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The perils of being an IP investor

Yesterday, Daniel Ravicher wrote an article for the investment website Seeking Alpha entitled “Google Request To Postpone Vringo Ongoing Royalty Motion Ignored”. The piece, which was sent out to over 5,500 people, focused on a patent dispute between Vringo and Google, which saw a jury find in favour of the NPE last November and award it $31 million in damages. Since them, the two parties have been engaged in various manoeuvres, one of which is Google’s request for the postponement of a decision on Vringo’s petition for the grant of a royalty to reflect on-going infringement by Google. Ravicher detailed the timeline of events and then wrote:

… if the Judge wanted to grant Google's motion to postpone consideration of Vringo's motion for post-judgment royalties, I strongly believe he would have already done so by now. The fact that he hasn't, signals to me that he won't …

Of course, he could grant Google's postponement request at any time, he could decide later to have a hearing on the post-judgment royalty issue, he could decide to hold it in abeyance until the other motions are decided, he could deny Vringo's request altogether, etc. It's his court and he can do what he pleases when he pleases. The point of this article is to merely say that it is becoming increasingly clear to me that Google's attempt to delay consideration of Vringo's motion for post-judgment royalties has been unsuccessful and that this is good news for Vringo.

A few hours later, Ravicher wrote another piece for Seeking Alpha. This one was entitled: “Critical Update On Google Request To Postpone Vringo Ongoing Royalty Motion”. In it, he wrote: “Within an hour or two after Seeking Alpha published my article, the Judge issued an order granting Google's postponement motion.” He went on: “Thus, obviously my conclusion from my article earlier today was wrong.” He finished off with these frank words: “There's no sugar coating it, I was wrong. Isn't the first time, and won't be the last time, either.”

Ravicher, whose columns are always worth reading, is absolutely up front with his readers. They know he is long on Vringo stock, he is always clear that he could well be proved wrong in his assessments, he never seeks to pull the wool over anyone’s eyes. He is also a patent attorney who understands the litigation process, IP valuation and deal dynamics. As such, he appreciates fully the risks investors take when dabbling in IP-based stock and can see beyond short-term headlines to longer term outlooks. That, I would suggest, makes him the exception rather than the rule among investors in IP.

But I would also suggest that people who dabble in IP without the knowledge that people such as Ravicher have are taking a major gamble with their money, especially if they are relying on the kind of stuff that people like Ravicher write. Not because anyone is trying to deceive them - clearly the very opposite is the case – but because they do not have the context within which to make a proper assessment of what they are being told. It’s this, at least in part, which may explain why so many IP-based stocks are so volatile – investors really don’t understand what it is they are investing in and so they react to one off events, often in dramatic style. That’s why we have seen Vringo’s stock soar over recent months and that’s why it would not be any kind of surprise to see it fall back down again just as quickly should there be a bad news announcement.

Right now you need nerves of steel to put significant cash into IP-based stock and you certainly need an eye to the long term. It’s a very volatile place to be. Also yesterday, Ravicher wrote another piece entitled “VirnetX Highly Likely To Get Apple Injunction”. I wonder. 


Joff Wild
IAM Magazine
24 January 2013

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Patents, IP business, IP finance, IP valuation

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