Will Vringo's $22 Million Patent Purchase Pay Off?
By Patrick Anderson:
As reported last week, Vringo (VRNG) paid $22 million in cash in exchange for a stash of patents from Nokia. (see "Vringo Investors To Fund New Business Model"). Vringo's stated motivations for the purchase are purely driven by monetization potential, with an investor presentation identifying key licensing areas as Communication Management, Data and Signal Transmission, Mobility Management, Radio Resources Management, and Services. However, Nokia successfully negotiated licensing terms to protect its commercial interests at the possible expense of Vringo's monetization potential.First, Nokia receives a whopping 35% royalty that kicks in too early. Second, Nokia placed significant conditions on Vringo's use of "essential" patents. Third, Nokia's prior licenses may limit the licensing market for the acquired patents.
Nokia Royalty Will Delay Vringo's Profits
According to Vringo's announcement, the "purchase price for the portfolio is $22 million, plus to the extent that the gross revenue (as defined in the Patent PurchaseComplete Story »