Thanks again to VRNG24 posts on Doc283. Disclosure I am long VRNG.
Looks like ZTE not only leaked the pricing information to Google but also to Huwei and other competitors of ZTE in a coordinated effort to damage the stock price and patent portfolio value / reputation of VRNG. More importantly ZTE had requested feedback on the leaked documents from multiple parties and asked for written comments in counter complaints against VRNG to the Chinese Gov and ... unbelievably receieved it from Google and Huwei and other anti-VRNG actors.
From a legal perspective I think VRNG are trying to show irreparable harm was caused in the NDA case and if they can prove that then ZTE will be forced to pay or they are done doing business in the USA. Watch for more lawsuits to be filed in relation to this. Google's, Ms. Wang should be immediately dismissed for her behavior in this issue, whatever happened to do no evil Google?
Magnetic induction technology and wireless conductive are very different in terms of efficiency and load. The flicharge website explains the differences on the technology page of their website.
Try to keep your head up mate long way to go yet but I agree that justice was not served in the Google case and the overall process to determine obviousness should be left with the USPTO and not a CAFC court. Reform is needed in general..
Just re-read mu first post and wanted to clarify ... I do not mean that each licensee will pay the same rate, it is usually negotiated between .5 - 2% so those that are WILLING participants and have larger volumes usually get a lower negotiated rate. As of now NO ONE is a willing participate given ZTE stance but that could change quickly if ZTE loose.
This mornings conference call was interesting and generally positive. I won't comment on the conductive wireless business other than it is obviously a growth area and the question on the call about wireless recharging of larger objects like power tools and cars was cool - it will work just need the specification of each battery etc. I love the idea of furniture recharging too .... but back to the business at hand - the ZTE lawsuits....
ON ZTE ... for those that were listening carefully management stated that they have identified and contacted multiple manufacturers who they believe have violated the same standard patents as ZTE. The comment from Pearlman (paraphrasing) .. we believe that many parties in China there are watching the ZTE case, which make sense to us, and we offer FRAND terms as these are standard essential patents.
If ZTE competitors are smart they will cut deals with VRNG now (before ZTE ends) becuase it will give them a competitive advantage over ZTE where ZTE will end up paying FRAND plus whatever damages. While ZTE's competitors may not want to legally license they also must weigh 1) the consequences of not licensing (maybe same outcome as ZTE) and 2) becuase the license terms are not discriminatory (unlike ZTE if they loose) they know they will not pay any more or less than the next competitor that requires a license, however ZTE will pay more.
VRNG stated that even today they still remain open to ZTE on FRAND terms but as the lawsuits continue they that will obviously change.
oliver, the odds of SCOTUS even considering a patent case were less than 2%. But why anyone would sell VRNG now, without waiting to see how ZTE plays out, is just foolish or they should not have invested in high risk equities to begin with. Investing in NPE's is akin to gambling on horses - you do your research on the patents, financial position, PPS, management and the legal teams track record in litigation and play those cards as the court process proceeds. The odds of the CAFC overrule were about 1 in 10 but the one came up - it happens - tough luck but not proper justice we (and Chen) all know that.
The more interesting question right now is why have the shorts not covered yet with 11.4M short? The risk \ reward makes no sense to short right now knowing the status of ZTE in SDNY. If a Judge stops ZTE doing business in the USA because of their behavior, ZTE will immediately enter settlement discussions and we know the number VRNG want. They could settle for half that and anyone short would still be wiped out right now. Gains and losses on paper are just that, you have to sell eventually but investing in NPE's is not really investing your gambling ... and gambling is fun but only if you can afford to loose.
I agree that it will speed things up (and it's also financially much better for VRNG) but it is more likely ZTE chose a judge over jury because they risk higher damages at a jury trial. There is really no other reason.
VRNG business model (as an NPE) and ability to license and negotiate in good faith with ZTE was definitely hurt by ZTE actions (maybe SEC violations \ collusion with 3rd parties to hurt VRNG - maybe even the DOJ on that one if they are investigated).
HOWEVER the judge will punish ZTE appropriately in terms of their dealing with VRNG on this FRAND DEAL NLY plus some punitive damages and fees etc. VRNG says ZTE has caused irreparable harm to the business model but I think the judge will push back on that .... Why?
The standards based patents in question in this lawsuit use well known FRAND rates that are ALREADY KNOWN BY INDUSTRY to be .5 - 2.5% of revenue assigned to the product that use the patents (and that can also can be argued in term of sum of parts vs the whole i.e VHC case with Apple etc).
VRNG can still negotiate FRAND with other third parties, ZTE does not prohibit them doing that adn VRNG SHOULD BE doing that regardless of lawsuits - that what NPE's do. ZTE may end up being the first domino to fall for VRNG because 1) they won in court with solid patents - they have the ability to litigate well, 2) have access to financing based on future damages \ IP, 3) public markets will respond to ZTE so the PPS will normalize as will the valuation model for tyopcial NPE's with great patent portfolios and 4) VRNG can start negotiating in good faith with other parties BUT STILL BASED ON FRAND for standard based patents.
FRAND is the key for ZTE. We know the global settlement offer was $800 million if VRNG were smart they would cut better deals to ZTE competitors in a show of good faith because the genie is out already.
In addition it looks like ZTE planned to short the stock as part of its overall strategy to force VRNG into a lower settlement offer....not an acutal smoking gun but it may not matter to Kaplan.
Attachment 1 (Page 5): (emphasis added)
"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".
Thanks again to VRNG24. Disclosure I am long VRNG.
We no longer have to guess what the "big" global licensing number was because it is now disclosed in Exhibit J.
Exhibit J (Page1). "The objective of Vringo 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 field of wireless and terminals".
I agree, if you follow their ZTE logic (only in terms of Guo) you do end up close to the same place as VRNG motions in August.
It's like telling a judge "I did rob the bank, you are right your honor. But listen .... I gave back most of the money after they caught me (I think) and from this point on I promise to co-operate with the bank I stole money from in prosecuting myself but your honor I may need to spend a little more money until October 15th (just to get my affairs in order). However I promise not to use the same money I stole or at least as far as my countries laws are concerned ... we have done nothing wrong ... we are the good guys!!! .... why are you smiling at me your honor!!!!!!
Guys, even a CAFC or rule 37B argument is non-sensical in this case and Kaplan can shut down ZTE's business while we wait or at least make it very painful for them to continue. It just makes no sense .... this is a stupid FRAND license deal ... if they are not careful it will turn into a buyout and very damage their ability to business in the USA.
Actually there are a lot of really smart Chinese engineers (many working in the valley) - I agree that none of them work in ZTE's legal department!
I do agree with you, many Chinese Corporations do not respect the United States IP as compared to the Aussies \ Western Europeans \ India. However we see our own corporations (i.e Apple, Google, IBM, Intel) not respecting the intellectual property of our own small inventors. Not because they do not respect IP (they are the biggest patent filers of all of us) but worse - because they know they can win a resources war.
This approach is unethical and morally suspect but nothing changes that legal strategy because it is still cost effective until something big happens to send a message that using this strategy could backfire - especially if they "knowingly infringed" on real patents - lets all hope Kaplan and SCOTUS decide to send that message. Overall it makes you really think about the legal professions and the politicians born from that cauldron of deceitfulness.
Disagree ... ZTE response is up so you can read it if full yourself, nothing misleading about my post and I disclosed that I am long the stock.
Listen, I could have been worse on ZTE here are some direct excerpts from ZTE document (this is NOT A VRNG filing this is from ZTE attorneys) .... so if you don't think ZTE are admitting their mistakes and looking for mercy based on the interpretation of Rule 37b then I really don't know what to tell you but I would not be holding short way too risky now ...
"ZTE has been unable to comply with the Court's orders regarding the deposition of Guo
Xiaoming ("Mr. Guo") and the production of documents from more than 100 ZTE custodians".
"The Court has already determined that ZTE breached the NDA by attaching the 40-page
presentation to an anti-monopoly complaint filed by ZTE in Shenzhen, China in February 2014."
"In addition, several other disclosures of NDA-protected information have taken place.
The disclosures, however, have not been identical. In some instances, the entire 40-page
presentation has been disclosed. This happened when ZTE filed its anti-monopoly complaint in Shenzhen and also when ZTE filed a complaint with China's National Development and Reform Commission in April 2014. In others, only the opening settlement offer from the 40-page presentation—a dollar amount—was disclosed. This number was disclosed to Margaret Wang of GOOGLE when ZTE forwarded a draft of ZTE's NDRC complaint to her in April 2014." -- I love that one!!!!.
"The number also was included in internal reports on the Vringo dispute distributed within ZTE, one of which was forwarded to Mark Lee of Edelman, a PR firm used by ZTE, in August 2014. " -- The PR Firm - pricless !!!!
ZTE have on multiple occasion asserted that they are the reasonable ones and it is VRNG who are not reasonable with their outrageous rack rate high pricing. While we do not know the big number we do know this from the documents and especially Exhibit B....
ZTE Argument .....
" Vringo has not established that testimony from Mr. Guo would be central to any claim or defense in either the NDA case or the FRAND case.2 There is evidence that Mr. Guo gave his approval to certain legal and public relations countermeasures against Vringo (countering the litigation and public relations measures taken by Vringo). (See Ex. B.) These countermeasures, however, were developed and implemented by subordinate executives—including Shen Jianfeng, Shen Nan and Hu Yi—who have appeared for depositions in New York. The countermeasures were also the subject of a corporate representative deposition pursuant to Rule 30(b)(6). (See Ex. C.) Vringo offers no reason to believe that information about these countermeasures—let alone
"case dispositive" information—is missing from the case because Mr. Guo has not appeared for a deposition.
OK, they are still downplaying Mr. Guo but the reference to Exhibit B is where it gets interesting and I hope VRNG will use this in damages...
EXHIBIT B Excerpt from ZTE emails ....
" Beginning of 2013, Vringo, through their English lawyer, made an application to the English court to make a
judgment authorizing them to make an offer to our company for a global license in accordance with the payment terms of$2.5 USD per smart phone; $1.2 USD per sub-module; and 1.5% of revenue for systems".
Typical FRAND rate are from .5% to 1.5% on standards based systems. The per device charges if you use the sum of the parts calculation on a $300 smart phone device come in right at the same levels.5% ~1.25%. The AXON is $450 so less there. Seems close enough to FRAND rates - wonder if Kaplan will agree?
Once again thanks to VRNG24 for the all the great info. Disclosure I am long VRNG.
The ZTE response is in on PACER and predictably they have asked the court for mercy. They admit that they are in breach of the courts orders and violated the terms of the NDA with disclosure to multiple 3rd parties. They propose their own low ball sanctions.
ZTE main argument is that VRNG seeks sanctions that are not in line with the damages they caused (under rule 37b). They propose paying for all courts costs, attorneys fees and precluding themselves from introducing evidence during the future trial related to the breach.
It is a poor argument but really the only one left but rule 37 is complex and gives a lot of discretion to the district court as long as there is a claim and the evidence (facts) supports the claim. Unfortunately (for ZTE) that bullet left the gun when they refused to produce Guo in SDNY. Again, in this document, they try to make him less relevant with the argument that he was so senior he had no idea what was really going on. The fact (his own emails) dispute this especially with the Chinese government suit. Kaplan will never buy it and I think he basically told this to ZTE when he warned them what may happen if Guo violates his order again - which ZTE then did.
ZTE ... "We respectfully submit, however, that the sanctions proposed by Vringo—default judgment in the
NDA case as well as dismissal and default judgment in the FRAND case—would not be appropriate"
Kaplan ... "VRNG already told us they would seek litigation ending sanctions, what did u expect"
ZTE ... "But we promise to produce everything they need now, give us till Oct 15th, we have new lawyers we are good guys!!"
Kaplan ... "I told you twice to produce Guo?"
ZTE ... "But he does not want to come and firing him will not help!!!!"
Kaplan ... "Have you tried?"
ZTE ... "Well no"
Kaplan ... "onto the damages phase, VRNG do you have anything to share"
VRNG ... "Lets talk FRAND"
By agreement I mean, ZTE know they lost the case and will take their chances with Kaplan (not agreement on licensing) - did not mean to mislead, apologies.
I am not sure about Worldwide (there are many countries we are not in yet). There are references to the English settlement discussed in the Exhibits but they all failed on unit price.
Obviously VRNG would want to get a global license done but that is very difficult and maybe not even practical (at this time but that is still the goal). The SDNY and NDA will definitely give them more leverage for a licensing framework based on one because they can make a valid argument - ZTE has leaked the rack rates to Google and other etc so now they will be forced into a lessor negotiating position with future licensees.
Damages phase will come next.