Investing in the Patent Space is Littered with Winners and Losers

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Earlier this month,VirnetX (VHC) made news after the stock fell 45% following a Texas court ruling that sent two pending cases against Apple (AAPL) back and claimed they needed to be filed separately. Many analysts on Wall Street doubted if VHC could collect again from the tech giant. Yes, I said again.

You see,VirnetX won a patent infringement case against Apple back in 2012. The company was awarded $368 million for those violations and after the money came through the share price skyrocketed to $35.25. The second case, referenced above, are patent violations from Apple’s VPN-on-Demand and the redesigned VOD in iOS 7 and 8, the redesigned FaceTime in iOS 7 and 8 and OS X 10.9 and 10.10 and iMessage. VHC is seeking $625 million from Apple, which represents more than $11 per share and at of the time of writing the stock was trading at $2.67.

Investors and analysts now mostly concur that VHC will have to accept a smaller settlement from Apple, but this case is taking place in Texas and many consider the court system much more sympathetic in the Lone Star State for patent holders. And, the bottom line is that if VirnetX receives another large settlement, the shares will soar and investors will once again be thanking their lucky stars for their patience and fortitude through the volatility.

Furthermore, the Supreme Court lowered the threshold that patent holders needed to meet in order to receive punitive damages in patent infringement cases. The changes were never more apparent than in the Parkervision Inc. (PRKR) v Samsung case. In the case, Parkervision sued over the Korean tech company’s use of their patented radio–frequency technology. The suit was filed in May 2014 and in late July this year, Samsung agreed to patent and licensing terms with Parkervision. The news sent the stock soaring by 120%. Parkervision also has a similar case with Apple and many believe that the licensing deal struck with Samsung was the bell tolling for Apple’s case as well.

Both the VirnetX case and the Parkervision case set the table for a company we have written about often Voip-Pal, Inc. (VPLM), a (voice over internet protocol) technology company that made breakthroughs in the field in the early 2000s. The company developed technology that allows calls and data to move between networks seamlessly. VOIP-Pal has filed a patent infringement case against Apple (AAPL) due to the latter’s unlicensed use of Voip-Pal’s SMS (text) and voice communication technlogy. A similar patent infringement lawsuit was also filed against Verizon (VZ) and AT&T (T).

Cases like VirnetX and Parkervision show the upside for an investor to stay patient and let the lawsuit unfold. As stated in a previous article, microcap companies are often at the forefront of new or disruptive technologies and must defend themselves against larger companies incorporating these technologies into their products and services. Often, larger companies quickly implement newly developed technologies without paying licensing fees and then battle with the smaller companies in court. If you are investing in the patent space understand the volatility that comes with it, and the long bumpy road these stock often travel. Understand also the rewards are vast and as my mentor trading teacher told me years ago...success in this industry is an acute observation of the risks versus the rewards. No truer words were ever spoken

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