Friday, August 31, 2012

MARKMAN BASICS: Apple, Cisco Or Siemens Should Just Buy VirnetX?

MARKMAN BASICS: Apple, Cisco Or Siemens Should Just Buy VirnetX?

Much of this info here is the basics on history of Markman Hearings from VHC.

How does this effect VRNG?

Read below:

"It's important to remember that 90% of all cases settle right after the Markman because once the judge makes a decision, it doesn't make much sense to go up against that decision.
The evidence considered in a Markman hearing falls into two categories: Intrinsic and extrinsic. Intrinsic evidence consists of the patent documentation and any prosecution history of the patent. The key here is that VirnetX already has prosecution history with this patent, in the Microsoft case, and that decision will weigh heavily with the judge.
Extrinsic evidence is testimony, expert opinion or other unwritten sources. Extrinsic evidence may not contradict intrinsic evidence. In other words, since the intrinsic evidence includes the VirnetX victory over Microsoft, no extrinsic evidence may contradict that ruling. Cisco, Apple, NEC and Aastra are boxed in, and in my opinion it will be very difficult for them to win.
Based on Judge Davis' comments at the end of the Markman hearing, it appears VirnetX has the upper hand. After speaking with a couple of people who attended the hearing, here is what I learned:
At the end of the hearing, the judge got up and asked if all parties had gotten together and tried to work out a settlement. Everyone nodded their heads.
That's news to me. I didn't realize settlement talks had begun.
The judge then said that he understood VirnetX and the defendants would not continue settlement talks until after his order, so he would deliver a preliminary order soon.
After delivering his preliminary order, he would direct all parties to begin settlement talks within 30 to 45 days. Then he joked that it sure it would be nice if "y'all would settle this before I issued my ruling," which got a laugh from everyone.
Contrast that to Judge Davis' closing remarks during the Microsoft/VirnetX Markman hearing in 2009: "All right. Very well. All right. Thank you very much for your excellent arguments. The matter is submitted, and we will get you an opinion as soon as we can."
In 2009, Judge Davis' closing statement made no reference to a settlement. He was also in no hurry to issue a ruling. In fact it took him six months. However, he did end up ruling in VirnetX's favor.
This time around his tone was quite different, with a clear bias toward a quick settlement. In my opinion, Judge Davis would not keep bringing up the idea of settlement unless he believed his ruling would lead to settlement negotiations. If he believed all VirnetX patents were invalid, why would he be talking about settlement?
Here is an analyst's perspective on the hearing. On January 6th, Craig-Hallum stated, "The Markman hearing proceeded better than anticipated. The judge implied he may have come to some view regarding the situation and strongly encouraged parties to consider mediation sooner rather than later." The analyst said that the judge's verbal communication and desire for mediation implies the VirnetX case is very firm.
Perhaps the most significant fact gleaned from the hearing was that none of the defendants presented any new information. In other words, they basically presented the same case that Microsoft did, the case that caused Microsoft to be defeated.
Judge Davis has already delivered a positive ruling for the 135 and the 180 patents in the Microsoft case. As a computer scientist, he understands these patents better than most, and is unlikely to change his stance with this new group of seven defendants. Why would he?
Here are some other factors that I think bode well for VirnetX:
Number one: In the Microsoft trial, there were only two patents involved. The current defendants are facing infringement charges on a total of six patents, which include the 135 and the 180 patents. The level of infringement, hence the dollar value of these cases, could be many times greater than the Microsoft case.
Number two: Judge Davis has never been overturned, and it's unlikely he's going to overturn himself on these two patents.
Number three: If there is a positive ruling on the January 5th Markman, there may not even be a need for the second Markman (Siemens, Mitel, Avaya), which is now scheduled for July 12th, 2012. In fact, there will not be any need for a trial in November if all parties decide to settle.
Number four: Avaya is planning a $1 billion IPO in April. It may want to settle with VirnetX before the IPO, because attracting investors could be difficult with a pending lawsuit. Also, VirnetX could get some positive publicity as a result of the IPO.
Number five: The VirnetX legal team is led by Doug Cawley who not only gave VirnetX its Microsoft victory in 2010, but also successfully argued the i4i versus Microsoft case in front of the Supreme Court. He received a unanimous decision in favor of i4i. Many say that Doug Cawley and the McCool Smith team are the best in the business.
Another important factor not directly related to the Markman has to do with the recent re-exam. Regarding the 180 patent, the USPTO completely denied re-examination. That's their way of saying, "There's no problem here. This patent is valid. We are not even going to review it." That's a major coup for VirnetX.
Remember, with the Microsoft Markman, all patent claims for the 135 and the 180 were validated. Why would Judge Davis, who knows these patents like the back of his hand, reverse his previous ruling?
For Apple and Cisco, the best solution may be just to buy VirnetX. Apple is sitting on $97 billion in cash, and Cisco has about half that amount. A buyout would free either company from its current litigation liabilities and give them an extremely strong IP position.
Apple is particularly vulnerable because VirnetX recently filed a complaintwith the International Trade Commission and requested that Apple be prohibited from importing into the U.S. some of its iPhones, iPads, iPods and Macintosh computers. For Apple the pressure is on because the ITC action begins this summer. This provides another catalyst for shareholders."

Comparisons with VRNG: Apple Sanctioned In VirnetX Patent Case For Obstructing 'Unfavorable Testimony

Apple Sanctioned In VirnetX Patent Case For Obstructing 'Unfavorable Testimony

In VRNG Case, we should expect a lot of current and former Google employees to be called.

This will be a big drag on Google in court.

We should EXPECT GOOGLE to use similiar dirty tricks and setting themselves up for sanctions.

"The court handed down a particularly clever and creative set of tailored sanctions, giving Apple the choice between two options:
Option 1: In addition to paying VirnetX the costs associated with this particular issue, Apple must also produce the engineer again for further deposition by VirnetX. Apple is banned from communicating with witness regarding the patents. If Apple attorneys have had conversations with the engineer since the deposition was interrupted, they are deemed to have waived any confidentiality of those conversations. Meaning, VirnetX is free to ask questions regarding those discussions and the witness must truthfully answer all questions about any communication. Apple, on the other hand, will not be able to ask the witness questions about the comparison of the two patents.
Option 2: Apple is not allowed to call the engineer to the stand at trial or provide ANY rebuttal or counter arguments of the engineer's testimony regarding the comparison of the two patents. In addition, (and here is the kicker) the jury will receive instruction at trial that Apple's interference was improper and that "…Apple's counsel's reason for terminating the deposition was to prevent such unfavorable testimony from being presented to you in this case."
On Wednesday, a court order was handed down which may have severely damaged Apple's (AAPL) defense in its patent infringement case with VirnetX (VHC). The judge in the case largely adopted and granted VirnetX's proposed sanctions against the Cupertino-based tech firm. Sanctions are penalties used by courts to reprimand or correct the damage done by an attorney for violating rules or abusing the judicial process. The sanction in this case came about in light of Apple's actions in interfering with a witness deposition.
Much is at stake for both companies in the litigation. The order for sanctions may significantly better VirnetX's position in its legal wrangling with Apple, helping it to secure a license for potentially billions of dollars in future sales. For Apple, the sanctions put it at an increased risk of paying damages, future royalties, and facing potential injunction of sales of its top products.
Earlier this year, VirnetX interviewed an Apple software engineer in preparation for the upcoming trial. During the deposition, the court ordershows the engineer testified that he worked extensively to help develop Apple's "VPN On Demand". VPN On Demand is in many ways at the heart of Apple's alleged infringement in this case.
According to Apple's documentation, VPN On Demand is used to "…establish a connection automatically when accessing predefined domains, providing a seamless VPN connectivity experience for iPad users." VPN On Demand is critical for Apple for several reasons. Without this feature, VPNs on the iPhone must be manually established, with many apps unable to connect without this access. Furthermore, this functionality found throughout Apple devices.
VPN On Demand is very relevant to the current patent case as VirnetX is alleging that any Apple product with VPN On Demand functionality infringes on its patents, which claim the methods to trigger secure communication links and VPNs (virtual private networks) based on DNS lookups. These alleged infringing products include the Apple iPhone, iPhone 3G, iPhone 3GS, iPhone 4, iPod Touch, and iPad. VirnetX will likely seek an injunction to halt sales of this wide range of products, which would completely cripple the company and directly impact Apple's bottom line. Furthermore, a license to VirnetX's patent portfolio will easy cost the company hundreds of millions, if not billions, in royalties in the long run.
During deposition, the software engineer claimed to have invented the method of "determining whether to establish a VPN based on a domain name" for Apple's VPN On Demand. The witness continued to explain how he and his team had attempted to patent this very idea via patent application 10/940,225.

'Maxim is an idiot'

Friday, August 31, 2012

Maxim is an idiot

We don't have much time to respond to the stupid PR by Maxim, as we are in the midst of opening a restaurant. However, EPE, Inc. would like to state that acquiring companies via patent infringement cases is NOT Google's MO. This PR lacks any analysis and is patently ridiculous. Maxim should try to employ a real analyst instead of PR'ing complete nonsense. If Google was going to acquire VRNG pre-trial, the PPS would certainly reflect it.

Our blog has been spot on regarding the legal proceedings, and firmly believe this Maxim "article" has zero validity. 

Disclosure: Enhydris Private Equity, Inc. is long VRNG.

Disclaimer: Enhydris Private Equity, Inc. @blogspot is a publication of general circulation under SEC v. Lowe, and does not act as investment advice in any way, shape or form. Enhydris does not advocate the purchase or sale of any security or investment for any specific individual.

Thursday, August 30, 2012

Chart of VHC from 2008 to 2012

Chart of VHC from 2008 to 2012

You may be skeptical about VRNG and it's prospect.

However history repeats itself when we pay attention.

Have a look at VHC from a 4 year time period.

These cases are similiar enough, BUT VRNG's claim is much bigger!

A federal jury in Texas on Tuesday ordered Microsoft Corp (MSFT.O) to pay $105.75 million to VirnetX Holding Corp (VHC.A) for infringing two patents for communicating over the Internet.

This is not a black swan.
All Google needs to do is study what happened between VHC and Microsoft.
Microsoft used a lot of the same exact tactics we saw Google use.
Make no mistake about it.
These cases are David V. Goliath.
Goliath can and does win sometimes!

"We believe the evidence demonstrated that we do not infringe and the patents are invalid," Microsoft spokesman Kevin Kutz said in a statement. Kutz called the damages "legally and factually unsupported," and said Microsoft will ask the court to overturn the award.

Tuesday, August 28, 2012

Apple's Historic Court Victory Focuses ALL EYES on VRINGO - THOMSON ARTICLE

Apple's Historic Court Victory Focuses ALL EYES on VRINGO - THOMSON ARTICLE

Speculation that Vringo, Inc. (VRNG) will prevail in its patent infringement case against industry giant Google, Inc. (GOOG) may be more than just that. On Friday Apple, Inc. (AAPL) was awarded $1.05 billion from Samsung Electronics (SSNLF) in a patent win, with potential treble damages sought, and wide implications for the hand-held electronics market. In the ruthlessly competitive and highly litigious smartphone and mobile app markets, tiny Vringo will soon face Google over the claim that Google stole its patented expertise used in its search advertising technology, central to Google`s revenue base. Co-defendents are Google Inc. (GOOG), AOL, Inc. (AOL), IAC/InterActive Corp. (IACI), Target Corporation (TGT), and Gannett Co., Inc. (GCI) IAC/InterActive Corp., companies with market capitalization in the billions of dollars. Vringo has already received a favorableMarkman ruling last June, a possible harbinger for the October trial.  An interesting aspect of the Vringo claim against Google is that it does not involve simply features on a Smartphone, it is addressing a core technology - the search advertising business according to the complaint filed.
In addition to the Google suite Vringo`s huge, newly-acquired patent estate from Nokia Corp. (NOK), further bolsters Vringo`s patent portfolio Vringo has increased its IP portfolio by 15x and emerges as a power house in IP assets and IP monetization across the entire range of tech`s hottest sectors from mobility, to search engines, to digital advertising. This newly acquired portfolio potentially gives Vringo a pipe line of Infringement cases that could be extremely lucrative with potential award and royalty stream in the multi-billions. - the now-famous case of NTP vs. Research in Motion (RIMM) cost the defendant $612 million, and fully-paid, up-front licenses fees for eternity. David Cohen, in house council for Vringo, was formerly the senior litigation council for Nokia. During his time at Nokia, Cohen managed the successful worldwide litigation against Apple Inc. (AAPL) which resulted in a reported $715 million settlement, plus ongoing royalties for every iPhone sold worldwide. 

The "Modernist" Track Record: Picks Since April Down Average of Over 40%

The "Modernist" Track Record: Picks Since April Down Average of Over 40%

June 7, 2012
"Modernist" Pick - Long RSH
"Modernist" "Analysis" - "RadioShack is a compelling value investment that can easily double its share price... Shares have set a low."
"Modernist" Result - RSH went down. "Modernist" Position LOST 44.23% since article.
May 22, 2012
"Modernist" Pick- ZNGA
"Modernist" "Analysis" - "I love Zynga at these levels."
"Modernist" Result - ZNGA went down. "Modernist" Position LOST 53.88% since article.
April 25, 2012
"Modernist" Pick - Short AMZN
"Modernist" "Analysis" - "This is an article about Amazon (AMZN), and how it will destroy wealth for those who are currently long, and create wealth for those who get short."
"Modernist" Result - AMZN went up. "Modernist" Position LOST 29.11% since article.
April 19, 2012
"Modernist" Pick - Long DDMG
"Modernist" "Analysis" - "I very rarely make an explicit prediction along the lines of a stock moving from $200MM to $1BB in a year. ... This is the kind of stock that will freak you out. In a good way."
"Modernist" Result - DDMG went down. "Modernist" Position LOST 45.65% since article.
For what it's worth, the "Modernist" makes this call on Vringo: "Vringo's alpha is set to reverse. It is time to sell." While "past performance is no indication of future results," we note that each of his picks listed above went an average of 43.2% in the other direction.

Monday, August 13, 2012

"You may have a fresh start any moment you choose, for this thing that we call failure is not the falling down, but the staying down."

"You may have a fresh start any moment you choose, for this thing that we call failure is not the falling down, but the staying down."

Eleanor Roosevelt