XWELL Inc (XWEL) 2012 Q4 法說會逐字稿

Thank you for joining us for today's conference call for Vringo's fourth-quarter and year-end 2012 earnings call and business update. Before I turn the call over to the Company, we need to advise you of the following -- comments made on today's call may contain forward-looking statements within the meaning of the Private Securities Litigation Reform Act of 1995. These forward-looking statements are based on current assumptions and opinions and involve a variety of known and unknown risks and uncertainties. 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 to time in the Company's SEC filings, including the Company's report on Form 10-K for the year ended December 31, 2012, 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 for the fourth quarter and year end 2012, as well as the events subsequent to the year end. With me today are Alex Berger, our Chief Operating Officer; Ken Lang, President and CTO; Ellen Cohl, Chief Financial Officer; David Cohen, Head of Litigation, Licensing, and Intellectual Property; and Cliff Weinstein, Executive Vice President.

We are very pleased with the accomplishments of 2012 and subsequent events in the first quarter of 2013. We look forward to building value in the remainder of the year. Over the next few minutes, I would like to provide an overview, beginning with the highlights of 2012, subsequent events, and our insight and business outlook for this year.

2012 was a transformational year for Vringo. Our merger with Innovate/Protect was completed on July 19, 2012, which makes the newly combined Company approximately eight months old. We are pleased with our accomplishments during this brief period of time.

Shortly following the completion of the merger, we acquired over 500 patents and applications from Nokia relating to telecom infrastructure. We view this technology as being fundamental to the core of wireless networks that we use in our daily lives to make mobile calls, watch videos, surf the Internet, text, and email. The portfolio also contains patents covering mobile devices such as handsets, networked gaming, and ticketing.

Beginning in October of last year, we took initial steps to begin monetizing this portfolio and filed three lawsuits against ZTE Corporation in the fourth quarter of 2012. David Cohen will discuss these efforts in more detail shortly, but I can speak for our entire management team and say that we are excited and confident in the strength and potential of these assets.

Last year we raised capital through a small and select group of investors. These investors provided the capital needed to acquire the telecom infrastructure portfolio and to actively begin monetizing the patents. This cash provides the Company with a strong balance sheet and lengthy runway to accomplish our business goals. As of December 31, we had $57 million in cash, and as of the close of business today, we currently have approximately $54 million in cash, and we remain debt free.

On November 6 of last year, a jury in the Eastern District of Virginia found our 420 and 664 patents related to Internet search technology to be infringed by Google, Google's advertising engine known as AdWords. The jury also upheld the validity of these patents. This resulted in a jury award of $30.5 million for past damages and a running royalty of 3.5%. We are currently in the post-trial phase, which Alex Berger, our COO, will discuss more in detail shortly.

Turning now to first-quarter events, right after the new year, we announced the addition of Ashley Keller to our Board of Directors. Ashley is the founding partner of Gerchen Keller Capital, which specializes in litigation finance. Prior to founding Gerchen Keller, he was an analyst at Alyeska Capital, a multi-billion-dollar hedge fund based in Chicago.

Ashley is a former partner at the law firm Bartlit Beck, where he handled trial and appellate matters involving multi-billion-dollar patent cases and contractual disputes. Earlier, Ashley clerked for Justice Anthony Kennedy at the Supreme Court and Judge Richard Posner. Ashley graduated magnum cum laude from Harvard University, earned a master's of business administration with high honors from the University of Chicago, and has a law degree with the highest honors from the University of Chicago Law School, where he graduated first in his class. Ashley joins Don Stout on Vringo's intellectual property committee.

Jason Charkow has recently joined us as in-house intellectual property counsel. Jason came from the global law firm Winston & Strawn and has made an immediate impact reviewing and generating ideas on our current assets as well as opportunities we are seeing in the marketplace. Jason's years of community experience in telecommunications, patent litigation, as well as patent prosecution, brings additional expertise and relationships to the Vringo team.

These key additions to our Board and management will enable Vringo to continue executing on its plan to create, acquire, and monetize intellectual property assets through licensing and litigation. As many of you know, we operate in a very complex space, and recruiting top talent to our Board and management team enables us to potentially create value and deliver positive news to our shareholders. We plan to continue doing so in 2013.

In January, we filed a lawsuit against Microsoft in an effort to continue monetizing the Lycos portfolio. The lawsuit against Microsoft alleges that its search engine, Bing, infringes on our 420 and 664 patents, the same two patents we asserted in the Google litigation. We will keep the market informed of developments and important dates for this case.

With respect to the ZTE lawsuit in Germany, on February 21 we announced that we extended the lawsuit by adding an additional patent to the complaint. Originally the trial was scheduled on September 24. The judge has since consolidated both patents into one trial and set the date for October 15 of this year. We believe this is favorable because it allows for a more efficient and more timely resolution of our claims. The timeline has been shortened drastically by combining both patents into the trial.

Most recently we announced a partnership with Virginia Tech Intellectual Properties. Through this partnership, Virginia Tech IP has provided exclusive commercial rights to patented wireless technology that will enable Vringo to conduct related research and development and secure future licensing rights. We are particularly excited about this agreement and the potential of this technology, which Ken Lang will discuss in further detail.

This partnership is another step in achieving Vringo's goal to partner with world-class academic institutions, inventors, and corporations to create new technology and innovation. We feel that we have made significant progress as a company since the completion of the merger with Innovate/Protect. While we have accomplished a great deal in 2012, which resulted in our share price appreciating over 190%, we recognize this is only the beginning. We appreciate the support that we've received from our shareholders, and we are working harder than ever to build the business.

I'll now turn the call over to Alex Berger, Vringo's Chief Operating Officer and the founder of Innovate/Protect, to give an update on our litigation with Google.

Thank you, Andrew. We are in the post-trial phase of our litigation with Google. This current period is not a delay, but it is a standard period in which parties are given the opportunity to file post-trial motions, which is common in all litigations.

Many investors have expressed concern about the timing of the forthcoming rulings. While we appreciate the concern, there are complex legal issues involved, and the timing involved here is nothing out of the ordinary. We are actively working with our counsel at Dickstein Shapiro to keep apprised of developments as they occur.

I will now give a detailed account of the trial, starting from the jury verdict, for those people on the call who may be new to the Company. I will then explain where we stand today.

On November 6, 2012, a jury in Norfolk, Virginia, ruled unanimously in favor of our wholly owned subsidiary, I/P Engine. The jury found that all the defendants infringed all of the asserted claims for the two patents we asserted. The jury also upheld the validity of those patents and awarded damages against the defendants based on a running royalty, which it determined to be 3.5%. The jury also calculated the defendant's past damages to be $30.5 million.

On November 20, the clerk entered the court's final judgment. Since then, both sides have filed post-trial motions with the court. We filed a motion requesting that the court order a new trial solely on the dollar amount of past damages. Given the evidence in that case and factoring in the Laches decision, we believe an award of approximately $120 million is the correct damages calculation. The jury, however, inexplicably deviated from the evidence for its damages calculation of $30.5 million.

Because the jury's verdict on damages is, in our opinion, unsupported by the clear weight of the evidence, we believe a new trial is required solely on the amount of past damages. A new trial (technical difficulty) issue as the dollar amount of past damages could cure the discrepancy. The jury has already determined that the form of reasonable royalty is a running royalty. This finding should remain undisturbed because it is substantially supported by the evidence and is not implicated by our motion. The defendants filed motions related to the issues of noninfringement, invalidity, and damages.

These motions were fully briefed as of February 15 and are ripe for judicial determination. The court has indicated that after the currently brief motions are decided, the court may consider our other pending motions, including our motion for ongoing royalties for future infringement. In these motions, we requested that the court order the defendants to pay an ongoing running royalty for their continuing infringement from the jury's verdict until either, one, the defendants cease their infringement, or two, April 2016, when the patents expire.

With respect to ongoing royalties, we argued that the court should conclude that an upward adjustment to the running royalty rate for the defendants' ongoing post-judgment infringement is appropriate and that it should be between 5% and 7%. Our damages expert reached the conclusion that there is no reason to depart downward from the 5% royalty rate because the patents are known to be valid and the patented technology is acknowledged to be mission-critical for Google.

Further, we argued that the defendants' ongoing infringement is willful because the defendants are fully aware that their use of AdWords has been adjudged to infringed all of the asserted claims of the valid and enforceable patents in suit. Therefore, we requested that the court enhance the ongoing royalty rate to 7% in light of the defendants' ongoing willful infringement.

We have requested that the court order the defendants to pay these ongoing royalties on a quarterly basis by wire transfer accompanied by a statement certifying, under penalty of perjury, the US revenue attributable to defendants' use of AdWords and the calculation of the royalty amount. As this information becomes available, we intend to keep our shareholders informed.

I will now pass the call to my colleague, David Cohen, to discuss in more detail our monetization efforts with respect to our telecom infrastructure portfolio, which we believe will create value for shareholders in 2013 and far beyond.

Thank you, Alex. I will now discuss our telecom infrastructure patent portfolio and the progress that has been made since we acquired the assets from Nokia on August 9 of last year. For those listening that are not familiar with the assets, I will provide greater depth after giving an update on our current enforcement activities.

We are very excited about our telecom infrastructure portfolio and believe that the patented inventions form a critical component in the smooth functioning of all telecom infrastructure operations. Our infrastructure technology covers both required elements and widely adopted market differentiators. Moreover, our patented technology has been adopted worldwide by global industry players.

Given the global reach of Vringo's intellectual property rights, we are only now in the initial stages of the monetization of our assets. As Andrew noted, we have three suits on file against ZTE -- two in the UK, which is being handled by the law firm Powell Gilbert, and one in Germany, which is being handled by the law firm Reimann Osterrieth Koehler & Haft. The German case will have its trial this fall on October 15.

In the UK, we should have much greater clarity regarding the sequencing and time to trial on or before the case management conference this June. The UK complaints allege that ZTE's cellular network elements fall within the scope of six patents, and ZTE's GSM and UMTS multimodal wireless handsets also fall within the scope of at least one of the patents. A case management conference is where, among other matters, the schedule for the UK lawsuits will be set. We anticipate that this case management conference will occur in the second quarter 2013.

That said, as we noted in our letter to ZTE last September, Vringo is prepared to license all patents which are essential, as that term is defined in the ETSI IPR policy, to a standard, provided that the consideration proposed is fair, reasonable, and nondiscriminatory, also known as FRAND. If for as long -- and as long as ZTE does not make a concrete binding offer to take a license capable of acceptance by Vringo, which would include a FRAND payment for all past infringement and which would result in a license to essential patents on FRAND terms, Vringo will pursue all legal remedies available.

I would now like to offer some details on litigating patents in the German court system. Germany has a split infringement system where patent infringement cases are heard in district courts of general jurisdiction. Nullity cases where the validity of patents is adjudicated are heard in a proceeding in the federal patents court, separate from the infringement case. Appeals from the district court and the patents court are heard by distinct appellate courts. Appeals from those courts are both heard in the German Federal Supreme Court.

Infringement actions are typically decided by the trial court within eight to 13 months, on average. Nullity cases are typically decided by the trial court within 18 to 22 months, on average. If the District Court finds a patent infringed, absent certain factors, it will generally issue an injunction. Where there is a pending nullity action and the accused infringer has not rebutted the asserted patent's presumption of validity, the District Court will generally issue an injunction upon payment of a security. Where the presumption of validity has been rebutted, the District Court will generally stay proceedings pending the outcome of the nullity case.

On November 15, Vringo Germany filed a suit in the Manheim Regional Court in Germany alleging infringement of a European patent. ZTE formally responded to the complaint on February 15. The lawsuit was expanded to include a second patent on February 21, alleging infringement of another European patent. At the Manheim court's request, a consolidated trial will be held on October 15, 2013.

On February 14, 2013, ZTE filed its first defensive pleading with respect to European patent 119. The Manheim court has set a due date for Vringo Germany's reply brief on May 31, 2013 and ZTE's rejoinder brief on August 30, 2013. No further briefing before trial is currently anticipated.

To date, ZTE has not made what is called an Orange Book offer with respect to the 919 patent. An Orange Book offer is a license defense available in Germany when a defendant alleges that the patent asserted is truly essential. To partake in this defense, the defendant must behave like a true licensee and provide full accounting for past and potential future infringement and proffer a license amount payable to the patent holder or into escrow. Further details are available in our Form 10-K.

To provide a short background of the portfolio, it consists of over 500 patents and patent applications. The portfolio is global in nature and consists of patents and patent applications issued in more than 25 different countries and territories. The majority of the patents were filed in the late 1990s and early 2000s, when Nokia was at the forefront of building a wireless infrastructure backbone all over the world.

Today, this technology enables us to use our mobile devices to make mobile calls, watch videos, send and receive texts and emails, and surf the Web. The portfolio is divided into 124 patent families with approximately one-quarter of the patents mapping onto standards. 31 of the patent families have been declared essential by Nokia to wireless communication standards.

The standards represented in this portfolio include those commonly known as 2G, 2.5G, 3G, and 4G and related technologies. These are also known as GSM, W-CDMA, LTE, and others.

An essential patent or standard essential patent is a patent that claims an invention that must be used to comply with the technical standards. Standards organizations, therefore, often require members to disclose and grant licenses to their patent and pending patent applications that cover a standard that the organization is developing. This is important because we believe that it will allow us to create a unique business model with recurrent licensing revenue from those standards patents and to potentially pursue high-value infringement claims.

It is now my pleasure to pass the call to our President and Chief Technology Officer, Ken Lang. As many of you know, Ken is the inventor of the 420 and 664 patents that we acquired from Lycos. Ken remains the largest shareholder of the Company.

Thank you, David. I'd like to discuss one of our most recent developments on the technology front, our partnership with Virginia Tech IP. As Andrew mentioned earlier in the call, our partnership with Virginia Tech IP is one of the many opportunities to partner with academic institutions, a key source of top-tier inventors and talent.

We are currently exploring several other opportunities and partnerships in an effort to enable and create innovative technology. Some of the areas we have been exploring include geolocation, global monetization, global video, and mobile social. The partnership with Virginia Tech IP is related to cognitive radio and allows us to leverage and further develop inventions that have been created at the University.

Virginia Tech is a leading research institution in the field of cognitive radio. Cognitive radio combines software-defined radio with technology for intelligently sensing, adapting to, managing, and optimizing the wireless spectrum environment. The IEEE standard, 802.22, uses cognitive radio techniques to allow usage of the recently freed-up TV spectrum formerly used by analog broadcast signals. As 802.22 is put into usage, it will enable groundbreaking new opportunities for wireless communication.

One application of the technology is to enable first responders to quickly set up a wireless network in areas where telecommunication infrastructure has been destroyed or rendered inoperable, thereby allowing rescue workers and people in need of help to remain in communication with each other and the outside world.

Another application is on the consumer market side, allowing for wireless communication in areas where wireless service is limited or unavailable, such as subways, tunnels, or remote locations. The patent licensing agreement between Vringo and Virginia Tech IP dovetails with Vringo's existing patent portfolio in adaptive wireless communication to provide an even stronger technology base from which Vringo can seek to develop further innovation in this exciting area, as well as create future licensing opportunities.

This quarter, our product team also went to the Mobile World Congress in Barcelona to advance our product line business, survey the latest mobile technologies, and seek out new potential strategic partnerships. We continue to operate our mobile application through our carrier and distribution partners. We believe the relationships with operators, handset makers, and mobile marketing partners, among the biggest in the world, will enable us to distribute additional products and services. We are currently in the process of exploring several opportunities for our mobile application business. As with intellectual property, we are highly selective in what we acquire or invest in.

On the application development front, the Facetones product release of our newest version went live in February, featuring a new post-call window enabling deeper social engagement and lifetime customer value. It is still early in the mobile technology space, and we remain optimistic that there is a great deal of opportunity to create innovation with substantial value now and in the future. This quarter we focused on advancing our intellectual property portfolio via the conversion process of our provisional patents we filed last quarter towards full patent applications. We expect to continue to add further inventions to this portfolio in the coming year.

I'll now pass the call back to Andrew to discuss the financial results from 2012.

Thank you, Ken. We ended 2012 with positive cash flow from financing activities of $85.7 million. This is mainly attributed to $76.1 million raised in two financing rounds and $12.3 million received from the exercise of equity instruments by our investors.

As of the close of business on March 21, 2013, we had approximately $54 million of cash and cash equivalents on hand. We expect these funds will be sufficient to support our current operations and allow timely execution of our current business plans.

Net loss for the year was $20.8 million, mainly attributable to operating legal costs of $9.5 million recorded in connection with the ongoing litigation against Google and ZTE, as well as the impact of $10.6 million of noncash expenses recorded in connection with the amortization of intangible assets, depreciation of equipment, and share-based compensation.

Our net loss was offset by a net nonoperating income of $4 million recorded mainly in connection with the decrease in fair value of derivative lines. In 2012, we recorded total revenues of $369,000, $269,000 of which was in connection with post-merger revenues generated by our mobile-based products. An additional $100,000 was recorded in connection with a partial settlement of litigation in August 2012.

On a per-share basis, our net loss fell by 55% to $0.53 per basic share compared with a net loss of $1.17 per basic share presented by Vringo as of December 31, 2011, premerger. The decrease in basic loss per share was mostly due to an increase in the number of shares and a decrease in the fair value of warrants classified as long-term derivative liability, partly offset by increased costs reflecting the pos-merger operations of the combined Company.

Net loss for the fourth quarter was $14 million compared to a net loss of $3.2 million in the third quarter. This increase in our net loss was mainly due to changes in the value of our derivative warrants and an issuance of warrants on October 2012. Overall, our operating loss was $10.6 million compared to $10.5 million in the third quarter of 2012.

We will continue to be judicious with our cash, resources and equity. As we have mentioned previously, we continue to partner with world-class law firms and other professionals and will deploy our capital into assets where we see the potential for superior risk-adjusted returns.

In conclusion, I'm proud of the accomplishments of our team to date. We look forward to executing on all of our initiatives throughout 2013. We appreciate the support that we have received from our shareholders and will keep you updated of important developments.

I'll now turn the call over to the operator.

(Operator Instructions) Mark Argento.

First question, on the start of the infrastructure licensing campaign, clearly focused efforts internationally with the three suits. Can you talk a little bit about some of the gating factors in terms of additional campaigns, both domestic and international? Do you want to see how things play out with the existing campaigns and make some adjustments? Or what are some of the things you think about when you are planning on the different monetization campaigns around those assets?

Yes, I think that's a great question. So first of all, in the campaigns that exist in Europe, I think it's important to know that Europe versus the US, the bar to even be accepted to be heard is incredibly high. You have to submit the pleadings up front. And because we believe in the assets that we have asserted, we've obviously passed that bar and we're on a path in Germany. So we feel very good about that.

In terms of continuing other campaigns, as a company, we've set forth a budget for this year. It includes additional licensing and litigation campaigns. I obviously can't point to where and when, but the Company has a very clearly defined plan, and we've only scratched the surface as to the actions that we will take this year.

That kind of dovetails into my next question. When you look at -- you guys -- there's been a tremendous amount of change. You guys have built a decent-size platform in a very short amount of time. When you think of capacity, the ability to monetize the assets you have right now, I know you had alluded to looking at other assets, but how do you feel from a capacity utilization perspective? How much more could you bring in over the next six months, or what kind of capacity, or how do you guys model the business from an operating perspective?

It is Alex Berger speaking. Thank you for the question, Mark. I look at capacity in a couple of areas at the Company. First, we have raised capital and we have cash that we can deploy if we see compelling opportunities.

Second, we just welcomed Jason Charkow to the team. Jason is an experienced intellectual property attorney. He joins us from the global law firm of Winston & Strawn. We also partner with world-class firms both on the engineering and legal side to help us in identifying opportunities, running a diligence process when it comes to patents where we look at validity, infringement, and damages to determine where we see value, and then to execute on it.

David and Jason have been working a lot to implement the strategy with respect to the very, very large portfolio that we acquired in the telecom infrastructure space.

Just to add quickly to what Alex is saying, I think you'll see us maybe make some -- you'll see us make some additional key hires. We're not going to bring on staff at an exponential rate. As we mentioned, we want to use our cash judiciously. Right now, again, if we brought on an additional portfolio, we would think about increasing our staff. But we're confident in the path that we have set out for this year, and right now we just want to execute.

When you think about new IP, and granted, I know you have a ton of IP right now that you have to get in process, but when you think about looking at other portfolios, other IP, do you guys -- what's the strategy? Will you focus on wireless predominantly and Internet, kind of a cluster strategy? Would you do something completely in another vertical? Maybe help me think through that a little bit.

Yes, absolutely. So right now we're very focused on online, mobile and telecom. Those are areas that management knows and we obviously understand with the backgrounds of Ken Lang, David and myself and Jason. So we want to execute in these areas. I think over time you might see us go into other verticals, but right now we want to stay focused.

Okay. And then shifting gears back to the search portfolio and in particular the Google situation, so you had said the jury came back with a $30.5 million verdict. According to your guys' calculation, it should be closer to $120 million. How do you get to the $120 million? Are you using the 3.5%, using the 3.5% and just looking, pointing back in arrears? Or how do you guys get there?

So we define the time period, which is from when we filed the lawsuit in September 2011 to roughly around the time of the trial, depending on when Google made its last production of revenue data to us. We then look at that royalty base, multiply it by the apportionment factor, which is 20.9%, according to the evidence that we presented at trial, and then multiply that by the royalty rate of 3.5%. These numbers are all approximate.

Okay. And at the end of the day, is there any precedence for a judge to make those adjustments from the bench? Or does that typically end up in an appeal type situation in front of one of the appeals courts?

The defendants have a Seventh Amendment right to a trial by jury. So even though the calculation that we are asking for is somewhat simple, we believe that it is likely to require a trial by jury.

That is something we've asked for at this stage in the posttrial phase from the District Court judge. Anything that goes on down below, as they say, in the District Court, could be appealed to the Federal Circuit, which is the Court of Appeals.

Great. Very helpful. Congrats on a busy 2012, and good luck in 2013.

Thanks, Mark.

John Grimley.

Just a real quick technical question. David mentioned that you had not received an Orange Book offer. Could you just go through what that means exactly, for those of us that don't -- aren't familiar with that language?

Sure. As I indicated when I was talking previously, in Germany, when an infringement is filed in the infringement courts, the injunction pretty much always issues automatically. The only option when it might not issue is when an Orange Book offer has been made. And an Orange Book offer, first let me make it clear, an Orange Book offer is something that is made at the sole discretion of the defendant. So typically it is made with the defendant's first pleading. And as I mentioned earlier, the first pleading with respect to the 919 patent has been made -- has been filed, and no Orange Book offer has been made.

There are cases when it has been -- made it up to any point up to and including the actual trial. And as you know, with courts around the world, the timing in the manner of submissions to the court influences the seriousness of with which the court takes those submissions.

The German courts are particularly stringent about the form of the offer. And defendants can't be blase about the required components of the offer. The offer must be binding and contain regular royalty reports about patent infringement. And the proposed monetary terms -- that is the terms that would be proposed by ZTE in our case -- must be sufficiently high such that Vringo's rejection of that offer would be an inherent violation of the relevant antitrust laws.

Finally, to show its willingness to be bound, the defendant must either make this payment to the plaintiff directly or submit the payment into escrow.

Got it. Thanks. Nothing else for me. Congrats on all your accomplishments and a lot of progression over the last 18 months. Look forward to following you guys going forward.

Thanks, John.

John Tinker.

Just following up on Germany, if and when things go well in Manheim and you have to put forward a cash security, how much of that cash might you have to put down?

Yes, so this is David here. The cash security is not related to the harm that ZTE would suffer through an injunction. Rather, it's related to a statutory amount that is determined by the court when you file a case. The current statutory amount for each of the patents is EUR1 million. So were we to be successful on both patents, the current statutory amount would be $2 million of security. That said, the court does have some discretion on upward and downward valuation for the security. However, it is rarely more than a couple of percentage points up or down.

So in short -- it is Andrew -- just to add to that, we are more than confident that we have well more cash than we would ever need to actually be able to secure an injunction.

Andy, could you -- I may have missed this, but could you update a little on the timeline for Microsoft, and also how you came up with the number for them?

Yes, sure. So right now, all that has happened is that we filed in New York. There is no timeline that has been defined, nor have we made any public statements about that. For people that have been investors of the Company before we went to trial with Google, damages are always a sensitive topic. So there is no damages number that is out there right now. But it would obviously be proportional to the infringement.

Okay. And just finally, just looking at your K, I still see you have the research and development being run out of Israel. Is that something that is active, and what might you be looking for from that?

Yes, absolutely. So we view -- first of all, we view having a location in a technology hub like Israel as being strategically important, both to the intellectual property business and to being in any technology business. This is one of the key places in the world to be if you're involved in any kind of technology, the same like a Silicon Valley is.

As far as what our engineers are up to, they continue with the mobile application business that we have today, and we're starting to look at ways to build products that use applications of the inventions that are contained in the Nokia portfolio. But R&D is something that -- it's something that we take very seriously, both in the sense of developing and creating new intellectual property, but also in terms of envisioning products that work in tandem with our intellectual property.

And final question, and I may have missed this. On your deal with Virginia Tech, how in theory does the monetization split work?

So this is David here. The monetization works -- we have a licensee to them for our exclusive option. And then we have a two-year period in which the development, research and productization and commercialization program jointly with Virginia Tech. And at the end -- or during, too, but definitely by the end of that period, we will negotiate the precise counters of that relationship.

Thanks. Great start. Thank you.

Thanks, John.

Menachem Kranz.

A question for you about how we as investors should think about the space -- what your pitch might be, if you can comment on this at all. So if you look at some of your competitors, when they go in and have a conversation with a potential IP candidate, what's really the benefit for them to do business with you guys versus some of your competitors, if you can talk about that at all?

Thank you for the question, Menachem. This is Alex Berger. I'm just going to begin by addressing something that came up on another question about the mini-trial, as we've called it. We have posited in our filings that to correct the damages would take at most one day. I didn't mean to alarm people by suggesting that we were going to go back to Norfolk for another four weeks for a trial.

To answer your question specifically about why somebody would choose to work with Vringo, it's because of our team and the experience that people on the team have. As we look around the room, we see David Cohen and Jason Charkow. We have Ken Lang, an inventor, Andrew and I and Cliff and others who you've gotten to know over the course of time and being involved in the Company.

At our Board of Directors level, we most recently have Ashley Keller who has joined us. Ashley brings experience from the US Supreme Court, from clerking in an appellate court, and from being a partner in a law firm. Don Stout has been around since the beginning and founding of the Company. Don has practiced law in Washington for 40 years and has been involved in some very well-known and large patent cases, including the one where his company, NTP, collected over $600 million from RIM.

We work hard. We move quickly.

And separately, just to continue on this, I think, unlike a lot of other people involved in monetizing intellectual property, we actually have a global reach. So if you look at a lot of our competitors, they are solely focused on action in the United States. And one of the key members of the internal team is, obviously, David Cohen, who has been on this call with us. David is one of the few people that has true experience on a global scale, based on his experience while he was at Nokia.

So I think there are some keys differentiators. I think it's the way that we do business, the speed with which we execute, the team that we have created, and also our global reach.

And just one other question. This is maybe for David. You talked a little bit about -- or, actually, a lot about the Nokia portfolio and the plans there. There was I think over 500 patents, and we are talking about a handful of them in terms of going after ZTE and perhaps others. Can you comment on what we can expect timeline in terms of perhaps addressing some of the other areas of that portfolio? Or does that require lots of time and lots of manpower to go after?

Sure. I think it's a multi-layered question. And there's a lot of opportunities there. We do have a number of things, as Andrew alluded previously, in the pipeline. And we hope to start accomplishing them or start effectuating them in the next few months. And we're developing it. And as I'm sure everyone is sensitive to, it's very hard for us to discuss a lot of the future plans without causing challenges for ourselves down the road. But there is a significant amount of thought and timing that has gone into getting ready for that.

Thanks.

(Operator Instructions). Actually, at this time I'd like to turn the call back over to Andrew for concluding remarks.

Thank you all for participating in this call. We look forward to speaking with many of you in the coming days and weeks. Please feel free to contact us with any specific questions.

All right, thank you. And ladies and gentlemen, that does conclude today's conference. We thank you for your participation. You may now disconnect your lines. And have a great day.