U.S. District Judge Raymond A. Jackson crushed Vringo (VRNG) shares earlier today by ruling the company cannot collect damages for the six years prior to the lawsuit's filing last year. The stock is down 35.75% on the news.
What this appears to mean is that even if the jury delivers a guilty verdict and awards VRNG all sorts of money, they can only collect future royalties.
Jackson says that the suing party waited too long since Google (GOOG) made the patent technology available in 2005. It's the law of "Laches." In a nutshell, it means the suing party waited to be in a better position before making a claim; in this case, perhaps waiting for Google's revenue to climb enough to seek spectacular damages.
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The judge believes the case will be wrapped up tomorrow, and we guess that VRNG will appeal the judge's ruling. Just a guess as we are not legal eagles.
The way it reads to us, VRNG could still walk away with a plentiful haul, as long as the jury rules in VRNG's favor. They could receive royalties on close to $65 billion in estimated North American Google revenue through 2016. With a 0.5% royalty rate, the total figure could still reach $320 millionish. Again, we aren't lawyers and it's our interpretation of what is available in the press. We could be way off and depends entirely on the jury's verdict.
It's precisely because of the risky nature of these patent lawsuits that we suggested rolling out of the stock into options.