollars" are too overly optimistic and bullish (not mentioning anything about a Google algorithm change) due to the possibility of still allowing evidence of workarounds to technology infringed by Google in this case.
We believe Google may try to raise a new argument involving its new search algorithms to lower the amounts it must pay:
"Another issue that arises occasionally with respect to patent infringement damages is whether the entire product should form the basis of compensation or merely a component of it. Generally, the basis for compensation will be the entire product only where the patent was granted for the entire product or the patented component gave the article its whole commercial value. Otherwise, the patentee has the burden of proving a basis of proportioning profits between the patented and unpatented portions of the product sold.
The law does not permit recovery of indirect consequential damages resulting from the infringement. For example, the fact that the patentee may have suffered competition and loss of business outside of the patent infringed or been required to borrow money at a higher interest rate is not generally considered a proper ground for compensation."
We believe there is a good possibility Google now may have at least a partial workaround in its ongoing case against Vringo concerning the 420 patent :
"Google's new 'Hummingbird' algorithm is about queries, not just SEO HTML coders inevitably panic when they hear word of another tweak to Google's search algorithms. Small wonder much dander was raised when Google announced Thursday it had silently rolled out a new algorithm, code-named "Hummingbird."
This website tracks updates to Google Algorithms and it claimed in early August there were potential major changes to Google Search.
A VentureBeat article recently caught our attention entitled "Things, not strings: How Google's new Hummingbird algorithm sets the stage for the future of mobile search":
"It's about meaning, not just keywords
Core to what Google is doing with Hummingbird is a shift in focus away from keywords and towards intent and semantics, which are infinitely more relevant to users. While the Google of a decade ago was focused on delivering search results based solely on queries, the Google of today is drawing insights from a variety of other signals - location, social connections, and even your previous searches.
In other words, stuffing your webpages with SEO-friendly keywords isn't going to cut it anymore. Or, as Google search guru Matt Cutts likes to put it, the Google of the future "is about things, not strings."
There are a number of ways of computing damages in complex patent litigation cases but potential workarounds leave a judge to decide what the status quo shall be. In cases between Apple and Android producers, Steve Jobs brought up the issue of workarounds:
"Shortly after he brought litigation against HTC, Steve Jobs met with then-Google CEO Eric Schmidt and said: "I want you to stop using our ideas in Android, that's all I want." Again, that's what HTC is now going to do with respect to the "data tapping" patent. What HTC calls a workaround sounds more like a throwout -- a complete removal of the feature rather than an alternative implementation -- but either way it's just what Steve Jobs wanted. He wanted this with a view to far more patents than one, but Apple can now try to make his vision materialize one patent at a time. Its litigation has already resulted in several modifications of competing products, particularly on Samsung's part."
So the question may be at this point is not simply now whether Google had past infringement. The question may be how much is Google currently infringing with Google's new algorithms?
In conclusion, we believe Google will try to use leverage in determining damages of a possible workaround against from its jury trial against Vringo with its first major changes to its search algorithms in over 10 years to pay substantially lower royalty rates. In recent cases between Apple and Samsung (OTC:SSNLF), a court did not accept Samsung's workaround. We believe though that Google will try to include new evidence of these algorithm changes in an expert's update to the court in October or November of 2013.
Disclosure: I have no positions in any stocks mentioned, and no plans to initiate any positions within the next 72 hours. 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.