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  • Has Our Court Of Appeals Gone Radical?

    The Virnetx(NYSEMKT:VHC) and Vringo(NASDAQ:VRNG) appellate basis were "miles" apart in reasons for overturning the Jury decision. In the Vringo case (styled as I/P Engine v. Aol, Google et al) the 3 member appellate court ruled "de novo" and set aside the valid jury decision by insisting the I/P Engine patents were "Obvious". How the appellate came to this conclusion is now the subject of judicial controversy. The appellate courts are allowed to rule on the "substantial evidence" presented at trial, as if there had been no trial at all. The evidence presented here was the past verbal testimony of a defense expert. When posed with the question of whether two existing patents, (which were combined that created the I/P Engine patent), would have been included for seeking better search results, by someone skilled in the art, the reply was "yes because it was there". No basis or decision why the results would have been included were spoken of in the testimony. The appellate judges (2 of the 3) decided with that testimony to move the "burden of proof" from the defendant back to the plaintiff.
    Moving the "burden of proof" from a trial expert's testimony on the basis that doubt is given in favor of the defendant's expert, because he delivered ambiguous incomplete testimony delivers a mockery of jurisprudence, and eliminates a jury as an unnecessary appendage of the Judicial. Now all Defendants, in patent litigation, need only find an Expert who will testify at trial that the accused system would have been thought of "because it was there", and assure themselves a "de novo" victory at the appellate courts.

    Patent reform is the last problem we have when our Judicial acts in this manner.

    Disclosure: The author is long VRNG, SITO, WDDD.

    Sep 16 6:39 PM | Link | 22 Comments
  • Businessweek Comment On The Appellate Decision

    Businessweek comment-

    Respectfully Justice Haldane's Reversal for Obviousness was fatally flawed and a bold faced attempt at weakening the viability of all US Patents. One cannot merely suggest that combining prior art, because its there, is acceptable grounds to invalidate new art. Indeed, Justice Haldane invites collapse of our entire system of Patents. Justice Mayer's use of Alice v. CLS is equally flawed and also invites deep ramifications in the test of what is patentable in software. Justice Chen whose deep experience in serving with the USPTO was the guiding light in his dissent of Haldane and Mayer. The entire Appellate owes Vringo and En Banc review or at worst SCOTUS should accept this for review. The decisions presented here have massive implications and deserve review.

    Disclosure: The author is long VRNG.

    Tags: VRNG
    Aug 15 2:33 PM | Link | 3 Comments
  • The Markman Hearing; Potential Coronation Of Patent Kings

    We all look for opportunities and buying windows in the equities we hope to own. Many of my investments are focused on intellectual property stocks or as some like to term "patent plays." Understanding fully the patent process, as well as patent infringement litigation, I began to delve into the financial impacts of equities at various stages of patent litigation, specifically the Markman hearing.

    Let me impute some caveats to this measure. The plaintiffs I use have totally different litigation points and are seeking recompense in different technologies. They do share some common elements of financial history. Prior to Vringo's (NASDAQ:VRNG) Markman hearing of June 4, 2012, the company's 10-Q March 2012 income statement revealed only $106,000 in revenue. ParkerVision's (NASDAQ:PRKR) recent 10-Q reveals no revenue at all. Lastly, VirnetX (NYSEMKT:VHC) also reported meager revenues of $33,306 in its March 21, 2009 10-Q.

    The unique limited financial bearing of these companies allows us to better understand the impact of certain events on their market capitalization. The two commanding variables that they all equally share is the causality of having won a positive Markman order in US Federal district court, and a corresponding increase in stock price.

    Markman hearing; the controlling variable in patent litigation enforcement?

    For better or worse one of the last vestiges of the Crown in American Society is the life appointed federal judge. Many argue that the Markman hearing could be construed as a "king maker event," to destitute corporate plaintiffs seeking billion dollar awards. Some of my examples above are testaments to this theory. What is a Markman hearing? The legal function of a Markman hearing is to determine what language the jury will hear when determining whether or not the patents in question will be infringed. The defendants in these situations typically pray the judge to "narrow or focus" the definition of key words within the patent. How the judge rules will determine how the plaintiff and the defendants can best argue their case.

    The plaintiffs want the broadest possible interpretations of its key words making it simple for a Jury to conclude infringement. The defendant reaches for narrow confining definitions typically to enforce the strength of prior patents making the patents in question appear without merit. Obviously this can be a "make or break" event to an under capitalized plaintiff.

    Vringo, ParkerVision and VirnetX all possessed limited revenue operations, prior to receiving their positive Markman hearing orders. On May 23, 2012 Vringo traded at $2.72. On June 4, 2012 the Markman hearing began and the stock value closed at $4.15. Prior to the decision on June 12, 2012 the stock traded at a low of $3.30. One day after the ruling of June 19 Vringo closed at $4.36. The impact of the positive Markman hearing can be seen here as a 60% rise in per share value (May 23 to June 19) with market capitalization going from $185 Million to $292 Million.

    Looking at the ParkerVision price per share results of their Markman hearing, we see an even stronger impact correlation. The judge reached a decision on February 20, 2013. On that day the stock closed at $2.43. The following day ParkerVision closed at $4.21. The impact of that hearing amounted to a 73% rise in shareholder value, with market capitalization going from $201 Million to $348 Million dollars.

    VirnetX has gained the advantage in several of its Markman hearings. This example must be reviewed in a different light as the multiple hearings demonstrate a more pronounced effect on the stock. Winning against Apple (NASDAQ:AAPL) on April 25, 2012, the following day the stock goes from $24.58 to $25.25. We see VirnetX going on to win another Markman hearing on August 1, 2012, against Avaya (AVYA) and Siemens (SI). The impact to the stock over 2 days was minimal but still positive, trading at $23.93 to $24.49. Looking back to the very first Markman hearing, we see and even more pronounced effect on the stock. VirnetX won their first Markman hearing against Microsoft (NASDAQ:MSFT) on July 30, 2009. On that day the stock traded at $1.48 to $3.00.

    Conclusion: Investors profited off Vringo, ParkerVision's and VirnetX positive Markman orders.

    The result of the Markman hearings, to the plaintiffs, were positive in all these examples. In the VirnetX example we saw the first Markman order as having the highest positive price per share increase. Since Vringo and ParkerVision have not engaged in multiple Markman hearings, we cannot accurately assess if the primary hearing is indeed the most impacting. Not to despair, I have faith that more lawsuits are on the way.

    The negative effects of a positive Markman?

    Enter Activision Blizzard (NASDAQ:ATVI). This gaming software titan, with sales exceeding $4.86 Billion, owns popular titles such as the Call of Duty, and World of Warcraft franchises just to name a couple. Looking closer at Activision it becomes incredibly obvious that this is a cash cow of epic proportions. For 2012 on the same $4.86 billion, they earned $1.149 billion in net income. There's a lot of profit at Activision and with zero debt and $4.38 billion in cash many investors are taking notice. This giant may have stepped into a costly briar patch. A very small IP company could become a very big thorn in the ATVI profitability model. Worlds, Inc (OTCQB:WDDD). This pre-Markman hearing example has many investors wondering what the potential infringement award will be. Worlds' hearing is scheduled for June 27, 2013. The lawsuit alleges that two of Activision Blizzard Inc.'s massively multi-player online role-playing games (MMORPG), World of Warcraft and Call of Duty, are directly infringing on a suite of patents (6,219,045; 7,181,690; 7,493,558; 7,945,856; 8,082,501; 8,145,998 & 8,161,385) owned by World Inc.'s collectively known as "System and Method for Enabling Users to Interact in a Virtual Space." These patents describe how to generate a virtual three-dimensional space designed to enable multiple users to interact in real time. Furthermore, the lawsuit claims that these patents describe the exact same virtual architecture utilized by Massive Multi-Player Online Games (MMORPG) in general. Potential loss exposure to Activision's billion dollar franchise could be tremendous, based in part by Worlds charges of willful infringement. Worlds have further charged over 50 separate claims of infringement making it very difficult for Activision to come out unscathed. If ATVI doesn't defend well in the upcoming Markman it is possible that ATVI will have negative effects visited upon its market capitalization, pending a Markman order in this case.

    Investing on the Markman

    Is this a new trading philosophy? I think not as hedge funds and venture capitalists like Hudson Bay Capital and Iroquois Capital have hit the ground running looking for these "pre-Markman hearing" patent plays. Both companies recently announced on February 13 and 14 respectively, that they had taken a stake in Spherix (NASDAQ:SPEX). Notably Spherix, has no revenues and has yet to file any patent litigation but trades with the premise that they will. Following the money, offensively and defensively, it may be wise to consider evaluating pre-Markman patent plays for a place in the speculative part of your portfolio.

    Disclaimer: This is not legal advice and you should not invest in any of these equities without doing your own due diligence.

    Disclosure: I am long OTCQB:WDDD, VRNG.

    Mar 13 10:16 AM | Link | 2 Comments
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  • $RVP $BDX based on Value of Award and Market Cap, eliminating this small competitor and mooting Court requirements is more favorable.
    Nov 13, 2014
  • $RVP $BDX $VRNG RVP's lack of open PR on the matter is indicative of possibly Becton settlement or Buyout. Buyout makes much more sense IMO.
    Nov 13, 2014
  • $RVP Win not digested by the street yet. Thinly traded diamond in the rough IMO.
    Nov 11, 2014
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