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Matias Castro
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UCLA graduate- BA Political Science- Philosophy Minor- Law School student - Intermediate Investor I am a current law student and investor. I have been investing for about 5 years. I began investing in Apple, but over the years began investing in small bios and companies that were under $5 that... More
  • Why Vringo Will Likely Receive The 3.5% On Going Royalty Rate In Future Damages 18 comments
    Dec 5, 2012 9:08 PM

    Why Vringo will likely receive the 3.5% on going royalty rate in future damages

    By now, many of you probably have read Dan's article "Vringo Verdict And Future Royalties Against Google On Shaky Ground."In the article, Dan insists that Vringo received a verdict for 31M. However, it needs to be clear that this was a jury verdict. The Final verdict is yet to come. The final verdict is the verdict given by the judge and the only one that matters.

    Moreover, Dan says that the jury has not awarded future damages and that is correct. But the jury has awarded an ongoing 3.5% royalty rate, and the judge will take that into account if he decides to award future damages.

    As mentioned countless of time there seems to be a mistake in the jury's calculation for damages. The judge will certainly address this issue and decide what he believes to be reasonable award. So far, Google has argued that the damages received, in comparison to the other defendants, are too large. However, Vringo will of course argue that it works the other way around and Google's damages are too little in comparison to the rest of the defendants and pay more. Vringo's chances look better at this point since all the other defendants were based on the same calculation. The only one which is different is Google's and for that reason I believe it is the incorrect one.

    Lastly, in regards to future royalties, the judge will do what he thinks is reasonable. The judge probably thinks that the jury made a mistake in past damages and for that reason Vringo should get the 3.5% on going royalty rate in future damages based on the 20% add increase.

    Disclosure: I am long VRNG. I wrote this article myself, and it expresses my own opinions. I am not receiving compensation for it. I have no business relationship with any company whose stock is mentioned in this article.

    Themes: earnings
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Comments (18)
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  • Clider
    , contributor
    Comments (33) | Send Message
     
    How does 'practicing' lawyer get away with half truths like he does. Especially when he writes articles to incite web riots or mislead investors. I'm surprised no one has filed a complaint with whatever state he holds a bar card.

     

    Regardless. Short and to the point - good work!
    5 Dec 2012, 09:17 PM Reply Like
  • trexia
    , contributor
    Comments (162) | Send Message
     
    Damage is already done ... VRNG drops to $3.03 !!!
    6 Dec 2012, 01:39 AM Reply Like
  • DavidTru
    , contributor
    Comments (63) | Send Message
     
    About the past damages award and what it means to the future royalties ruling. It's possible that there was a jury error. But it's also possible the jury meant to charge Goog a lower amount. On Nov 6th, Edvacourt and Mikehd25 both reported back that the jury asked a question of the judge. Paraphrased it was
    ==> "If we assign a cash amount now is that in addition to the running royalty rate?" The judges answer was "yes"... but he went further and instructed the jury to pick a damages amount for each defendant.
    So it's possible the jury charged Goog with a smaller monetary percent amount thinking that the money amount would be in addition to the running royalties for past damages. On the message boards it's been said that royalties apply to only Goog, not the other defendants.

     

    I believe those are the only two feasible explanations for why the jury charged Goog with the lower 15.8 million amount.

     

    But here's the thing - whether there was a.clerical/math error, or if the jury got confused and thought the monetary amount would be in addition to the running royalties. The logic in both scenarios is that the intent of the jury was to punish Goog to the full extent, 3.5% of 20%, plus maybe an extra few million in the second scenario. Hopefully that intent is meaningful to the judge when he rules on future royalties.
    5 Dec 2012, 10:32 PM Reply Like
  • Matias Castro
    , contributor
    Comments (48) | Send Message
     
    Author’s reply » Definitely possible and likely. However, regardless of what the mistake is or even if there was no mistake the judge will very very likely award future damages. Those future damages will be based at least on 3.5% of 20%. Like I said on a previous article judges are "SMART" people and he decided to put the question there for a reason. He definitely was thinking about a future royalty rate. We just have to wait and see. So far I believe VRNG has the upper hand.
    6 Dec 2012, 01:18 AM Reply Like
  • Matias Castro
    , contributor
    Comments (48) | Send Message
     
    Author’s reply » Thank you both for taking your time to read and comment.
    6 Dec 2012, 01:19 AM Reply Like
  • Danburydude
    , contributor
    Comments (105) | Send Message
     
    Gotta hand it to David. I think he found the logic behind the numbers. That would make a lot of sense. The jury may have thought damages plus a running rate going back to September of last year. That would produce damages of 15. 8 million, interest on that, PLUS five years of running rate. You have to use the numbers VRNG produced, since Google doesn't want to cough any numbers up. That adds up up fairly tidy sum.
    5 Dec 2012, 10:48 PM Reply Like
  • plovell
    , contributor
    Comments (2) | Send Message
     
    Ans how much would that amount to using Davids theory ?
    Thanks for the reply
    6 Dec 2012, 07:12 AM Reply Like
  • Matias Castro
    , contributor
    Comments (48) | Send Message
     
    Author’s reply » Well using his theory it would seem to suggest that they should get the 15mi plus future royalties of 3.5% on 20% so in the next 4 years that would amount to about 500mi
    6 Dec 2012, 10:46 AM Reply Like
  • Danburydude
    , contributor
    Comments (105) | Send Message
     
    Under Dave's theory, you would have five years of running royalties I believe. Google was slapped with a 15. 8 million dollar penalty, plus the jury wanted the running rate to start in September of last year. That would give you five years of running royalties. If I understand the numbers correctly, that would put the amount won in the case to just above $800 million. That number could be a bit off, as there is a little uncertainty about what the yearly running rate would be. That is the dollar amount I come up with using Dave's theory.
    My question would be what price per share would correlate with an 800 million dollar judgement ? I can find no answers as what price per share that translate into if such an award were granted.
    6 Dec 2012, 01:01 PM Reply Like
  • Matias Castro
    , contributor
    Comments (48) | Send Message
     
    Author’s reply » Well the problem is that even if VRNG gets awarded 800 million I do not think we will see an exact correlation with the price per share. First, the money will be given as the years go. Also, G will certainly appeal. My expectation is that once the judge awards 600-800 million the stock price will go to 6 or 7. However, there will be some profit taking there so the price will go down a bit before it goes to 8. Then it will stay around 7-8 until appeal is over. Also, ZTE lawsuit will be in play next year so it is hard to know how that will affect the price.
    6 Dec 2012, 02:42 PM Reply Like
  • DavidTru
    , contributor
    Comments (63) | Send Message
     
    Dan, I presented two theories as to why the jury wrote 15.8 mil on the form. The only two theories I believe are feasible. With the argument that in either case, the intent of the jury was clearly to punish Goog to the fullest extent. And that hopefully the judge will see and move forward on that intent in terms of setting the future royalties award.
    But the jury form did clearly ask if there is a monetary amount that could serve in lieu of the running royalty for the past damages period. And the jury wrote in ~15.8mil.

     

    So, even if the judge does come to the realization that the jury made a clerical/math mistake, or became confused because of how he answered their question. It is doubtful that he will actually include both the monetary amount and the running royalty for past damages. It is more likely that he will move forward with what was clearly stated on the form and let the jury monetary award against Goog stand at 15.8 mil for the past damages period.

     

    That said, I believe that for future royalties he'd have to strongly consider the jury's true intent, which was to punish Goog to the fullest extent. I wrote my previous comment in reference to what should happen with future royalties if the judge moves forward with the jury's true intent... not for why past damages might get adjusted.

     

    Although with the latest docket releases, Goog has now opened the door for serious consideration of adjusting past damages. I wonder why (appeal) they would go out of their way to open that door.
    6 Dec 2012, 03:31 PM Reply Like
  • Matias Castro
    , contributor
    Comments (48) | Send Message
     
    Author’s reply » Yah David is right about the past damages. The judge is most likely not going to change that. I have written another article about that. I ll give you guys the link. Basically I show how the judge will give more in future damages instead of fixing or changing the past damages.

     

    http://seekingalpha.co...
    6 Dec 2012, 03:38 PM Reply Like
  • Matias Castro
    , contributor
    Comments (48) | Send Message
     
    Author’s reply » Also for past damages we have to remember about laches. So the amount does not even represent what it would be from 2011 til now. It only represents what it would be from September 2012-November 2012 if I am correct. It would definitely makes sense. Since Google should pay about 30 million per quarter.
    6 Dec 2012, 04:07 PM Reply Like
  • DavidTru
    , contributor
    Comments (63) | Send Message
     
    No, Because of laches the past damages time period was cut from
    2005-Sep2012 to Sep2011-Sep2012 (~12.5 months). The jury only awarded 15.8mil from Goog for that 12.5 months. Some think it was a math/clerical error, I think it was either that or the jury thought the monetary award was in addition to a past damages running royalty.

     

    After the verdict, Vrng presented motions for interest on past damages and also for the extra ~month past damages just prior to the verdict (~13 mil). That month is important for more than just the monies. If ruled on before we hear about future royalties, the amount ruled for that month of damages will hopefully give a good indication of the direction the judge is headed with future royalties.
    6 Dec 2012, 08:02 PM Reply Like
  • Matias Castro
    , contributor
    Comments (48) | Send Message
     
    Author’s reply » Ok thank you for clarifying that for me. MUCH APPRECIATE IT :)
    6 Dec 2012, 08:24 PM Reply Like
  • Matias Castro
    , contributor
    Comments (48) | Send Message
     
    Author’s reply » David. I absolutely agree. Specially since the question about the running royalty says very clear that it only applies to Google.
    Damages
    A. "If you have found any claim of the '420' patent or the '654' patent to both be valid and infringed by Google, should reasonable royalty damages be based on a 'lump sum' or running royalty'? ANSWER (CHECK ONLY ONE)"

     

    "lump sum"
    "running royalty"
    B. THIS QUESTION ASKS ABOUT THE RATE FOR THAT RUNNING ROYALTY

     

    C. What sum of money if any would reasonably compensate for any of defendants past infringement? ANSWER IN DOLLARS......
    AND THEN IT HAS THE LIST OF ALL DEFENDANTS.

     

    HENCE THEY SEEM TO BE SEPARATE FROM EACH OTHER.
    6 Dec 2012, 11:13 AM Reply Like
  • R.S. Analytics
    , contributor
    Comments (205) | Send Message
     
    I am having a hard time believing the judge won't adjust the past damage award upwards - since it appears to be an obvious mistake. What if the Jury had accidentally used 350% and awarded VRNG $1.5B - you think Google would be arguing that their past damage calculation was correct and the other co-defendents were wrong?
    Of course not.
    It is a simple math error and I believe it will be corrected just as a $1.5B error going the other direction would be corrected.
    7 Dec 2012, 09:53 AM Reply Like
  • Matias Castro
    , contributor
    Comments (48) | Send Message
     
    Author’s reply » It could definitely be a math error. But the judge might add to future damages instead of fixing the past damages. Just have to wait and see. Either way VRNG will get a lot more than 30 million.
    7 Dec 2012, 04:21 PM Reply Like
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