Vringo v ZTE Breach of Contract

http://www.scribd.com/doc/233072816/722014-Breach-of-Contract

A recent filing was just discovered involving Vringo suing ZTE in the SD of New York in a Breach of Contract dispute.  According to the complaint Vringo and ZTE signed a confidential NDA on December 6th 2013 and held a settlement meeting on December 10th, 2013.  Every page was marked confidential subject to NDA.

On February 21st, 2014, ZTE filed an antitrust complaint in China and submitted the entire presentation in an exhibit in the Chinese Complaint, including the amount of Vringo's settlement offer.  Vringo did not become aware of the Chinese complaint until June 26, 2014.  Vringo is now trying to enforce its contract rights in the NDA by obtaining a temporary restraining order.

The Chinese court accepted the case and Vringo is alleging that multiple Judges in China have reviewed the information that was under NDA.  A first hearing of the case is scheduled for August 14, 2014 and will be open to the public.  A substantive hearing is scheduled for the next day on August 15, 2014 and again will be open to the public.

Vringo is seeking to have the Chinese cases withdrawn by ZTE and the breach has & will cause irreparable harm to Vringo.  ZTE is asking for millions of dollars in damages in Guangdong Appellate Court and is trying to harm Vringo's patent infringement monetization campaign.  Vringo is also asking for attorneys' fees and costs along with further relief the court deems just.

In my opinion ZTE filing complaints both in the EU and China is out of the playbook of Huawei who did this in their litigation with Interdigital (both parties agreed to binding arbitration to settle the dispute).  It is a way for Chinese OEMs to try to gain leverage in their patent disputes and avoid paying the maximum asking price.  It also sends a message to other patent holders that they will not roll over.  Having the cases withdrawn in China would weaken ZTE's negotiating position.  I believe it is already weak in light of injunctions being granted in Germany, India, and Brazil.

In Exhibit C, ZTE is trying to compare a license between Interdigital and Samsung in 2007 in the range of $400M in a 4 year agreement.  I think it is important to note that ZTE has still not agreed to a license with IDCC, which sued them back in July 2011 and is ongoing in multiple venues.

I am getting the opinion that Vringo is asking for a comparable amount to resolve the cases and for a global settlement in a six year license.  I have run a similar analysis backing into ZTE's financial statements, which yielded a slightly smaller number with a number of assumptions.  I did not publish as I did not feel comfortable publishing an analysis with too many obvious flaw.

The endgame for Vringo is a global settlement/patent license with ZTE, which I feel we keep moving another few notches towards as Vringo continues to secure favorable decisions in jurisdictions around the world.  The breach of contract dispute is another cog in the wheel to get a deal signed.  The timing if ever is very difficult to predict.

Disclosure:  I am long Vringo.

7/8/2014 PIPCO Pre-Market News

Inventergy (INVT) announced they are in licensing discussions with 20 companies and have identified 135 companies that it believes are currently using their IP.

MGT Capital Investments (MGT) announced they have dismissed their suit with WMS and will focus on Aruze Gaming.  MGT and WMS will file a joint motion at the PTAB to dismiss the IPR.

ParkerVision (PRKR) announced they will host an analyst day on June 15th in New York City.

Tessera Technologies (TSRA) announced the Z7 series as the first nubia smartphone platform to showcase the best of FotoNation's computational imaging features.

Wilan (WILN) announced they have acquired a patent portfolio from a global leader in non-volatile memory.

7/7/2014 Market Wrap

News:
Nothing to Report
Filings:
Nothing to Report
Trading Commentary:
The IP sector traded down a little over 2% today, likely in conjunction with the
Russell 2000 trading down 1.75%.  Volume was fairly average for the day across
almost everything.
ACTG was off 5% on average volume with no supporting news. Shares have
been strong very recently and I am expecting a solid Q2 report.
PRKR was down another 6% on strong volume with accelerated selling after
a bearish article on SA was published.  I am expecting shares to drift lower,
to much lower levels ahead of the eventual CAFC oral hearing.
VHC was down 6.6% on average volume.  There is no news that I am aware of
other than shareholders waiting for the CAFC to issue their opinion.
Ticker	$CHG	%CHG	Volume	Closing
				Price
ACTG	$   (0.9500)	-5.09%	352,900	$                              17.72
BCYP.OB	$   (0.0060)	-6.00%	31,100	$                           0.0940
CLGL	unch	unch	10,000	$                           0.0170
COPY.OB	$      0.0200	6.90%	67,500	$                           0.3100
CRDS	$        (0.05)	-1.57%	115,500	$                                3.13
DSS	$          0.04	2.90%	221,700	$                                1.42
EDIG.OB	$   (0.0039)	-8.69%	90,700	$                           0.0410
ENIP	$      0.0005	2.33%	168,500	$                              0.022
INVT (EONC)	unch	unch	114,100	$                                2.45
FNJN.OB	$        (0.12)	-2.72%	8,300	$                                4.29
IDCC	$        (0.52)	-1.09%	276,900	$                              47.81
MARA.OB	$        (0.15)	-1.31%	20,300	$                              11.30
MGT	$        (0.07)	-7.78%	130,200	$                                0.83
NTIP	$        (0.03)	-1.47%	100	$                                2.01
OTIV	$        (0.05)	-2.19%	96,300	$                                2.23
PCO	$        (0.05)	-2.73%	163,000	$                                1.79
PPRO	$        (0.05)	-1.67%	3,100	$                                2.95
PRKR	$        (0.10)	-6.80%	4,177,300	$                                1.37
PTNT	$          0.06	1.97%	11,600	$                                3.11
RMBS	$        (0.39)	-2.67%	415,200	$                              14.29
SITO.OB	$      0.0200	5.56%	14,000	$                              0.380
SPEX	$        (0.05)	-2.79%	851,200	$                                1.74
STRP	$          0.05	0.51%	70,800	$                                9.92
TIVO	$        (0.17)	-1.30%	862,100	$                              13.07
TSRA	$        (0.36)	-1.60%	265,700	$                              22.36
UPIP	$        (0.07)	-3.12%	372,900	$                                2.18
VHC	$        (1.13)	-6.64%	592,400	$                              15.90
VRNG	$        (0.04)	-1.10%	1,422,800	$                                3.60
WDDD.OB	$   (0.0103)	-5.41%	183,800	$                           0.1802
WILN	$        (0.04)	-1.23%	135,000	$                                3.16

7/7/2014 PIPCO Pre-Market News

CopyTele (COPY) announced that a markman hearing will be held on August 8th, 2014 in their case against Microsoft and Citrix.

Wilan (WILN) announced they have signed a multi-year patent license with Nokia Networks.  The new agreement covers CDMA, WCDMA, GSM, HSPA, and 4G/LTE Technologies.

Thoughts on Vringo Reexamination Certificate

Vringo (VRNG) was issued a reexamination certificate on their '420 patent, confirming all claims that were reviewed in an Ex Parte Reexamination petitioned by Google this morning (7/2/2014).  The claims at issue were 10,14,15,25,27,28.  A jury returned a verdict that Google infringed the same claims of the '420 patent in November 2012.

Quick thoughts on the development:

Google has filed 4 Ex Parte Reexamination requests, two each on the '664 and '420 patents.  Both '664 reexaminations have been already decided on by the USPTO with confirmation of claims.  The '420 patent already had one reexamination certificate issued.  Today was the 2nd confirmation on the '420 patent.  There are no requests outstanding.

Invalidity/Obviousness has been a hot button issue since the CAFC oral arguments held in early May.  The majority of the time and questions were related to obviousness, which was the focus of the panel.  My non-expert conclusion after seeing the last reexamination certificate is that obviousness is now an even less of an issue at the CAFC.  A jury verdict plus subsequent reexamination certificate supporting validity of the patents asserted is a strong position to be in when your District Court decisions go up on Appeal.  It is very difficult to analyze or forecast how patent litigation is going to resolve, but it is my opinion that Vringo's position is about as good as it gets.

Disclosure: I am long VRNG.  As always, I strongly suggest seeking out the opinion of a patent lawyer (I am not one).

7/1/2014 Market Wrap

News:
Nothing to Report
Filings:
Nothing to Report
Trading Commentary:
Volume was rather light in the sector, which closed slightly higher today.  The
IP sector did not participate in the broad market move higher today.
ACTG was fairly strong all day again after they disclosed 3 agreements
this morning.
PCO closed up 4% after the PTAB issued a final decision in their IPR proceedings
finding the reviewed patents not unpatentable.
Ticker	$CHG	%CHG	Volume	Closing
				Price
ACTG	$      0.2600	1.46%	576,500	$                              18.01
BCYP.OB	$   (0.0023)	-2.29%	161,000	$                           0.0980
CLGL	unch	unch	N/A	$                           0.0185
COPY.OB	$      0.0050	1.67%	115,800	$                           0.3050
CRDS	$        (0.18)	-5.37%	236,000	$                                3.17
DSS	$          0.01	0.73%	154,300	$                                1.38
EDIG.OB	$   (0.0021)	-5.11%	253,600	$                           0.0390
ENIP	$   (0.0029)	-11.65%	190,400	$                              0.022
INVT (EONC)	$        (0.08)	-2.86%	67,400	$                                2.72
FNJN.OB	$        (0.01)	-0.24%	16,200	$                                4.24
IDCC	$          0.45	0.94%	738,600	$                              48.25
MARA.OB	$        (0.10)	-0.90%	5,300	$                              11.00
MGT	$        (0.10)	-9.05%	230,500	$                                0.96
NTIP	unch	unch	2,000	$                                2.04
OTIV	$        (0.08)	-3.36%	113,500	$                                2.30
PCO	$          0.07	3.98%	355,800	$                                1.83
PPRO	$        (0.10)	-3.28%	11,200	$                                2.95
PRKR	$        (0.01)	-0.68%	3,584,300	$                                1.47
PTNT	$          0.05	1.61%	16,000	$                                3.15
RMBS	$          0.16	1.10%	650,900	$                              14.46
SITO.OB	$      0.0100	2.63%	51,200	$                              0.390
SPEX	$          0.01	0.56%	984,400	$                                1.80
STRP	$        (0.33)	-3.24%	89,600	$                                9.87
TIVO	$          0.19	1.47%	1,234,800	$                              13.10
TSRA	$          0.22	1.00%	464,300	$                              22.30
UPIP	$        (0.04)	-1.79%	392,200	$                                2.19
VHC	$        (0.04)	-0.23%	582,400	$                              17.57
VRNG	unch	unch	1,132,200	$                                3.42
WDDD.OB	$   (0.0010)	-0.48%	187,800	$                           0.2085
WILN	$        (0.06)	-1.89%	37,100	$                                3.12

7/1/2014 PIPCO Pre-Market News

Acacia (ACTG) has three news items this morning:

- Signed a royalty bearing patent license agreement with Dialogic under their Saint Lawrence Communications subsidiary.

- Filed an 8K disclosing a settlement with ZTE under their SmartPhone Technologies LLC subsidiary.

- Filed an 8K disclosing a settlement with T-Mobile under their  Location Based Services LLC subsidiary.

Blue Calypso (BCYP) announced the launch of their MobileADvantage platform with a Fortune 100 company beta test.

Finjan (FNJN) announced that they have filed suit against Symantec as I reported last night.  The complaint alleges infringement of Finjan patents that cover endpoint, web, and network security technologies.