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SteveKimLaw
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I am an active husband, father, lawyer (more than 24 years, how time flies), and investor. I believe in contrarian investing, i.e., going where the crowd isn't. I believe that successful investing, like successful living, requires equal parts listening and evaluating, followed by independent... More
  • Idle Thoughts While We Wait For Judge Jackson 30 comments
    Jan 10, 2013 11:03 PM | about stocks: VRNG

    Over on the non-YMB board, and privately here on SA, I have been asked from time to time why I have been so quiet. I posted this reply there, and I thought I would post some of it here as well:

    To be honest, during the month or two before trial, during the trial, and for a short period after, things were moving pretty hot and heavy in the case with new motions, orders, and issues arising several times a week. Since then, the pace in the case has slowed considerably, and there frankly aren't that many goings on in the case.

    I am aware that there are multiple post-trial motions pending, and in bits and pieces, and in different places, I have already touched on my thoughts on most of the pending issues. But for the sake of not having anybody have to search through prior articles or posts, here are some of my thoughts on various topics (in brief form):

    Running Royalties
    I have been pretty consistent in arguing that I think the safest and most likely outcome is that Judge Jackson will award running royalties of 3.5% on 20% of Google's AdWords revenues. This is the only number that is directly supported by the trial evidence. Of course, the 3.5% was the number that the jury found to be appropriate for a running royalty, and I don't think there is any support in the record for a higher royalty base than 20% (or 20.9%, to be precise).

    That having been said, Vringo has some pretty significant arguments in favor of a higher running royalty. Whereas the past royalty would be based on a hypothetical negotiation between the parties at the time the infringement began, taking into account their relative size, need, market power, etc., the FUTURE or running royalty could certainly be based on a different set of negotiation circumstances, namely the fact that Google is now an adjudicated infringer that is using Vringo's IP without its permission. In a previous SA article, I cited to a really well thought out article setting forth good arguments why Courts frequently set running royalties at a HIGHER rate than the royalties set by the jury.

    Personally, I am sticking with my 3.5% guess-timate, but mostly because I believe that the ultimate running royalty rate will be at least that much, if not higher.

    Google's Renewed JMOL's
    I think these will be denied. Again. Excuse me for yawning.

    Motion for New Trial on Dollar Amount of Past Damages Only
    This is a really good motion. It should probably be granted, but as I have mentioned before, I think the Judge's inclination is going to be to leave the jury verdict intact. If the Judge were writing a law school essay, I'm pretty sure he would say the issue of damages should be retried. Since this is real life, I think the Judge grits his teeth and leaves things the way they are.

    Laches
    I don't think the Judge was right on this one, for strictly procedural and notice reasons. I think he stands an even chance of getting reversed on the laches issue, but this doesn't mean that Vringo therefore automatically gets a crack at all past damages. It means that the appellate court sends the past damages issue back to Judge Jackson, who then gets to address the issue of laches again, and I think next time, he rules the same way, but does it procedurally correctly. I don't see a lot of hope for Vringo on the laches issue, and none of us should be banking on that as a future windfall.

    The Ravicher Flip-Flop
    I pretty much agree with Alan Brochstein, and for most of the same reasons. I have a few other thoughts, but they would be unseemly, and so are probably best left unsaid. I think the fact that Dan's biggest endorser is Modernist, pretty much tells the tale. That having been said, there is no question that Dan has to be a pretty smart guy. I just wish he would be more responsive to legitimate questions that commenters (including me) have posed in response to his articles.

    Adam Gill
    Nice article, and I agree that his conclusions are well thought out and reasonable. I don't personally think the Judge has much incentive to grant Google's request to delay briefing over Vringo's objection, though, because: (1) the parties already agreed to a briefing schedule and now Google is trying to depart from it; (2) this Judge seems to be very cooperative to grant continuances that are agreed to, but otherwise he strikes me as a pretty pedal to the metal guy; (3) I think Vringo's argument that they would be prejudiced by further delay is very reasonable, given that in the meantime Google continues to act as an adjudicated infringer and continues to infringe, without paying for its use of Vringo's IP; and (4) I'm guessing that everybody, including Google and Dan Ravicher, already knows that Judge Jackson is probably going to deny the JMOLs (again) for the umpteenth time, and so the idea of delaying the future royalties to chew on the JMOLs doesn't make a lot of sense. Everybody should bear in mind that litigation is inherently unpredictable, so Adam's guess is as good as mine, maybe better. But my feeling on that issue is different from his, though I would not be shocked if he is 100% right on that issue. It's educated guesswork.

    Vringo European Litigation
    What I am spending more time thinking about these days are the 3 ZTE lawsuits in UK and Germany. I think we got, and are in the process of getting, a resoundingly good result in the Google case. The market certainly doesn't agree yet, but I sincerely believe that it's because the market has to wait for specific decisions to come out in order to price in results. But in a sense, Google is already somewhat in the rear view mirror. Vringo has three cases against ZTE pending in Europe, and I am trying to learn about those cases and legal processes, because I think that's the next area that's going to impact our crazy little stock. If I can put together enough helpful information to help all of us understand what is at stake and what is going on in Europe, I'll certainly disseminate it.

    Time
    I wish I had more time, as I really do enjoy reading and thinking about the Vringo case. I do try to check into this Board frequently, and I frankly don't have a lot to add to the mix that is any better or different from what anybody else is already saying. I do feel badly if anybody feels like I have abrogated my responsibility to contribute. I view this board as a community, and that we all have a responsibility and that it is a privilege for us to contribute. But time is an issue for me. In truth, I have been very grateful and gratified that ThinkingMan, Tim, and Newbie have stepped up to help with moderation. You guys don't know what a favor they have done us all. And I appreciate the very high level of conversation we have here, although I do enjoy the occasional YMB visit when I need a TIIIIMMMMMMMBERRRRR!!! fix. Or not!

    Aloha,
    Steve

    Disclosure: I am long VRNG.

    Themes: GOOG Stocks: VRNG
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Comments (30)
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  • Noreika
    , contributor
    Comments (460) | Send Message
     
    There he is! Nice to see you pop in here at Seeking Alpha Steve!

     

    Thanks for all your hard work on this case.

     

    PS - I'm trying to coordinate a steel cage match with Ravicher the Ravager against another opponent, but I'm not getting a reply.
    11 Jan 2013, 07:01 AM Reply Like
  • jlf75
    , contributor
    Comments (157) | Send Message
     
    Thanks Steve, your input as a contributor is invaluable. Patience being the key, I will wait along with you. Until JJ rules, jlf75.
    11 Jan 2013, 09:09 AM Reply Like
  • GVT
    , contributor
    Comments (22) | Send Message
     
    HI Steve,

     

    When do you expect the final ruling to take place?

     

    Thanks!
    11 Jan 2013, 10:08 AM Reply Like
  • SteveKimLaw
    , contributor
    Comments (461) | Send Message
     
    Author’s reply » Hi, GVT. Well, let's see what happens with Google's request to postpone briefing.
    11 Jan 2013, 11:11 AM Reply Like
  • mg62bk
    , contributor
    Comments (20) | Send Message
     
    Steve. do u know where the company lang is with and where its listed? the. company in Iseral
    11 Jan 2013, 03:28 PM Reply Like
  • Kevin Porter
    , contributor
    Comments (1795) | Send Message
     
    SteveKim I totally disagree with everything you said

     

    The following are 3 very important direct quotes from the latest Vringo vs. Google case motions filed by I/P Engine (Vringo)

     

    1) New 1-day trial solely on past damages calculation

     

    A new trial solely on the dollar amount of past damages could be accomplished in a single day, with brief openings, stipulated facts, and expert testimony (consistent with their reports) from Dr. Becker and Dr. Ugone.

     

    The jury's findings on infringement, validity, running royalty, and the 3.5% rate, should remain undisturbed.

     

    This Court should order a new trial on the dollar amount of past damages for five reasons, the first three of which are independent of this Court's ruling on I/P Engine's post-trial motion regarding laches. First, the timing and Court implementation of its laches ruling after the close of the parties' respective cases, and the Court's forbidding I/P Engine to identify a specific damages amount to the jury, was fundamentally unfair and highly prejudicial to I/P Engine.
    Second, this Court wrongly prevented I/P Engine from introducing evidence of Defendants' accused revenues, which formed the total revenue base.This evidence also would have enabled I/P Engine to explain the damages amounts from September 15, 2011.
    Third, the jury's damages award is internally inconsistent; the jury awarded 35% of I/P Engine's initial claimed damages against four defendants, but only 3.5% of I/P Engine's initial claimed damages against Google.

     

    2) Laches

     

    The Court's October 31, 2012 oral ruling on laches was both procedurally improper and substantively incorrect. Under Rule 52, the trial court is the first recourse for the correction of errors. If the laches ruling was error, then there is no reason why this Court must adhere to it. The Court should amend its findings regarding laches under Rule 52(b), and grant a new trial on the amount of damages under Rule 59.1

     

    In making its laches determination, the Court made three critical procedural errors, each of which justifies the granting of this motion. First, the Court issued its laches ruling sua sponte, with no notice to I/P Engine that the Court was going to rule on laches. The Court did not permit I/P Engine to be fully heard on the issue as required by Rule 52(c). Second, after the Court announced that it had resolved the disputed issue of fact of whether Google's July 2005 blog post was sufficient to trigger the laches clock and thereby shift the presumption, the Court refused to permit I/P Engine to introduce evidence and rebut that presumption. Third, contrary to Federal Circuit law, the Court wrongly shifted the burden of proof on laches to I/P Engine, requiring I/P Engine to rebut both elements of laches by a preponderance of the evidence.

     

    3) Willful Infringement Post-Verdict

     

    Defendants' ongoing infringement is undisputedly willful. Defendants are fully aware that their use of AdWords has been adjudged to infringe all of the asserted claims of the valid and enforceable patents-in-suit. Judgment has been entered against them, and yet they continue to infringe.

     

    I/P Engine respectfully requests, consistent with the case law, that this Court enhance the ongoing royalty rate to 7% in light of Defendants' ongoing willful infringement.

     

    In any future negotiation, specifically one that would take place after November 21, 2012, the parties would also evaluate the alternatives to a compulsory license, namely that I/P Engine could sue again and Defendants would once again be liable for infringement - this time willful infringement and thus treble damages and attorneys' fees.

     

    My considerations

     

    All these Vringo motions are extremely strong.

     

    GOOG already played all its best cards during the trial, lost on Nov 6 and is now in a very weak situation.

     

    Vringo is fighting to have all it deserves, the whole past damages back and enhanced future royalties.

     

    I am forecasting Vringo will win the whole amount of past damages (493M) one way or the other (new 1-day trial or appeal).

     

    If Judge Jackson will grant a new 1-day trial on the dollar amount of past damages without granting the laches back, Vringo will at least win the proper amount for Sept 2011-Oct 2012 and will appeal the laches ruling.

     

    The jury's findings on infringement, validity, running royalty, and the 3.5% rate, should remain undisturbed.
    So the new 1-day trial once granted should be basically only a formality.

     

    Regarding future royalties, the market HAS NOT understood at all that, as explained above, Vringo can sue all the defendants again and this time willful infringement, treble damages and attorneys' fees would be almost automatic.

     

    The 7% Vringo is asking is basically a settlement number for future royalties.

     

    The max possible total award (past + future damages) is more
    than 2 Billions. The most probable range is 1.25-1.65 Billion.

     

    That's why I am thinking a reasonable settlement sum is
    1-1.25 Billion.

     

    If I was Vringo I'd go for the new trial and the almost automatic
    10.5% plus attorneys' fees.

     

    VRNG was one of the best stocks of 2012, up almost 200%.

     

    The company has accomplished several goals, 2013 will be even better.

     

    Even if there are always risks involved in any investment,
    in this case I see them as very weak.

     

    My current position is long 3.12, as posted in realtime through my comments.

     

    All in all, my $10-12 target is stronger than ever.
    12 Jan 2013, 03:10 PM Reply Like
  • Patent Plays
    , contributor
    Comments (912) | Send Message
     
    As to your Laches comments and the Rule 59 Trial I tend to agree with Kevin's position that Jackson will allow the ruling on that Motion. Albeit on Appeal the issue would come back as well.
    23 Jan 2013, 12:05 PM Reply Like
  • SteveKimLaw
    , contributor
    Comments (461) | Send Message
     
    Author’s reply » Sounds good to me, I hope you're right!
    13 Jan 2013, 12:09 AM Reply Like
  • pdlobo
    , contributor
    Comments (85) | Send Message
     
    Thanks Steve, you seem like a good dude.
    13 Jan 2013, 02:17 AM Reply Like
  • asia24
    , contributor
    Comments (140) | Send Message
     
    "TIMBERRRRRR" fixLMAO

     

    Thank you once again Steve for your time and contributing useful information to us.
    13 Jan 2013, 08:59 AM Reply Like
  • stockhawk
    , contributor
    Comments (242) | Send Message
     
    I certainly hope KevinPorter is right but would rather be less optomistic and pleasantly surprised in the end. Also Steve has the patent law experience, not to be condescending Kevin, to back up his analysis and opinion. One little tidbit I pondered: with G and their android ties with ZTE are they maybe digging in a bit more as far as the legal team is concerned. Could it be G is now taking V more seriously in litigation? Who knows Steve, I guess I can speculate too. As usual value you're opines.
    13 Jan 2013, 09:02 AM Reply Like
  • Kevin Porter
    , contributor
    Comments (1795) | Send Message
     
    I am not sure at all if SteveKim is such a good expert actually

     

    2 months ago he was saying the math error was not fixable due to the Additur rule and this is clearly wrong as VRNG lawyers explained

     

    he was also saying that JJ was probably going to lower Future royalties compared to past royalties and giving zero importance to future willful infringement, now he is saying exactly the opposite
    13 Jan 2013, 09:34 AM Reply Like
  • SteveKimLaw
    , contributor
    Comments (461) | Send Message
     
    Author’s reply » Hi, Kevin. Actually, I have to clarify a couple of things. I have stated that the Judge cannot revise the verdict upward due to the additur rule. This remains true. I also stated that (1) Vringo could make a motion to correct the verdict based upon a clerical error if it could prove conclusively that there was a clerical error; and (2) Vringo could make a motion for a new trial on the issue of damages, but that there is risk in this strategy. Both remain true.

     

    I don't recall ever having stated that Judge Jackson was going to reduce future royalties compared to past royalties. I believe my position has been consistent that the Court would be most likely to confirm the 3.5% running royalty going forward.

     

    Finally, there is a subtle difference on the WI issue between what we are arguing. As I have stated in the past, Judge Jackson cannot award WI damages, which is essentially enhancing (e.g. trebling) the jury's award. However, in determining the amount of future royalties going forward, the Judge can look at the status of the parties at the time the royalty is being set, which includes the fact that Vringo has now been determined to be the owner of IP that is being infringed by Google. In view of this status, the future royalty can certainly take into account the fact that Google's future infringement would at this point be wilful.

     

    That having been said, I don't view myself as a patent expert in any sense. I view myself as a lawyer who has some handle on the litigation process.
    14 Jan 2013, 11:26 AM Reply Like
  • RHD
    , contributor
    Comments (447) | Send Message
     
    Well said, sir, and I respect Kevin greatly as well. OT, and probably intolerably tedious to you, do you have a view on JJ's delay in progressing against what appears to me to be a defined timescale for the post-trial motions?
    14 Jan 2013, 01:03 PM Reply Like
  • SteveKimLaw
    , contributor
    Comments (461) | Send Message
     
    Author’s reply » I really don't have any inside track on what is going on with the timing of the motions. As I mentioned in the instablog post, I tend to think that Judge Jackson will deny Google's request to delay briefing, but as Adam Gill has pointed out in his recent article, there are good arguments on both sides, so it could certainly go either way.
    14 Jan 2013, 01:21 PM Reply Like
  • stockhawk
    , contributor
    Comments (242) | Send Message
     
    Steve: Looks like somebody/hedge fund?, did some heavy volume shorting on Friday 1/18. Could be some news related activity soon. Someone from the SA community, I forgot who, gave out a link to shortanalytics. Check it out, for what it's worth. It can turn into the wild west on SA quickly.
    19 Jan 2013, 12:17 PM Reply Like
  • yvette.grier
    , contributor
    Comments (154) | Send Message
     
    Am I the only one who thought JJ had a deadline of today?!?!?!?
    20 Feb 2013, 05:39 PM Reply Like
  • stockhawk
    , contributor
    Comments (242) | Send Message
     
    patience yvette, from my understanding of the process, he now has all the motions from either/both sides and is working on them. When he makes a decision, we will all get the news. There is no set timeline for him to finish, and remember he has a docket full of other cases as well. Patience is a virtue! Hope it works out the way we expect it too. GL.
    21 Feb 2013, 01:32 PM Reply Like
  • yvette.grier
    , contributor
    Comments (154) | Send Message
     
    Thanks. I am working on that patience thing.
    22 Feb 2013, 01:05 PM Reply Like
  • docyoo
    , contributor
    Comments (4) | Send Message
     
    Hi Steve; I have read all your articles and found you to be consistent from the beginning-past damage (JJ probably will not change) /royalty base (20.9% is only one evidence in the trial) /royalty rate ( JJ will probably stick to 3.5% and most likely will not lower it, but possibly up). I have one question. A lot of investor fears Google's appeal for invalidity and impingement issue. What is the chance of over turn in appellate court? Thank you your impartial opinion.
    22 Feb 2013, 05:56 PM Reply Like
  • SteveKimLaw
    , contributor
    Comments (461) | Send Message
     
    Author’s reply » Hi, Doc.

     

    As far as immediate impact on stock price, the current issue is really are what happens with the post-trial motions, as you know. I think it is pretty clear that both sides will file notice of appeal. The most important thing to be aware of is that the appeal process is not a quick process. Once Judge Jackson issues his final rulings in this case, the parties would file their notices of appeal, then over a period of several months, their opening briefs, answering briefs, and reply briefs would come due. From that point, it would be fair to estimate 10 to 12 months before the appellate court issues a decision. So the whole process could easily be 12 to 18 months. That's a little far down the line.

     

    That having been said, I don't have a great basis to begin to guess at the potential appeal outcome until we see the briefs, but I do feel good about the way Judge Jackson handled all the issues that Google might appeal from.
    23 Feb 2013, 01:08 PM Reply Like
  • Kevin Porter
    , contributor
    Comments (1795) | Send Message
     
    SteveKim you said you are not a patent expert at all

     

    so why do you keep creating fears and doubts every time you write something ?

     

    really incredible
    23 Feb 2013, 01:21 PM Reply Like
  • RHD
    , contributor
    Comments (447) | Send Message
     
    Yo Kevin, Cool down dude. Differences of opinion (frankly I think you two are agreeing loudly:-) ) should not precipitate rudeness. Your prior comment re three points above are well-taken and noted. SK has an articulate, reasoned POV which I, for one, appreciate. I also appreciate yours and your contributions to the discussion. Your bio speaks for itself.
    Many uncertainties in this situation remain to be resolved.
    24 Feb 2013, 08:40 AM Reply Like
  • SteveKimLaw
    , contributor
    Comments (461) | Send Message
     
    Author’s reply » The comments I made are not specific to patent issues, but to appellate timelines in the Federal Circuit. So if you want to ask me do I think "x" patent fails for obviousness, my answer is "your guess is as good as mine." If you want to ask me whether a motion appears to raise a genuine issue of material fact, such that summary judgment is unlikely, or how long civil appeal time periods are, I feel like my feet touch ground there.

     

    I am sorry if you feel as though providing information regarding realistic timelines is "creating fears and doubts," but frankly, i think we all deserve to have a realistic understanding of potential and likely timelines in this case, if they are pertinent to folks' investing strategy.

     

    Are you of the opinion that an appeal would be resolved in just a couple of months? Would you want folks to bet on that? As far as fears and doubts, I think by far those are created by lack of understanding of the potential results and timelines. If folks know what to expect, they can strategize. Isn't that a good thing?
    26 Feb 2013, 09:35 PM Reply Like
  • Kevin Porter
    , contributor
    Comments (1795) | Send Message
     
    you haven't got the faintest idea if there will be an appeal but you write
    ''it is pretty clear that both sides will file notice of appeal''

     

    People already worry about 200 things but you have to add a 18 months appeal as a sure thing while actually you don't know anything about that

     

    why not 18 years ? isn't that possible too ?
    27 Feb 2013, 08:18 AM Reply Like
  • SteveKimLaw
    , contributor
    Comments (461) | Send Message
     
    Author’s reply » "Faintest idea?" Well, let's see. Google lost the Markman hearings, the MSJ, its motions for judgment as a matter of law, and has renewed those motions post-trial, which are pending. If those pending motions are denied, don't you think the chances are quite high that Google will file an appeal? I do. Now let's say that Google files an appeal, which I think is highly likely. Once Google has appealed, I don't think there is any chance that Vringo decides not to cross-appeal the laches issue.

     

    I suppose if total disaster strikes and Judge Jackson grants Google's post-trial motions, then Google would not file an appeal. I view that as very unlikely. But that, barring settlement (which I gave up on long ago), is the only scenario I see where Google does not file an appeal.

     

    And no, I would venture to guess that even given the craziness of this case, it is safe to say that 18 years is not possible.
    28 Feb 2013, 11:21 AM Reply Like
  • docyoo
    , contributor
    Comments (4) | Send Message
     
    SteveKim;
    Thank you for your candid and thoughtful answer. I hope justice prevailed.
    24 Feb 2013, 08:18 AM Reply Like
  • Tyammons
    , contributor
    Comments (36) | Send Message
     
    SteveKim,

     

    In regards to your statement "I think it is pretty clear that both sides will file notice of appeal" I have a process question. Is it typical in a case like this that the appeal be filed in the same breath as the decision or will there be time for the PPS to run up for a small profit? I understand they have 10 days'ish to file, but is it commonplace to wait that long? This information would be helpfull to adjust my investment strategy. TIA

     

    Ty
    24 Feb 2013, 10:52 AM Reply Like
  • SteveKimLaw
    , contributor
    Comments (461) | Send Message
     
    Author’s reply » Hey, Tyler. Once the tolling motions are resolved, the parties have 30 days to file notices of appeal. I would not be surprised if there is a couple weeks of lag before notices of appeal are filed.
    26 Feb 2013, 09:29 PM Reply Like
  • pdlobo
    , contributor
    Comments (85) | Send Message
     
    Been awhile since I held a stock for a year.Guess this is the one!
    24 Feb 2013, 12:42 PM Reply Like
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