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If you are short Vringo (VRNG) (p13c)
August 2, 2015 Comments (0) Recommend This Post (4)
I have repeatedly referred to Vringo Inc. (VRNG) [Friday 7/31/2015: $0.72 +0.18 +31.51% ] as a “speculative” and/or “highly speculative” “investment” in the patent licensing industry. I am writing this blog because many people bought Vringo stock, warrants, or options, and lost money … HURT, as evidence shows, by a ZTE conceived, and implemented plan to manipulate Vringo’s stock price through multiple courses of action. If, you do not believe me … that’s okay. I am reading, and re-reading, … and re-reading, ZTE SDNY documents and exhibits because I can not believe … what I am reading, myself.
Documents submitted to the US Court, Southern District, New York, (SDNY), Case 1:14-cv-04988-LAK-FM, indicate that while major telecoms have licensed these patents previously from Nokia outside China, none have licensed within China. Vringo Inc. (VRNG) is mired in a global battle with ZTE to license its patent portfolio, a patent portfolio consisting of 500+ patents, including Standard Essential Patents (SEPs) and non-SEPS, Vringo acquired from Nokia (NOK). In this global battle, Vringo has been willing to compromise, within reason, on the unpaid licensing royalties due Nokia and Vrino, past, present, and future … and documents, submitted in evidence, subject to the Non-Disclosure Agreement willingly executed between Vringo and ZTE, refer to varying amounts as “… ZTE owing hundreds of millions …” and “$871” millions ….
As the story unfolds in SDNY, Case 1:14-cv-04988-LAK-FM, expanding Vringo breach of the NDA allegations are being supported by ZTE document production. Attempting to describe the contents of the documents produced in discovery as “revelations”, “unbelievable”, “incredulous”, or any other terminology just doesn’t seem suitable.
The gist is this, ZTE hasn’t licensed for nearly 12+ years, and now, ZTE’s objections hinge, primarily, on the gross USD amount of the accumulating liability as … too much … ( DUH! )
So ZTE conceived a plan to “force” Vringo to either accept a substantially lower amount … or to force Vringo to go away altogether.
Note: If you have PACER, you can search for and verify the documents, and excerpts noted below there, if you do not have access to Pacer, WordPress.com’s vrng24 has done an admirable job, setting up a blog to track the Vringo versus ZTE global documents in one easy to access location for reference.
Some of the documents, all in downloadable PDF format, I will be referencing:
( 1) Document 178 Filed 07/30/15 Pages 2, 3 of 6 (Main)
( 2) Document 178-3 Filed 07/30/15 Page 5 of 32 (Exhibit C)
( 3) Document 178-8 Filed 07/30/15 Page 4,5 of 22 (Exhibit H)
( 4) Document 178-10 Filed 07/30/15 Page 2, 4, 6 of 18 (Exhibit J)
Now, that stated, … to the story:
I. First from Document 178 Filed 07/30/15 Pages 2, 3 of 6 (Main)
ZTE has distributed the NDA materials … far and wide … even to Google (GOOGL, GOOG) violating the NDA terms and conditions.
“ZTE’s counsel was apparently unaware that ZTE had a team of more than 115 employees working on the Vringo litigation and asserting “countermeasures” against Vringo. These 115 employees were also given Vringo’s NDA material. Yet, nearly all of these employees wereomitted from witness interviews and document collection in a case where the central issue is improper distribution and use of NDA material. After learning of this widespread dissemination,Vringo requested that ZTE perform a robust search of these employees’ documents. ZTE’s response: it is “physically impossible” in the time remaining. So, according to ZTE, Vringo’s case must suffer because ZTE ignored its discovery obligations for more than 7 months.” … and …
” More troubling yet, ZTE apparently did not send litigation holds to prevent spoliation of documents that might show what these employees did with the NDA material they received. ZTE also never collected documents from its internal servers or databases. And based on ZTE’s email retention and newly disclosed destruction procedures, it is highly likely that evidence was destroyed. While ZTE has agreed to take some steps to partially remediate spoliation issues, ZTE still refuses to perform a robust search of its additional custodians’ files for responsive documents. Vringo respectfully requests that ZTE be ordered to remedy this situationimmediately” … and …
“After reviewing ZTE’s July 2015 production, Vringo uncovered that ZTE provided Vringo’s key NDA material – its settlement offer – not only to (1) the Shenzhen Court, and (2) the NDRC, but also to (3) Google; (Exh. B); and (4) more than 115 ZTE employees, including executives and PR staff, in, e.g., weekly reports (Exh. C) and minutes of the Vringo negotiation (Exhs. D and E).”
Interesting, Google, in a battle of its own with Vringo over infringing Vringo’s search patents, recieved NDA protected materials from ZTE. Here we need to know more, … like what Google did with the materials; and, what Google intended to do with the materials. Why would Google personnel, ethically, accept NDA marked materials? Also, interesting, Google having already asked for, and received, two extensions to file its response to Vringo’s SCotUS Grant, Vacate, and Remand (G-V-R) filing … doesn’t, hasn’t, per SCotUS, yet appear to have done so. Why not? Concerns regarding potential ZTE revelations?
II. Second, Document 178-3 Filed 07/30/15 Page 5 of 32 (Exhibit C)
This ZTE document reveals things aren’t going well for ZTE globally, boosting ZTE’s determination to “attack” Vringo ….
“[Vringo Holland-case one: evidence preservation before litigation] On May 21, Vringo reapplied to the local court for evidence preservation in the wake of the application to the Dutch customs for seizing our company’s goods, the bailiffs went to the office of Dutch sub-company to conduct evidence preservation on that very day; since the Dutch sub-company office failed to provide relevant evidences as required by the bailiffs, it’s punished for a fine of 50,000 euros, currently Vringo haven’t applied for execution temporarily, our company has arranged lawyer to institute legal proceedings.On May 22, the legal service department and the local lawyers continued to coordinate with the court to apply to suspend relative evidence preservation before litigation; the court didn’t send bailiffs to collect evidence again on May 22 after receiving our appeal.On may 23, the court rejected our petition for suspension of evidence preservation before litigation without prior notice and reassigned bailiffs to investigate once again, and insisted to obtainrelative sales information and expressly ordered ZIE China (import and export records and offshore accounts) to provide necessary technical support to meet the court’s evidence preservationrequirement, otherwise a penalty of max. 1 million euros will be faced. Through emergent coordination by the parties and with the assistance of local lawyers and local sales colleague, the bailiffs conducted evidence preservation, however, as the information quantity is too much, the bailiffs didn’t obtain the expected information. The bailiff requested our company to provide correspondingmaterials by two times respectively on Monday (May 26) and on Wednesday (May 28) since they didn’t obtain the expected information.”
… and …
“(Vringo Holland-case two: goods seizure]I. Five containers out of the involved LIE products (7 containers) have been seized formally attributable to patent infringement, the other two containers are yet to be investigated currently, and the result is not optimistic;2. The involved UMTS product (1 container) has been formally seized on April 29 by Dutch customs due to involvement with IPR, Vringo has applied for civil seizure request, so those products would not be released temporarily;3. Progress of the alternative plans of the other lines of German projects: according to the analysis, the risk of passing through Greece or Poland is pretty low, the logistics and German office arecommunicating for solid plans with the sub-company. Presently, license has been issued for the Greek VAT accounts.As for the seized LTE products, currently the evidence materials and argument for suit of no tort have been prepared, it’s expected that a lawsuit would be filed to Dutch court in this week so as toask the court to order Holland to release the seized products; as for the seized UMTS products, non-infringement test report will be completed and submitted to the court ASAP to request the courtto release this product.”
III. Document 178-8 Filed 07/30/15 Page 4 and 5 of 22 (Exhibit H)
This explains why ZTE is hurting … no oportunity to cross license, lowering licensing fees thru offsetting licenses.
“Cross licensing is not required with overcharged licensing fees. Since Vringo does not engage in management of any entity product, the ordinary equal value exchange of patent cross licensing fails to curb it.After starting an undeclared war, Vringo published the sky-high rate of license via the British court. Based on US$ 2.5 for per smart phone and US$ 1.2 for accessory module for cell phone per cell phone,charge for side device of the system. is collected at 1.5% of the income. After …”
… and … realization is clearly, seemingly, beginning to sink in at ZTE:
“The rather extensive coverage of patents has great subsequent hidden troubles. The standard and required patent portfolio that Vringo claims covers a good deal of realms of products and technologies including systems, terminals and core nets, The effective range of patents cover main market areas globally as Europe, the United States, Australia, India, Brazil and China, In case of success of encircling and surprising ZTE, it will necessarily start wars in other counterparts in ICT sector by taking advantage of the victory, resulting in severely threatening overseas sales of terminals of GSM/UMTS/LTE including Lenovo, Coolpad, TCL, Xiaomi, Vivo and OPPO and sales of equipment of systems and corenets by manufacturers of system equipment in China as TD, Potevio and FiberHome. In fact, it has become a great obstinate disease and hidden trouble to healthy and orderly development of ICT industry
So, from the above ZTE quote, as my homework suggested, ZTE was indeed, just the tip of the iceberg. For Vringo stockholders, the party is just starting … And, ZTE had more to say in Document 178-8:
“So far, to Vringo’s behaviors of abusive intellectualproperty rights, ZTE has taken the following countermeasures globally:(1) Filed invalid declaration and claims or invalid litigation for patents of Vringo relating to lawsuits in the countries and family patents of all Chinese patents in Vringo’s patent portfolio (See details of Appendix III).(2) In EU, ZTE has submitted anti-monopoly complaint to the European Commission on April 10,2014.The anti-monopoly complaint was filed on the grounds of’Vringo’s abusive market dominance in violation of Article 102 ofTFEU. As the holder of standard patents, Vringo owns dominance of each marketrelating to standard and required patent. However, it abuses market dominance in violation of FRAND obligations that the holder of standard and required patent should assume.(3) In China, in addition to submitting relevant anti-monopoly compliant to the Price supervision and inspection and Anti Monopoly Bureau of the National Development and Reform Commission, ZTE in the meantime, filed anti-monopoly litigation to Shenzhen Intermediate People’s Court on the grounds of abusive market dominance, requiring Vringo’s ceasing of civil tort of monopoly and claiming compensation for corresponding loss.
As a representative of domestic ICT operating businesses, ZTE earnestly requests Patent Reexamination Board of State Intellectual Property Office to keep a foothold in protecting”
IV. Document 178-10 Filed 07/30/15 Page 2, 4, and 6 of 18 (Exhibit J)
ZTE titled this “Vringo Case Media Counterattack Plan Draft”. I know I keep telling readers that fundamentals, technicals, sentiment, and conference calls matter … This document examines Vringo in really good detail, but not from the prospect of investing, but from the perspective of how to do the most damage to undermine Vringo’s stock price. The document goes into detail on Vringo’s Beta. It also examines the ratio bewteen Institutional and non-institutional stockholders, namely, us. This plan of attack, IMHO, was to bash and berate Vringo to inflict emotional cause for concern in ** each of us ** to get us to bail, and therein, sellers would weaken Vringo’s pps, and that would conceivable beget more selling.
“Vringo is a listed American patent troll company. Since initiating litigation against our company in England from August 2012, Vringo have, thus far, sued our company in 8 countries; among which there are three countries where there are bans, and 4 where market sales have been affected; this is the IPR lawsuit that has the biggest threat to our company thus far. The objective ofVringo in initiating these lawsuits is to force and threaten our company into accepting the patent licensing price of 817 million USD, the patents involved are the fields of wireless and terminals.”
… and …
“Because Vringo is a listed American company, by studying the relationship between Vringo’s patent lawsuits and stock price, we have discovered (for more detailed information please see attachment 1) that, at present, ZTE places quite a bit of reliance on the degree of exposure from the ZTE, AOL, and Asus lawsuits.Particularly, after the continuous release of positive patent litigation information in 2013, there was gradual small increases in its overall stock price; from a certain perspective, it can be said that the capital markets, regarding the news on these lawsuits and whether or not a ban will be obtained in India, have a certain level of optimism. It will not necessarily pull up suddenly as usual like 2012, and this also leaves room for shorting.”
… and … ZTE wasn’t done:
“(III) Public relations company to attack Vringo’s stock priceAccording the needs of the current progress of our litigation or the progress of a license with Vringo,contact American and European PR resources, and, through deeper analysis ofVringo’s patent lawsuits, broadcast media reports detrimental to Vringo, actively hit Vringo until its docile, best ifthe price ofK stocks could be attacked.Responsible person: Branding Department Yilan Zhou
(IV) Expert commentaryThrough interpretation of the lawsuits from a legal perspective, gain the industry’s attention. At the sametime, use the perspective of people in the industry to lower securities experts’ perspective on Vringo. Currently, we are considering asking our company’s cooperating lawyers in America and Europe to find a third party expert to provide commentary when the time comes, what is to be said exactly will be determined according to the demands of the actual situation,Responsible person: IPR department Chunlei Ke, Yi Hu
(V) Find allies to jointly attack Vringo’s stock priceNote: Related documents must be promptly provided to cooperating partnersResponsible person: IPR department Yi Hu”
… and … Document 178-10 Filed 07/30/15 Page 6 of 18
This is where you’ll find a detailed Vringo analysis:
“If we assume Vringo to be a listed NPE company, there is a considerable distance between it and AcaicaResearch; Vringo’s total stock valuation is 268 million USD while Acaica’s is 742 million USD and pays a dividend of 0.12 USD per share; looking at the institutional holding ratio, Acaica’s institutional holding ratio is 93%, while Vringo’s is only 20%. From a certain perspective this means that institutional views of VI’ in go’s business model and outlook is not necessarily good; with the majority of its shares held by the public, this directly affects the r) index (stock price as compared to fluctuations in the overall market), I is the threshold for ~, if it is over I, it means that the stock price’s fluctuations are larger than the overall market, that is to say, Vringo’s stock price is more susceptible to fluctuations than the NASDQ index, while Acaica’s B index is only 0.75, which means that its stock price is relatively stable; this is related to its high institutional holding ratio and the market’s positive outlook on its business model. In light of the above analysis, Vringo has a relatively low institutional holding ratio and its stock price is more susceptible to fluctuations than the market, as such, this provides room to work to decrease their stock price, particularly as their institutional holding ratio does not give them a chance to placate the market when it is falling.
… There is more … way more than I can post here. Even if you are not invested in Vringo, this saga has the potential to undermine ANY and every USA company’s stock … financial warefare at its ugliest, because even when you, and I, are doing your/our homework, it won’t disclose, or reveal the deliberate intent of others, like ZTE did, to use your emotions against you, and undermine your investments.
If this isn’t il;legal, and, IMHO, I believe it is … it very well should be.
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(2) Investing and Trading
Have a great day investing, or trading …