Vringo Loses Appeals Court Ruling in Google Patent Case

Google Inc. won its bid to overturn a $30.5 million patent-infringement verdict, a reversal that sent shares of Vringo Inc. down 72 percent.

The U.S. Court of Appeals for the Federal Circuit in Washington determined that the Vringo patents in the case were invalid, according to an opinion on the court’s website today.

Vringo, a patent licensing firm that reported $1.1 million in revenue last year, claimed that its filtering technology to determine placement of advertisements on search results was being used in Google’s AdWords and AdSense for Search products. It had won a November 2012 trial against Google and some of its customers over violations of the patents, which had belonged to defunct search-engine company Lycos.

The trial judge later ruled that Google’s modifications to AdWords didn’t adequately work around the patents. Google has agreed to cover any costs incurred by customers AOL Inc., Gannett Co., IAC/InterActiveCorp. and Target Corp.

Google argued that the patents simply combined well-known filtering methods without coming up with a new invention.

“We agree and hold that no reasonable jury could conclude otherwise,” the court said in a 2-1 decision.

Shares Fall

Vringo lost 72 percent of its stock market value today, closing at 88 cents, its lowest price since January 2012. Google was little changed, falling 0.2 percent to $573.48.

In a statement, Vringo said it was “evaluating its options with respect to the case.” The New York-based company can ask that the three-judge panel reconsider its decision, have the case heard before all active judges, or appeal to the Supreme Court.

Google, based in Mountain View, California, also denied infringing the patents and challenged the value set by the jury. Since the court invalidated the patents, those issues weren’t addressed.

“We always believed strongly in our case, and we are pleased with this decision,” Catherine Lacavera, director of intellectual property litigation at Google, said in a statement.

While the majority ruling that the patents were obvious, Circuit Judge Haldane Mayer also said they didn’t cover an actual invention, citing a June Supreme Court ruling that limited software patents when they claim to simply implement an abstract idea on a computer.

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The “claimed system is merely an Internet iteration of the basic concept of combining content and collaborative data,” Mayer said. “Moreover, the scope of the claimed invention is staggering, potentially covering a significant portion of all online advertising.”

Circuit Judge Raymond Chen, who had been the top solicitor at the U.S. Patent and Trademark Office before he was named to the bench last year, said the majority didn’t give proper deference to the jury, which had considered the same evidence before the appeals court.

Innovate/Protect Inc. bought eight Lycos patents, including the two at issue in the trial, for $3.2 million in June 2011 and sued Google and its customers three months later. Andrew Lang and Donald Kosak, inventors of the two patents, are former Lycos employees who became executives at Innovate/Protect, according to the complaint.

Vringo was a company that sold telephone ring tones before it merged with Innovate/Protect, which owned the Lycos patents. It’s since bought other patents, including those from Nokia Oyj being used in litigation against companies including Chinese phone-equipment maker ZTE Corp. and Tyco International Ltd.’s security division.

Other companies that rely on patent licensing also fell. Spherix Inc. dropped 4.7 percent; Marathon Patent Group Inc. fell 6.9 percent; Inventergy Global Inc. dropped 3.9 percent.

The case is I/P Engine Inc. v. AOL Inc., 13-1307, U.S. Court of Appeals for the Federal Circuit (Washington). The case is I/P Engine Inc. v. AOL Inc., 11cv512, U.S. District Court for the Eastern District of Virginia (Norfolk).

(Updates with closing share prices in seventh paragraph.)
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