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Vringo (NASDAQ:VRNG) is suing Google (NASDAQ:GOOG) for search patent infringement. We are currently awaiting a verdict. I believe the patents Vringo is suing for are bogus. However, I am not an authority on patent law, and my opinion disagrees with a top authority's. So I am wrong.

Daniel Ravicher has an outstanding reputation as a patent law professor/advocate. His judgment should be deferred to. Although he has disclosed a short position in Vringo, he believes a jury will most likely recognize the patents, and has assigned the lawsuit an expected value of $60MM.

Fundamentally, I don't understand how a $60MM win justifies a short position. Vringo's enterprise value trades around $100MM. So Ravicher's short thesis implies an underwhelming multiple.

The case against Google may be Vringo's once-in-a-lifetime case, but Google is also one of the most vigorous litigators in IP. We're talking about a company that puts copyrighted content on YouTube and Google Books and often gets away with it. Virtually all defendants will be easier for Vringo's top-notch litigators.

What $60MM says here is Vringo can pursue multiple smaller cases. It raised a similar amount when the stock traded at $5. So Ravicher's calculations say Vringo should have plenty of money to acquire patents and flip them through litigation. This is what patent trolls do, and Vringo is the best of them.

To quote Argo, "If you want to sell a fake idea, get the media to sell it for you". It remains to be seen if a $5 valuation was a fake idea, but investment media sold it convincingly in a flood of euphoric articles. A black-swan laches ruling transformed euphoria into depression. With depression comes perfectionism. Professor Ravicher made a bull case for Vringo, but still held a short position.

When the market loses touch with fundamentals, alpha is hidden in plain view. In the long term, I do have doubts about the sustainability of patent trolling. But that's on a different time scale. I hate to say it, but Vringo is now a buy.

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.

Source: Why Vringo Is A Buy