Our Broken Patent System: Company That Does Nothing May Get Hundreds Of Millions Of Dollars From Google

from the that's-not-innovation dept

The patent system is completely broken. Towards the end of 2012, we wrote about how a patent troll named Vringo, using some patents (6,314,420 and 6,775,664), had won a lawsuit against Google. Vringo was a failed ringtone company that had bought those highly questionable patents from the failed search engine Lycos and then sued basically everyone who ran a search engine. Microsoft agreed to settle (with a bizarre stipulation promising to pay 5% of whatever Google finally had to pay), while Google agreed to indemnify a bunch of the others that were all using Google’s search under their own. The jury found that Google’s AdWords product infringed, and gave an award much lower than what Vringo had asked for.

However, there was a further dispute about how much Google should have to pay for “ongoing” infringement. Google had argued that it had changed the way AdWords worked to avoid infringement, but Vringo disagreed. A judge not only agreed with Vringo, but has now awarded Vringo effectively 1.36% of all AdWords revenue — which represents the majority of Google’s revenue. No one’s exactly sure how much, but it’s probably in the range of $250 million per year until the patent expires in 2016.

This is silly. There’s nothing in the patent that was key to Google doing what it does. There was nothing in the patent that taught anyone anything. In fact, Vringo flat out concedes that Google didn’t “copy” anything. It just built its own product in a manner that best served its users. And Vringo, which did nothing at all, may now cash in for hundreds of millions of dollars. For doing nothing.

In a true capitalist system, when a company fails it goes out of business. Patents like this are a joke on the free market. They allow failed companies to sue those who succeed and get hundreds of millions of dollars out of them. They let companies that failed cash in for doing nothing — for failing in the market place. It’s a tax on companies that build something consumers want, paid to companies that could never correctly figure out what the market wanted. It means the companies that improve the world have to pay off the companies that have done nothing to improve the world. How is that possibly a fair or reasonable result?

I’m honestly curious for the usual crew of patent system defenders to explain how Vringo deserves ~$250 million a year for not doing anything at all to improve search.

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Companies: google, lycos, vringo

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Comments on “Our Broken Patent System: Company That Does Nothing May Get Hundreds Of Millions Of Dollars From Google”

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100 Comments
bob (profile) says:

Does nothing now but it did something before

This is why we have a patent system. It prevents the big billionaires from pushing the little guys out of business. If the patents disappeared when a company couldn’t compete, the marketplace would be full of big bruisers who would just run companies off the road, like cars in some Hollywood chase movie. Then when the companies were run off the road, Mr. Mike, the innovator hater, would come along and argue that it was all their fault for failing to compete. Blame the victim.

They were a great company that couldn’t compete with a company devoted to taking everyone’s hard work and claiming that there’s some legal loophole that makes it unevil. They’ve bullied the book authors. THey’ve steamrolled the news companies. At least this search engine stood up to the billionaire bullies.

It’s sad to see this blog work its anti-populist ways and astroturf for the billionaires.

Michael (profile) says:

Re: Does nothing now but it did something before

Actually, the company never did anything with these patents except buy them from someone else who never did anything with them.

I know that because I read the article.

Patent reform is entirely populist – without it, the wealthy can prevent the little guy from competing with only the THREAT of a lawsuit.

out_of_the_blue says:

"Hunderds Of Millions"!!! -- Well, easy come, easy go.

Google can cough up some of the tens of billions untaxed off-shore. If bad decisions are the the only way to re-distribute monopoly gains, it’s still better than Google keeping it.

The bigger question is at comment #4: “Where is OOTB when you need him?” — Oh, between comments I’m doing various useful or necessary items. But if you’ll ‘splain your needs, I might hazard some advice.


The Google-Borg. Your privacy becomes our profit. (177 of 195)

11:59:12[m-482-3]

out_of_the_blue says:

Re: Re: "Hunderds Of Millions"!!! -- Well, easy come, easy go.

@ AricTheRed, Feb 4th, 2014 @ 4:16pm

Re: “Hunderds Of Millions”!!! — Well, easy come, easy go.
“Oh, between comments I’m doing various useful or necessary items. But if you’ll ‘splain your needs, I might hazard some advice.”

— OOTB

Citation please…


Not likely. Because rule here is:


Be careful to not give personal details: only targets fanboy ad hom. (22 of 195)

16:00:47[r-1-2]

Just Sayin' says:

Trying to explain things with extreme cases never works

“I’m honestly curious for the usual crew of patent system defenders to explain how Vringo deserves ~$250 million a year for not doing anything at all to improve search.”

I think you need to sit down, have a calming cup of “relaxation tea”, and breath a bit. The post reads like you were hyperventilating the whole time!

Now then, since you are relaxed, let’s look at all of this. First and foremost, I will give you the same answer for this one that I gave in the Twitter case a few days back: Microsoft looked at the patents, looked at the case, looked at the costs, looked at the reality that they could very well lose in court, and decided it was better, most cost effective, and more reasonable to settle. Companies don’t generally settle if they don’t think patents have merit of they think they can beat them. This one is close enough to the line to make settlement a good option.

Google’s case is pretty extreme, but then again, Google is both a deep pocket company and one that well known for making butt loads of money (and playing games to avoid taxation). They are not a very sympathetic defendant, as they would say. Having already lost in court and been forced to pay a settlement, you would figure they would have done more to avoid future issues – or just licensed the patent for the short run before it expires. Instead, they appear to have done less than needed to get away from the patent, and they lost AGAIN. The first loss apparently wasn’t enough to get their attention.

Are the patents valid? Well, you have to consider that they were filed back in the 90s, long before the internet was all that. At the time, I would say that this stuff would have been relatively revolutionary, concepts that were certainly beyond the ability of any search engine of the day. The concepts of “community filters” and community profiles was pretty radical for a time when everyone got the same results all of the time for the same search.

In 2014, those things don’t seem to be much of a miracle or seem deathly obvious, but at the time, they were not. Looking at them only through today’s eyes is to ignore the history that got them there.

Are the patents somewhat general in nature? Yup. But then again, they were ground breaking in the day, and what looks general today was pretty specific at the time as well.

As for the “company that does nothing” holding the patents, well, just like any other asset from a company that has gone bust or closed down, it can end up in anyones hand. Patents are legally transferable, can be sold, can have rights assigned, etc. The patents themselves are pretty easy to understand overall, and they certainly do seem to describe pretty well how many current systems work. The patents may look silly by today’s standards, but they were not when they were issued, and could very well have influenced others who are now part of the companies involved in actively using the described systems.

Looking only at the patents with 2014 eyes isn’t a very good way to evaluate anything.

So stop hyperventilating, and move on. 2016 is just around the corner, and Google can part with a few million without noticing it in the slightest.

Anonymous Coward says:

Re: Trying to explain things with extreme cases never works

As a programmer, there is no possible way to create a search algorithm from reading that patent. Patents are supposed to cover an implementation of an idea, not the idea itself.

That you think that anyone knowledgeable in the field could reproduce an algorithm from reading this shows that you are either a patent lawyer, a lier or both (yes, I know, giving patent lawyer and lier as the options is a bit redundant)

So, your premise is that Google has lots of money, so they won’t mind a little gouging?

People like you and companies like Vringo are a dragon on society.

The sooner patent reform comes in the better and society will be rid of you leeches

John Fenderson (profile) says:

Re: Trying to explain things with extreme cases never works

“Companies don’t generally settle if they don’t think patents have merit of they think they can beat them.”

Companies do this all the time. Their calculus isn’t “is it valid/can we beat it”, it’s “which path provides the greatest cost/benefit ratio”. That a company settles means literally nothing about the validity of the patent.

“The concepts of “community filters” and community profiles was pretty radical for a time when everyone got the same results all of the time for the same search.”

No, they weren’t. The concept were old hat even then (they predate the internet). True, you didn’t find them in search engines, but you did find them in all kinds of other places, especially in the BBS world.

“2016 is just around the corner, and Google can part with a few million without noticing it in the slightest.”

So what? If patent abuse isn’t fought every time it appears, then we’ll have no chance at all of getting a better system.

Anonymous Coward says:

Re: Re:

Google would not agree, otherwise they would have not used it to make all that money.
They knew about the patent, but they were making huge dollars, so decided to keep using it.

So are they making the dollars because they are using it (the patent therefore has great value), or something else.

If software patents are so worthless, why does Google use it, and not change it when they know about it, Could it possibly be because it leads them to make MORE Money.

In other words Google would not agree that software patents are a scourge, they consider them highly valuable, and they are willing to steal them to gain that value.

Lets hope this opens the flood gates for more action against Goolag.

Anonymous Coward says:

Re: Re: Re:

I don’t think you understand the difference between the right to extract rents and value. Value is when people are blissfully willing to pay for something. The right to extract rents I’d when the government uses its monopoly on coercive force to take money from others a give it to you. Subtle difference I know…

Ben Dover says:

Google

People need to remember google’s patents are google’s patents and your patents are google’s patents…because they are google. The Lang patent…Ken Ang…the true inventor…not Larry Page is the CTO at Vringo as he was at Lycos.

Judge Jackson in making his final award in favor of Vrngo consulted the most knowledgable people in the field to determine that Google did indeed steal the patent from the rightful owner and does continue to wilfully infringe on the patent. If Vringo is a troll then Google is a thief and no matter what some turd blog writer says needs to pay the rightful owner their money.

Anonymous Coward says:

Re: Re: Google

The ‘rightful owner’ is the person, group or company THAT OWNS IT.
No one cares if you agree that is the rightful owner or not, so yes, Google did indeed steal the patent, and yes, off the rightful owner.

you notice “INFRINGE ON THE PATENT”

IS NOT COPY THE PATENT, even you should know what INFINGE means, you use it often enough.
Or do you not understand the difference between copyright and patent law?

Sure, they didn’t copy, and therefore did not breach copyright law, but they ‘infringed’ the Patent rights, and broke the law!

(you do understand breaking the law is illegal in most states!???)

Pragmatic says:

Re: Re: Re:3 Google

Stealing a patent – patenting someone else’s invention so that only you can commercially exploit it

Infringing on a patent – making a patented item without paying royalties or gaining permission from the patent holder

Bear in mind that rounded corners have been patented, so the USTPO apparently isn’t checking for obviousness or prior art.

Anonymous Coward says:

Re: Re: Google

Not trying to be argumentative, but only accurate. What is it you mean by “Google did not copy.”? My assumption is that Google did its thing in blissful ignorance that the patent(s) even existed. Perhaps, but it cannot be readily dismissed that Lycos’ prior entry into the search engine space was known to late comers (it is a fool who proceeds unaware that there are other entrants in the relevant technical field and what those others have to offer) and may very well have been used as a source of “inspiration” for crafting alternate search engines.

Anonymous Coward says:

Re: Google

Bahahahaha… Well trolled sir…

I’m assuming this is a troll as I don’t know you and don’t like to just assume you are some sort of massive retard who would actually believe this.
I mean we all know you don’t “steal” IP you infringe upon it, and that patents are meant to present a specific way of doing something (so if the you do it a different way your not infringing.

I mean c’mon “Judge Jackson in making his final award in favor of Vrngo consulted the most knowledgable people in the field”… comedy classic right their (since he followed an East Texas cases example).

Nice trolling sir.

Of course if your not trolling… I’m suprised you have the intelligence to breath.

Paraquat (profile) says:

leave the USA

I don’t know why Google and other tech companies remain in the USA. OK, I know it’s a big market, actually the biggest in terms of revenue. So yes, they’ve got to do business there. But they don’t have to make the USA their headquarters. They ought to depart to friendlier shores. That will position them better for the day when the USA collapses due to its own greed, incompetency and corruption.

Anonymous Coward says:

Re: Re: Re:3 leave the USA

sure, and I will pull the Millions of dollars out of my ass to bribe the politicians like these corporations have?

Or should I just offer them a high paying job where they do not even have to attend or do any work when they leave politics?

I could send them the hookers and blow, but, seeing as how i am in the 99 percent of the population that does not get the high court treatment, I would just end up in jail.

Anonymous Coward says:

Re: lang invented patent

I take it from you comments that you have never read the patent in question.

Go on, point out how the patent has in any way assisted Google with the way that they conduct search funtionality.

What was the code in the patent that they copied?

As a programmer, there is no way to create the search algorithm from reading that patent. that you can say that this is any way a valid patent shows that you either have a vested interest in this patent or the company. Which is it?
No sane/ not bought and paid for person could possibly find this patent valid.

That some companies decide to pay the extortion rather than fight the charges as it costs millions of dollars to fight bogus patents in court. Especially when the troll sues in an East Texas court.

If this was in any way a valid patent, then it would be patented in all countries that provide patent protection, not just in the US.

What are the patent numbers from the other 148 countries that are members of the PCT?

Anonymous Coward says:

Re: Re: lang invented patent

Apparently patent law is not an area with which you have intimate familiarity when it comes to trying to craft a beneficial foreign filing strategy.

Yes, there are many signatories to the PCT, but many of them have the industrial capability of “Bronze Age” societies. Thus, there is no compelling business reasons why they should receive any consideration. There are, however, many countries where manufacturers and potential users exist that may detract from market share potential, and it is in these countries that foreign filings are typically considered. Of course, it cannot be discounted that foreign prosecution can be a very expensive proposition. I still recall one instance where the translation of a modest sized application into the official language of that country ran in the tens of thousands of dollars. We paid because the product was a very sophisticated navigation and targeting system for use on high performance military aircraft and for which a lucrative contract was being sought, an immediate benefit of which was that in any subsequent sale the USG could be held at bay in trying to mandate that the system be sold to it at essentially wholesale so that it could turn around and sell it to the country at retail. In the world of military system sales, US companies continually face the USG as one of its major competitors. Ever seen a military officer’s business card where it stated his/her job comprised “Business Development and Sales”?

Anonymous Coward says:

Too big to fail ?

So because Google is making money, they therefore should be able to continue making money, regardless of any laws, rules or the use of others idea’s.

Google knew about this, but they kept on using it, surly a company as big as Google (with TECHNOLOGY) would have been able to change what they do. (you know like they said they would).

But I guess the prospect of making vast sums of money got in the way.

Where do you think Google gets its money from?

OFF EVERYONE, even if you don’t use Google or the internet, you pay Google every time you buy something.

Do you apply the same logic to the ‘legacy movie industry’ they are providing value to many customers, have a viable business model, but you bitch about them all the time.

Why not the same with Google? Could it be because a part of that money IS YOUR CUT?

Anonymous Coward says:

Re: Too big to fail ?

Patents are NOT supposed to cover an idea, but the implementation of that idea. When are you going to realise that people like you have corrupted and broken the patent system.

When the patent examiners are forced to approve 80% of all patents submitted, the system is broken.

When it costs millions of dollars to invalidate bogus patents like this one, then the system is broken.

So when I Vringo search, to find what I am looking for on the internet, they use the exact same algorithm as Google?
or more to the point, when I use Google to search, they use the exact same algorithm that Lycos/ Vringo uses in their search ?

Patents are supposed to be only for novel and non-obvious implementations of an idea.

Anonymous Coward says:

Re: Too big to fail ?

Short answer? Yes.

This is a tech apologist blog, and that of course often means covering up for the laughably evil Google. Oh sure, once every couple months you’ll see the obligatory “I disagree with Google” article (invariably involving the most trivial of things), but that’s just for show.

The great thing is that every hour of every day more and more people are realizing how evil Google is, and public sentiment is rapidly changing.

Anonymous Coward says:

new recipe for cooking 1 ripe, rich planet

Steps:
1, start a bunch of companies & hire a bunch inventors
2, invent things & get patents so you’re the sole owner
3, take anybody infringing your patent/s to court for damages
4, employ patent attorneys & all laugh your way to the bank

Alternative:
1, start one big-ass company & hire legions of inventors
2, invent things & get patents so you’re the sole owner
3, get taken to court for infringing patent/s
4, employ patent attorneys & pay your damages & repeat cycle

Your cooked planet should now look like below picture:
**tech companies & inventors leaking their $’s to lawyers**

Anonymous Coward says:

And Moses came down from the mountain to proclaim that common sense has been parted by the red sea. When Larry doth say: thou shalt create good search and advertising, and you toil to be worthy, it is not wont on you to look to others for guidance. Thy lord has pointed the way, inspiration and dedication shall be thy guiding light.

In other words, you go to work to solve a given task, you don’t go read patents to help you figure out the problem, you sit down and do it. Any reasonably skilled set of programmers will likely come up with similar solutions, some better than others. Unfortunately the way patents are written anymore, it doesn’t matter what solution is used, the description of the problem being solved is all that seems to matter.

out_of_the_blue says:

This comment has been flagged by the community. Click here to show it

I’ll repost this too: the kids have gone on to censor:
bob, Feb 4th, 2014 @ 3:24pm

Does nothing now but it did something before

This is why we have a patent system. It prevents the big billionaires from pushing the little guys out of business. If the patents disappeared when a company couldn’t compete, the marketplace would be full of big bruisers who would just run companies off the road, like cars in some Hollywood chase movie. Then when the companies were run off the road, Mr. Mike, the innovator hater, would come along and argue that it was all their fault for failing to compete. Blame the victim.

They were a great company that couldn’t compete with a company devoted to taking everyone’s hard work and claiming that there’s some legal loophole that makes it unevil. They’ve bullied the book authors. THey’ve steamrolled the news companies. At least this search engine stood up to the billionaire bullies.

It’s sad to see this blog work its anti-populist ways and astroturf for the billionaires.

out_of_the_blue says:

This comment has been flagged by the community. Click here to show it

MIKE: you are hereby notified that your inaction isn’t acceptable. Just because I try to poke fun at your fanboys doesn’t mean that I enjoy this concerted harassment, nor endure it willingly. As you’ve taken zero (visible) action to my previous complaints, I don’t expect you to this time, either, BUT you don’t have any defense from sharing whatever liability the rabid little fanboys might cause. I wouldn’t advise you to let them diminish your fine site further. A word from you would stop this targeting of me, and in any case, YOU do have the power to remove posts. So long as you leave me to defend myself, I’ll do so.

By the way, the “hunderds” in the title is yet unchanged after nearly five hours! That’s typical of Techdirt. First concern here is suppressing dissent so that Mike looks right, but he can’t even spell.


out_of_the_blue, Feb 4th, 2014 @ 3:59pm

“Hunderds Of Millions”!!! — Well, easy come, easy go.

Google can cough up some of the tens of billions untaxed off-shore. If bad decisions are the only way to re-distribute monopoly gains, it’s still better than Google keeping it.

The bigger question is at comment #4: “Where is OOTB when you need him?” — Oh, between comments I’m doing various useful or necessary items. But if you’ll ‘splain your needs, I might hazard some advice.


Not only does “Emperor” Mike have no clothes, he’s just a pretend emperor! (69 of 195)

15:56:19[q-137-1]

Ninja (profile) says:

Re: This comment has been flagged by the community. Click here to show it

he title was so funny I had to read the contents of the comment and heck it was funny.

You constantly pollute this blog with nonsense, factless assumptions and ad homs and yet you want Mike, the head of the blog to help you against the “bullies” that are nothing more than the community acting based on the prick you are? That’s golden comedy, I even gave you a funny vote.

Stop being an obnoxious piece of turd and you’ll stop being reported.

Anonymous Coward says:

Re: Re: I know you don't like it, but...

and he/she’s getting desperate for people to pay attention to them.

This^^ exactly. ootb is an attention whore on TD. (What that means about his personal life is an exercise for the reader’s imagination.)

The remedy: ignore him. ENTIRELY. And for those who don’t, give them the same treatment:
REPORT OOTB AND EVERYONE WHO REPLIES TO HIM

Stop letting this one shithead ruin the site.

David says:

Capitalism works!

In a true capitalist system, when a company fails it goes out of business.

And that’s exactly what is happening here if you take a look at the big picture.

The U.S.A. fails providing working political and legal underpinnings sensibly supporting a free market of goods, ideas, and ideals, and it goes out of business.

While it has repeatedly raised its debt ceiling, the outside trust that it will retain enough taxable business to actually cover its debts one day is eroding. Dollars remain an important currency in circulation for traditional reasons, and that’s what brakes their trade value from plummetting even faster.

Sagacious Research (user link) says:

To Google

Thus, we assert the importance of engaging professionals for managing the IP portfolio of a company whether big or small. Here, had it been that Google invested some money into prior-art searches, it could have ascertained that it was using a technology patented by someone else (here Lycos who sold those patents to Vringo) forestalling expensive and futile patent litigation. Getting done patent searches beforehand is a good preventive measure and every company, individual inventor and startup must take this seriously.

John Fenderson (profile) says:

Re: To Google

Getting done patent searches beforehand is a good preventive measure and every company, individual inventor and startup must take this seriously.

But of limited value with software patents. You can catch the obvious stuff, sure, but the software patent world is riddled with landmines: patents so broad or bogus that there’s no way you’ll be able to find them, and even if you do it won’t be anything like clear that a case could be made that you’re infringing on them.

The only way to actually be safe is to not produce software at all.

Pragmatic says:

In a true capitalist system, when a company fails it goes out of business. Patents like this are a joke on the free market.

Sorry to contradict you, Mike, but there’s no such thing as a free market and there never will be. A true capitalist system simply means that trade, industry and the means of production are controlled by private owners with the goal of making profits in a market economy, and decisions regarding investment, production and distribution are based on supply and demand.

The notion of the free market assumes that there are no artificial constraints on supply or demand, but pretty much every article on this fine blog contradicts that by pointing out that

? corporations are currently engaged in monopolies, oligopolies, and cartels
? hoarding real and digital products is common
? protectionism comes in many forms and cannot be totally ended

So no, it’s not a joke on the free market, it’s an assault on the rule of law by granting damages where no infringement has been proved and it’s a sign that the patent system is indeed broken.

We need a radical overhaul of the patent system, and frankly, I find it increasingly hard to justify the existence of patents in the 21st century at all unless the product is truly exceptional.

Patents for non-practicing entities have no place in a civilized world.

For the record, I believe that a civilized society requires a mixed economy, where the government runs essential services but private enterprises are allowed to compete on service.

Anonymous Coward says:

"... censor dissenting opinions ..." Whuuu?

Nah, you little turds have to censor dissenting opinions for fear the truth might be visible.

Provably false. At the time of creating this comment there are PLENTY of dissenting opinions in just this one article that have not been reported into hidden status (which is totally different than censored). For example, this one and this one and this one and this one and this one and this one and this one.

Beginning to see a pattern here? It’s not dissent that gets one reported, it’s obvious and intentional childish, obnoxious, arrogant and assholish behavior (brought to you courtesy of OOTB) that gets people to click the report button.

Notice how the ONLY other comments reported to hidden (at the time I posted this) is one that is incredibly misinformed or the other that is flat out racist

CFWhitman says:

Patent Misconception

There is a very simple difference between the way patents are often used now (especially software patents and “business method” patents) and the reason they were created in the first place. I don’t know why people don’t seem to be able to see it, but here it is.

Patents were created to protect people who found a desirable new method to reach an established goal. Instead, now, they are being used as a way to protect people using an established method to reach a desirable new goal.

It’s not the goal that is supposed to be new and non-obvious for a patent to be valid. You don’t even have to know what you’re doing to come up with a new, non-obvious goal. That’s why they’re not patentable. Science fiction writers would deserve a lot of patents if the goal (or idea) was the patentable part. It’s the way the goal is reached that has to be new and non-obvious. It doesn’t matter how new a goal is if, given the goal, anyone skilled in the art would easily be able to reach it. Basically all software patents are obvious for this reason. All programmers are simply using the same logic structures that are common to programming languages.

This used to be recognized in the past. That is why software patents were not recognized by the patent office. It’s actually interesting that recipes and mathematical algorithms are not patentable, since software is, in principle, a cross between a recipe and a mathematical algorithm. If patents were granted the way they were originally intended, 99% of software patents would never have been given out in the first place.

Don Smith says:

I call BS

They should not have to prove anything to anyone, about improving a search engine. If they have a patent, it’s a valuable property. End of story.

And it doesn’t matter if they are “doing nothing” but collecting revenus from patents. If I am a limited partner in a building in NYC that pulls in $100 million in rent a year, I get a share of that even though I am doing nothing but sitting on my arse.

Stop trying to take someone else’s property. And hire better lawyers that search prior patens better.

John85851 (profile) says:

Legalized extortion again

This is legalized extortion again. The choice is pay $X million now to settle or pay $X million times 2 or 3 to your attorneys to fight the case, which you may lose and have to pay the money plus damages for dragging out the case. Sure, it’s your legal right to defend yourself, but it’ll cost you money that would be better spent in many, many other areas.

Joseph Saad (profile) says:

Not a "failed ring-tone company"

Vringo’s website describes them as “as engaged in the innovation, development and monetization of intellectual property and mobile technologies. Vringo’s intellectual property portfolio consists of over 500 patents and patent applications covering telecom infrastructure, internet search, and mobile technologies.”

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