Monday, June 22, 2015

VHC Q&A from June 2015 Report

The following is a portion of some Q&A that I did with someone who bought the report.  The report will be available for purchase through Friday June 26, 2015.

The following are my opinions on these issues.  Hopefully I am right on most of them, but could be wrong.

My first question is SDNI/LTE-Advance.
Can future communication exist without SDNI?  Can LTE-A exist without VHC's patents?
Communication between devices probably involves hundreds of patents that are licensed.  Why is VHC having such difficulty in licensing a security patent that is "essential"?  Is it because there might be a better method out there to do the same thing that may not have been invented yet?

LTE-A can exist without the VHC patents, they would just run the networks without adopting key security features the standards board adopted.  I believe VHC is having trouble due to a very difficult patent licensing environment and the security technology has not been implemented in the advanced networks yet.  From what I understand the advanced network has been delayed building out and adopted.  It is starting to get close and should be running an all IP network sometime in 2016.  If there is something that has been invented it has not been adopted yet by the standards organizations that I am aware of.

It seems prudent that IPValue would have vetted the VHC patent portfolio before signing on.
1. Can IPValue still be effective given the numerous IPRs?  Are they concern that 697 did not survive?  Doesn't this hinder their ability?  Does IPValue have a good success rate in obtaining licenses from all their public clients?  Or are they a company that will take anyone and wait to see if anything sticks.

IPValue would be sure to take a deep technical dive of the entire portfolio before signing agreement.  They will construct validity, technical, and infringement claim charts.  I think they can be effective regardless of the numerous IPRs that have been filed.  At some juncture a handful of the patents/claims should survive.  I personally think the new patent grants with the encrypted communication link terminology will be a tough portion of the patents to invalidate.  The '697 will be appealed to the CAFC, but I am not sure how that will affect anything.  From what I have heard, IPValue only takes on premier portfolios and has a pretty good success rate.  They have generated a steady stream of licensing revenue since exception.

In reading your Microsoft settlement, did I understand correctly that you expect additional revenue from Microsoft other than the $23M?

I need to word the MSFT settlement better.  I don't think VHC will get another nickle out of Microsoft in the future.

On June 4, you twitted that they talked about VHC for about 10minutes in the trial that you attended.  Can you give me more information about what was discussed?  Was it positive for VHC?

Dr. Becker testified for Apple in the Virnetx trial back in 2012 for their damages theory.  I attended a trial where Dr. Becker was testifying for the plaintiff.  On cross examination the VirnetX transcript was shown where an analogy Dr. Becker made was the exact opposite argument in his damages theory for the plaintiff.  He was grilled on why the cases were different.  I will download the transcript when it becomes available in the future.

In your opinion, has VHC advanced in reaching its goals from 5 years ago, or was 2014-2015 a setback?

I would say 2013-CAFC was a setback and a "dead" period.  Nothing really moved forward and now they have to go back to trial in Jan 2016.  Any progress in that period on licensing/partnership is currently not public and unknown.

With some execution ie Gabriel roll-out over the next 18 months, Tier 1 partnerships, and IPValue licensing there is a good risk/reward profile.  A nice result with Apple in January will also be very helpful.  Apple will of course appeal, but it should reverse the very bearish sentiment in the investor base.

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