On November 6th the jury in patent lawsuit Vringo v Google issued its verdict—awarding $30 million to Vringo on the basis that Google infringed two old Lycos patents that Vringo purchased in 2011. The jury also awarded a running royalty and recommended it be set to 3.5% of the 20% profit increase Google saw from using the patented technology (US District Judge Raymond Jackson must still determine the exact running royalty amount). These patents expire in 2016, so this verdict will likely result in a rather large payday for Vringo.
While the $30 million verdict on past revenue is a small fraction of the $493 million demand Vringo was seeking, the running royalty is nothing to be scoffed at. Vringo successfully argued that Google saw a 20% increase in revenue from implementing its SmartAdServingSystem or “SmartASS” which utilizes technology patented by Lycos and owned by Vringo. They further convinced the jury that their patents entitled them to a 3.5% share of that 20% increase—no small chunk of change considering the huge amount of revenue Google Adwords generates. Some experts believe this will be worth about $125 million a year through the patent’s expiration in 2016.
This verdict is particularly fascinating because it offers us insight into how a company like Vringo that is essentially a “patent troll” makes an argument in court that it deserves money from a well-known brand like Google. Vringo’s lawyers had a three-pronged strategy. First, they invoked the constitution to explain why we have patents and their importance. Next, they showed evidence that their patents originated before Google began using the technology, along with internal Google documents showing the increase in revenue upon adopting SmartASS. Finally, they informed the jury that in civil cases a preponderance of evidence (51% vs 49%) is all that is necessary for a favorable ruling. Google’s lawyers made a strong argument that their engineers arrived at the technology independently, but the ‘preponderance of evidence’ argument and the relatively small piece of the pie Vringo requested were enough for the jury to ultimately side with the plaintiff.
This result is very welcome news for Vringo, whose business is almost entirely based upon patents (excepting a relatively unsuccessful video ringtone business). Its stock price has been closely tied to this trial as a result of this reliance on patents, and while the verdict is smaller than many investors were hoping for it is hardly a defeat for Vringo. This news is likely to further embolden other patent trolls to go after ever larger targets in an effort to monetize patents, but defendants in these lawsuits may also learn from the strategy Vringo’s lawyers employed in order to better defend against it.