While most IP stock fans are still fixated on the Vringo, Inc. (AMEX:VRNG) battle with Google Inc. (NASDAQ:GOOG), there's another owner of a big patent portfolio that may quietly be emerging as a far better trading idea.... VirnetX Holding Corporation (AMEX:VHC). Its battle with Apple Inc. (NASDAQ:AAPL) is still raging, and that battle - one way or another - is going to reach a major milestone today.
Most of that procedural stuff for that trial is over. VirnetX Holding successfully demonstrated that Apple had indeed infringed on four different VHC patents a total of sixteen ways (sixteen different products) using that patented technology. Like the Vringo victory over Google, the VirnetX victory over Apple wasn't a lottery ticket. The jury said Apple only owed VirnetX $368 million in damages.
That's not the interesting part, however. Where it gets really hairy for Apple and AAPL shareholders is the possibility - and this is admittedly not the likely outcome - that VHC could successfully get an injunction established that would prevent Apple from selling any of its products in the United States, as they all incorporate at least one of those four patents in question.
So why is that so time sensitive today? What is it about today that could be so game-changing? Because Apple's response to VirnetX's post-trial motion (for an injunction, among other things) is due to the judge today. Though the post-trial motions have seen a handful of back-and-forth rebuttals from both companies, this is likely to be the final one, from which Judge Davis will make a decision. It's possible a ruling could come today, though more realistically he wouldn't be able to review Apple's final response of the post-trial motion litany until this weekend, which would mean no news of a final ruling on an injunction until next week. Nevertheless, it's going to be soon.
As was noted, an outright injunction is unlikely, but if that is the decision, VHC proverbially holds all the cards, as it will mean Apple will be forced to deal with VirnetX on its terms to work out a deal that permits AAPL to lawfully use and sell those infringing products in question. Even without an injunction though, VirnetX Holdings still owns those patents, and would still be due licensing/royalty fees. Ergo, the question here is more one of "how much?" rather than "if", and VirnetX doesn't have many losing scenarios.
On the other hand, don't expecting hundreds of millions more to be awarded as a settlement. Most of the infringement has already occurred with Apple products that are outdated and no longer sold. The only current infringing product on the market that uses the patents in question is the iPhone 5, and royalty fees tend to be relatively small in the grand scheme of things. And, no, VHC doesn't have enough leverage here to apply extortion-like fees for use of the patent. If VirnetX Holding demands too much in the way of licensing revenue from Apple, Apple and VirnetX could be right back in court.
In the meantime, the chart of VHC is already in the midst of a rally effort that looks very much like the one's we've seen from the stock a couple of times since 2011. Granted, neither of the other two rallies lasted. In fact, they both imploded. But, they both doled out big gains for a while, and both were linked to successful court cases. Considering that VHC is apt to be win another major trial victory in the very near future (one way or another), we can take the budding shape of this chart as face value and presume the market's prepping the stock for another surge. Just don't forget to walk away when the celebratory buying is over.