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Vringo, Inc. (VRNG)
Q3 2012 Earnings Call
November 14, 2012; 05:00 p.m. ET
Andrew Perlman - Chief Executive Officer
Alex Berger - Chief Operating Officer
Ken Lang - President & Chief Technology Officer
Ellen Cohl - Chief Financial Officer
David Cohen - Head of Licensing, Litigation & Intellectual Property
Cliff Weinstein - Executive Vice President
Ashley Teller (Ph) - Unidentified Company
John Tinker - Maxim Group
David Cohen - Unidentified Company
Robert Douglas (ph) - Unidentified Company
Gary Markoff - Unidentified Company
John Dorf (ph) - Unidentified Company
Edward Swartz (ph) - Unidentified Company
James Sinclair (ph) - Unidentified Company
Robert Casino (ph) - Unidentified Company
Kevin Pamasali (ph) - Unidentified Company
Jonathan Arch (ph) - Unidentified Company
Peter Rousiary (ph) - Unidentified Company
Mike Huse (ph) - Unidentified Company
Thank you for joining us for today’s call, for Vringo’s third quarter 2012 earnings call and business update.
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Actual results may differ materially from those contained in or suggested by such forward-looking statements. Important factors that might cause such differences include those set forth from time-time in the company’s SEC filing, including the company’s report on Form 10-K for the year ended December 31, 2011 and other current and periodic reports the company files with the SEC.
At this time I’d like to introduce Andrew Perlman, the Chief Executive Officer of Vringo.
Good afternoon and thank you all for taking the time to join us for a discussion of our financial results of the third quarter, as well as the event subsequent to the quarter end.
With me today are Alex Berger, our Chief Operating Officer; Ken Lang, President and Chief Technology Officer; Ellen Cohl, Chief Financial Officer, David Cohen, our Head of Litigation, Licensing and Intellectual Property and Cliff Weinstein, Executive Vice President.
We are very pleased with the accomplishments in the third quarter and subsequent events in the fourth quarter. Our merger with Innovate/Protect was completed less than four months ago and we are excited by the milestones we have achieved in that short period of time.
Our balance sheet today with over $60 million in cash and zero debt is stronger than it has ever been and we expect that it will allow timely execution of our current business trend.
During the third quarter we continued our tradition of introduction under the leadership of Ken Lang and filed nine provisional patent applications, one utility patent, 12 continuations and one continuation in corresponding existing patents.
We took our first important step with regards to our telecom infrastructure portfolio we purchased for Nokia during the third quarter and filing a lawsuit in the U.K. against the U.K. subsidiary of ZTE. We also acquired subsequent to the end of the quarter a portfolio patent from quantumStream, consisting of two patents and one application, both relating to the placement of advertisement on web pages via a bidding process. Separately we received a favorable jury verdict against Google and others, which Alex will discuss in a moment.
We believe that we have created a unique and powerful business model as a company that creates, acquires and monetizes intellectual property and technology in the mobile online and computing areas. We appreciate the support that our investors have shown to-date.
We continue to see a scalable model in what our management team understands and has expertise in, mobile, online and computing. We expect to continue innovating and acquiring intellectual property and technologies in our core knowledge areas as we believe we have demonstrated that the portfolio’s acquired from Lycos, Nokia and quantumStream.
We see an excellent opportunity in the intellectual property sector, which in our opinion has become an attractive asset class commanding significant attention on investment. I would like to start on the areas of our company that have attracted the most attention recently.
I will now turn the call over to Alex Berger, our Chief Operating Officer and the Founder of Innovate/Protect, to give an update on the location.
Thank you Andrew. First I will discuss our current litigation against Google and others. As many of you know, we announced on November 6 that a jury in U.S. District Court in Norfolk, Virginia ruled in favor of Vringo’s wholly owned subsidiary, I/P Engine and its litigation against Google, AOL, IAC, Gannet and Target. We are pleased that the jury’s conclusions with respect to validity and infringement, but it’s a very significant win for us and we appreciate the significant efforts of our outside counsel at Dickstein Shapiro.
After finding the asserted claims of the 420 and 664 patents were both valid and infringed by Google, the jury found that reasonable royalty damages should be based on a running royalty and that the running royalty rate should be 3.5%. The jury also found that the total of approximately $30.5 million from Google, AOL and others if paid now in cash would reasonably compensate I/P Engine for the defendant past infringement commencing on September 15, 2011.
I/P Engine presented evidence at trial that the appropriate way to determine the incremental royalty base attributable to Google’s infringement was to calculate 20.9% of Google United States AdWords revenue, then apply a 3.5% running royalty rate to that base.