Vringo Inc., the patent assertion company that lost $200 million of market value after an adverse appellate court ruling on Friday, probably won’t succeed in winning an en banc review of the decision or in reversing the decision, and will have to live with the consequences.
That’s the assessment of Rob Kramer, one of the founders and the managing partner of Altitude Capital Partners, a private investment firm launched in 2005 to focus on investing $250 million of capital in businesses which own compelling intellectual property assets.
“En banc reviews are very rare,” Kramer said in an interview. “Vringo was successful in some re-exams so the Federal Circuit’s ruling is a little surprising.”
The Court of Appeals for the Federal Circuit on Friday reversed a 2012 jury verdict ordering Google Inc. to pay Vringo $30.5 million in damages plus a running royalty, which could have amounted to hundreds of millions of dollars. In the 2-1 ruling, the Federal Circuit reversed the verdict after finding that Vringo’s patents for a method of filtering Internet search queries was invalid because of obviousness.
Vringo had argued that although content-based and collaborative-based filtering techniques were commonly used, combining the two techniques was patentable. The Federal Circuit disagreed.
Vringo is unlikely to get an en banc review, let alone be able to overcome the reversal, Kramer said in an interview.
Kramer, who is based in New York, previously was a managing director at Fortress Investment Group, where he was responsible for sourcing, structuring and executing investments in many asset classes. It was at Fortress that he developed his expertise in litigation assets/claims and made numerous investments in pools of personal injury claims and class action litigation.
He later turned that knowledge to the business of patent investing and became one of the earliest and most successful of the patent monetizers, who are sometimes derided as patent trolls.
"I don't like being called a patent troll," he in an email. "I consider myself one of the earliest and most successful investors who applied real professionalism and sophistication to patent investing and licensing. Our average licensing prices were many millions of dollars, not nuisance settlements."
Indeed, Kramer and Altitude Capital generated than $700 million in licensing fees from infringement cases based on patents they purchased, before agreeing to largely exit the business in 2012 after selling a portfolio of patents to RPX Corp., a patent aggregator and provider of loss control services, for an undisclosed amount.
As part of the sale, RPX and its members received the rights to some 500 patents in the U.S. and another 50 outside the U.S. that were held by Digitude Innovations LLC, an Altitude Capital portfolio company, and sub-licensing rights to patents exclusively licensed to a unit of Digitude. RPX, based in San Francisco, also won the dismissal of a number of lawsuits against its members.
Kramer and Altitude Capital also agreed to restrictive covenants that prevent them from seeking licensing fees from RPX members for an extended period of time.
Today, Altitude Capital’s intellectual property portfolio includes only four portfolio companies.
Kramer said in substance he’s not surprised that the Federal Circuit invalidated the Vringo patents for obviousness.
“We looked at the assets,” he said. “In fact we bid on them. We thought there were some real validity issues. We thought there was some pretty close prior art.”
And indeed, the panel of the Federal Circuit seemed to focus on that prior art to reach its conclusion that Vringo’s subsidiary I/P Engine LLC’s patents used techniques for filtering Internet queries that were widely applied in the prior art and the product of only ordinary mechanical or engineering skill.
“The fundamental flaw in I/P Engine’s argument is that using an individual user’s search query for filtering was a technique widely applied in the prior art. Indeed, the shared specifications of ‘420 and ‘664 patents acknowledges that ‘conventional search engines’ filtered search results using the original search query.
Given that I/P Engine’s own patents “acknowledge that using the original search query for filtering was a ‘conventional’ technique, I/P Engine cannot now evade invalidity by arguing that integrating the query into the filtering process was a non-obvious departure from the prior art.”
To be sure, New York-based Vringo may surprise everyone and win both an en banc review and reversal.
Most observers of patent litigation, however, have said that is unlikely.
David Hoff, who writes the IP Hawk blog on patent monetization, said yesterday that Vringo would try to make its best legal arguments, but was probably stuck with the adverse ruling, though the ultimate decision was likely to be a close call.
Vringo officials couldn’t be reached for comment.
Even if Vringo is stuck with the adverse ruling as Hoff says, Kramer said it will survive.
“It’s a public company with permanent capital,” Kramer said. “Was the stock ahead of itself at $3 or $4? I always thought it was.”
Vringo has many other patents besides the ones at issue in the I/P Engine case. Indeed, the company has about 500 patents in three areas: Internet search, telecom infrastructure and wireless mobile technology.
“I know they were suing some foreign company for infringement of some wireless equipment patents,” he said, referring to infringement actions against ZTE in the U.K., Germany and Spain.
“The margins in wireless equipment are pretty damn slim,” he said. “This stock won’t see $3 for a very long time.”
To contact the reporter responsible for this story please call Dan Lonkevich at 707 318-7899 or email him at firstname.lastname@example.org