Vringo's Stout Trumps 13 Tech Giants In NTP Patent Suit

Jul.25.12 | About: FORM Holdings (FH)

NTP Inc. -- the company cofounded by Donald Stout, who is a Vringo (VRNG) director and Chairman of Vringo's intellectual property committee -- announced Monday that it has reached settlements with 13 tech companies. These companies have been infringing on NTP patents for years, and NTP is finally going to be compensated. The settlement figure, though not disclosed, could go beyond anything we have ever seen.

The list of companies that agreed to settle with NTP is impressive.

First we have the wireless carriers: AT&T (NYSE:T), Verizon Wireless (NYSE:VZ), Sprint Nextel (NYSE:S) and T-Mobile.

Next we have the smartphone manufacturers: Apple (NASDAQ:AAPL), HTC, Motorola Mobility, Palm Inc., LG Electronics and Samsung.

And to top it all off, we have Google Inc. (NASDAQ:GOOG), Microsoft (NASDAQ:MSFT) and Yahoo! (NASDAQ:YHOO).

The willingness of all these companies to settle is definitely good news for Vringo. Judges, juries and the infringing companies themselves should now be more willing to agree that patent holders need to be compensated. I don't know the terms of the agreement, but considering that Donald Stout and NTP already extracted $600 million just from Research In Motion (RIMM) for patent infringement, the settlement figures could be staggering.

One interesting fact is that there are only eight patents involved in this NTP settlement. Investors have complained that VirnetX and Vringo simply don't have enough patents to be taken seriously, but here is an instance where eight patents can bring 13 of the biggest names in tech to the settlement table.

As I mentioned in my last article, Donald Stout was so impressed with Vringo's patent portfolio that he invested his own funds and currently owns over 1 million Vringo shares. (approximately 95% of which he purchased). One thing that impressed me, was that he had the conviction to buy shares before the company went public. Owning illiquid shares in any startup company is a risky proposition, and the fact that he was willing to commit so early in the game is another indication of his positive view of management and the Vringo patent portfolio.

It all comes down to this fact: Donald Stout would not be investing his time and money unless he thought Vringo would win the current lawsuits.

The ramifications of this settlement are tremendous for patent holders like Vringo and VirnetX. No longer can these tech giants continue profiting from valuable patents without paying their fair share. In my opinion, more settlements will be forthcoming for both Vringo and VirnetX. If either of these cases ever does go to trial, the jury could certainly be swayed by the direction of the NTP settlement.

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Disclosure: I am long VRNG.