Vringo Inc. (VRNG), the patent monetization company run by CEO Andrew Perlman, is trying to recast itself to its deeply disappointed shareholder base as a relatively well financed operating company with growth prospects and a slimmed down and shrewder patent monetization strategy.

The rebranding comes after the New York-based patent monetization company won $21.5 million in a settlement with ZTE Corp., the Chinese telecom giant, after having spent $22 million on a portfolio of patents and incurred another $50 million in costs from a multi-jurisdictional enforcement strategy against ZTE in Germany, the U.K., France, The Netherlands, Romania, Malaysia and Brazil.

Before that, Vringo spent millions of dollars on a failed enforcement action against Google Inc., after briefly touting a $30.5 million award and 3.5% royalty that could have been worth hundreds of millions to Vringo. That award proved fleeting, however, when the Court of Appeals for the Federal Circuit threw it out and invalidated the patent in suit as obvious under the U.S. Supreme Court’s Alice decision.

Vringo’s request for a writ of certiorari before the U.S. Supreme Court was rebuffed despite the much ballyhooed hiring of famed litigator David Boies of Boies Schiller & Flexner LLP to assist on the appeal. Vringo saved some money by paying Boies with about 400,000 shares of common stock that today are worth about $688,000.

Looking at Vringo’s filings, the company's litigation spending has far outstripped its recoveries. The company reported general and administrative expenses of $10.27 million in the first three quarters of 2015, $15.48 million in 2014, $15.33 million in 2013 and $10.22 million in 2012. That’s a total of $51.3 million over the past four years

At the same time, Vringo posted operating legal costs of $25.37 million in 2014, $21.6 million in 2013 and $10.01 million in 2012, for a total of $56.97 million, a number that doesn’t reflect operating legal costs in 2015.

Shares of Vringo are currently trading at $1.72 and have traded between $1.58 and $9.80 over the past year.

“Spending that much money on 1-2 legal cases/ defendants is simply imprudent,” said Rob Kramer, managing partner at Altitude Capital Partners in New York. “Especially against ZTE products. We never spent more than $5 million to $10 million in cash against 5-7 defendants.”

Kramer was a pioneer in patent monetization and was famously bought out by RPX Corp. (RPXC) after winning more than $500 million in licensing settlements from infringers. He also has said that he passed on the portfolio of patents later bought by Vringo because of concerns about validity.

To be sure, the patents at issue in the ZTE case were a subset of the portfolio for which it paid $22 million in 2012. The portfolio probably still has some value if monetized in a more cost effective and prudent way.

Moreover, Vringo’s settlement with ZTE, which was a small fraction of the $817 million it had been seeking, also is a reflection of the broader patent monetization market, which has seen many other companies settling for fractions of what they expected.

For example, Rockstar Consortium, which paid $4.5 billion for a portfolio of patents from the Nortel Network Corp. bankruptcy before selling it just a few years later to RPX for $900 million.

Analyzed in that light, Vringo’s settlement with ZTE may have been the smartest move it could make, replenishing its cash and giving it the ability to recalibrate its monetization efforts to the new times.

“Vringo’s financials don’t specify how much of the company’s expenses went into fighting ZTE,” said Mark Gober, a director at 3LP Advisors, who also is an investor in Vringo. “If you make the blanket assumption that a big chunk of Vringo’s expenses have been related to ZTE litigation, then the return on investment for the $21.5 million settlement looks really bad. And on top of that, it took years to get that result.

Gober said for many of Vringo’s investors, the ZTE settlement was “a massive disappointment.”

Even so, he said “an eight-figure settlement for a small patent licensing company is an accomplishment in the current environment. You don’t see many similarly situated companies walking around with eight-figure settlement checks from large, international corporations.”

Gober noted that Vringo’s management has been silent on the ZTE settlement, which doesn’t seem coincidental. He said provisions in the settlement agreement may prevent Vringo’s management from making certain disclosures about the deal. For example, he said that might be why the $21.5 million settlement was not announced via press release and instead was only disclosed in an 8-K filing with the Securities and Exchange Commission.

Gober also noted that while Vringo had many successes against ZTE, things were not going perfectly. He said not long before the settlement, Vringo suffered losses against ZTE in The Netherlands and in France, and it had the looming threat of the ongoing antitrust case in China.

“Vringo’s management must have concluded that getting rid of the ZTE distractions and risks would be better for the company than to continue fighting in the hopes of a bigger settlement in the future.”

He also added that perhaps Vringo believes that it now has a better chance of securing additional licenses from ZTE’s wireless infrastructure competitors now that ZTE has settled.

Vringo also has patent lawsuits pending against Asus, DirecTV, and Lowes and likely expects settlements from them. All of those companies, however, are much smaller than ZTE, suggesting settlements would be correspondingly smaller.

Meanwhile, Vringo’s rebranding through the recent corporate update press release begins with lengthy updates on the Fli Charge and Group Mobile product businesses, which are followed by a shorter update on intellectual property monetization.

Vringo paid $6.33 million in stock for International Development Group, the holding company for wire-free charging technology company Fli Charge, and Group Mobile, the built to order supplier of rugged computers and mobile devices, in October.

Vringo officials declined to comment for this story.

In the Jan. 19 corporate update, Vringo noted that after the ZTE settlement it has $27 million in cash and court deposits as of Dec. 31, 2015. That would give it enough cash to operate its slimmed down IP business, as well as its Fli Charge and Group Mobile for four years, it said.

"Vringo is committed to further monetizing our portfolio of intellectual property assets,” said David Cohen, Vringo’s chief legal and intellectual property officer, in a statement as part of a January 2016 corporate update.

“We seek to obtain fair, reasonable, and non-discriminatory (FRAND) licenses to our standard essential patents. While we are more than willing to aggressively pursue our legal rights, Vringo is very pleased to be in discussions with several parties in an effort to achieve mutually agreeable license terms.”

The company declined to comment on the ZTE settlement, its monetization efforts, or identify any of the parties with whom it is negotiating.

"We are continuing to unlock the value of our patent portfolio, which contains a number of proven assets, including one of only two standard essential telecommunication infrastructure patents ever found valid and infringed in the United Kingdom. The addressable market for our portfolio captures not only traditional wireless infrastructure equipment, but also cutting edge small cell infrastructure technology. Small cells are forecast to become a $6 billion market by 2019," Cohen said.

Vringo named executive vice president Cliff Weinstein, whose duties include business development, investor relations and media relations, as the president of Fli Charge.

Group Media was touted in the update by Stephanie Kreitner, an executive vice president.

“I’m sure we’ll see Vringo continue its IP monetization efforts, but those efforts might now be taking a back seat to the product initiatives,” Gober said.

“More broadly, the Vringo story is a cautionary tale which demonstrates how difficult global patent wars can be for a ‘David’ when going up against ‘Goliath.’”

For example, he said it is worth nothing that while Vringo was awarded a number of injunctions around the world against ZTE’s products, Vringo never secured a major damages figure from a court.

“This is not surprising because courts outside the United States are notorious for their low damages awards relative to the United States." And indeed, Vringo did not pursue patent litigation against ZTE in the U.S.

—To reach the reporter responsible for this story, please contact Dan Lonkevich at 707 318-7899 or dan@thepatentinvestor.com