What's Google's Best Defense Against The Vringo Suit?
James is a member of The Motley Fool Blog Network -- entries represent the personal opinion of the blogger and are not formally edited.
Oy vey. Against my better judgment, I'm going to share a few more thoughts on the Vringo (NASDAQ: VRNG) suit against Google (NASDAQ: GOOG). I've already posted a couple of comments on the matter elsewhere, both of which were completely misinterpreted. I suppose I'm a glutton, however, 'cause I have to look at one more key aspect to the impending decision. This time though, a trio of truths to stave off any death threats...
- I have no position, long or short, on Vringo. Frankly, I don't really care about how the lawsuit ends. I just find this to be a fascinating study in trading behavior and investor assumptions.
- I'm not going to dissect the daylights out of every single patent. If I did that, this would become a 14-page diatribe. That doesn't mean I'm ignoring key details though. I'm just trying to paint a bigger picture.
- My goal -- my only goal -- is to start a dialog about some things nobody is talking about now that may end up mattering later.
Fair enough? Let's dig in.
In simplest terms, Vringo is suing Google for patent infringement. There are eight related patents involved (all formerly owned by Innovate/Protect), but there are only two key components to the complaint... Vringo is saying the "relevance" aspect of Google's search results is actually based on Vringo patents, and Vringo is saying, by extension, the "relevance" aspect of Google's ad-display mechanism is also based on Vringo's patents; "clicks" lay the groundwork for the whole shebang. And to its credit, Vringo's patents do look like they're the foundation for a decent argument, since how they're described seems to jive with how Google behaves. That much, most of you know, though if you want more of the story, John Ford has a good overview.
Moreover, the Markman hearings seem to lean in favor of Vringo, though the actual patent trial isn't scheduled until October.
Everyone up to speed? Great, and given just that much information, the Vringo case looks solid. Google may have a better defense than Vringo fans may recognize though. Here are the potential stumbling blocks Google could create between now and then.
Google Has 'Relevance' Patents Too
Have you taken a look at the patents Vringo is using to support its legal argument? I mean, have you really taken a close look at them, and compared them to Google's?
As I noted above, I'm not interested in exploring every nuance of every patent in question. But, I do think there are a couple of details worth exploring, like the nature of Vringo's search relevance patent.
Take this snippet from Vringo's patent US6314420 for instance, which covers a "collaborative/adaptive search engine" mechanism (issued in November of 2001). The abstract description of the mechanism itself is "A search engine system is provided for a portal site on the internet. The search engine system employs a regular search engine to make one-shot or demand searches for information entities which provide at least threshold matches to user queries. The search engine system also employs a collaborative/content-based filter to make continuing searches for information entities which match existing wire queries and are ranked and stored over time in user-accessible, system wires corresponding to the respective queries. A user feedback system provides collaborative feedback data for integration with content profile data in the operation of the collaborative/content-based filter. A query processor determines whether a demand search or a wire search is made for an input query."
In simpler terms, it's the design for a process that gives someone surfing the web a more relevant search result, based on which links users click, and which ones they don't. And you can even go as far as to look at the patent's diagrams and flowcharts (figures 3, 4, and 5, to be specific) to see that Vringo understands how to make web-searching more effective for web users.
Bam! Google is so busted, right?
Ehhh, hold your horses there. Google has patents too, like US6285999, which covers "Method for node ranking in a linked database." The abstract description says the mechanism is a follows: "A method assigns importance ranks to nodes in a linked database, such as any database of documents containing citations, the world wide web or any other hypermedia database. The rank assigned to a document is calculated from the ranks of documents citing it. In addition, the rank of a document is calculated from a constant representing the probability that a browser through the database will randomly jump to the document. The method is particularly useful in enhancing the performance of search engine results for hypermedia databases, such as the world wide web, whose documents have a large variation in quality."
If it rings a bell, it may be because it is indeed a lot like the patent Vringo is now defending... not in form, but in function. Both were approved by the USPTO, and Google could be using its own patent, even if it superficially looks (and acts) like the Vringo patent.
Sure, while programmers may be able to see a difference, remember, programmers aren't going to be judging this case. If it goes to trial, the issue will boil down to regular people trying to make a clear distinction between what Google's patent accomplishes and what Vringo's patent accomplishes.
At issue: "Clicks" and the click-through rate will be a battleground -- perhaps the battleground. Vringo will argue that this Google video explanation follows the Vringo process for finding relevance. Google will, or should, argue that the video was produced for its advertising customers, and not necessarily designed to be a snapshot of how its algorithm or patent works.
Here's the catch for Vringo... even if the company doesn't cite 6285999, Google could fall back to the patent approved in 2003, for "an improved search engine that refines a document's relevance score based on interconnectivity of the document within a set of relevant documents." Maybe it will want to explain the "Methods and systems for output of search results" patent from 2010. Or best of all, it could cite the combination of several search related patents, which would make it near impossible to say how its search results were being derived.
All of a sudden, the arguments get real messy. How's a jury supposed to know how Google really determines relevance when it's got multiple patents on the process, and nobody actually knows how the algorithm works? Are clicks the only factor? Doubtful. Vringo's asking a lot from a jury.
Google's Got a Good 'Relevant Ads' Defense Too
But what about using that "relevance" to display certain (more effective) advertising on a search results page? Though it has no patent specifically related to the relevancy of the ads it presents on a search page, one can infer that since Google is using Vringo's search methodology, then Google is also benefiting by being able to place more/better targeted ads. Ergo, Vringo should also be awarded for the fact that Google's superior search engine happens to be generating superior ad revenue.
That's the gist of the official complaint from Vringo anyway. As it states, "Google's search advertising systems filter advertisement by using 'Quality Score,' which is a combination of an advertisement's content relevance to a search query and click-through rates from prior users relative to that advertisement …[a]fter adopting the Lang/Kosak Relevance Filtering Technology, Google's market share significantly grew and its profits from search advertising considerably outpaced those of other PPC advertising providers… [t]he Lang Kosak Relevance Filtering Technology proved to be extremely valuable to Google, allowing Google to generate greater profits to expand…"
Uh-oh. Google really does place relevant ads on its search query pages. Looks like Vringo deserves a piece of that action… Google's bread and butter.
Problem for Vringo: Google has its own patent for delivering targeted, relevant ads based on a search results page. Its patent 20050222901, assigned to Google's attorneys in January of 2005, covers the process for "providing advertisements from related search queries." The abstract describes the mechanism as "Ad information, such as ad targeting keywords and/or ad creative content for example, may be determined using aggregated selected document-to-query information associations. For example, popular terms and/or phrases also associated with a selected document may be used as ad targeting keywords and/or ad creative content for an ad having the document as a landing page. Query information may be tracked on a per document level, a per domain level, etc. The determined ad information may be used to automatically populate an ad record, or may be provided to an advertiser as suggested or recommended ad information."
See where this is going?
And the more you read into each patent's document, the more difficult it is to distinguish between them (form as well as function). As was the case with the other patents, Google's 20050222901 filing has its own flowchart and technical schematic for ad selection. It doesn't look exactly like Vringo's. Even if it yields the same results as the Vringo process is supposed to, as long as Google is using its process rather than someone else's, it's protected; the fact that the USPTO already approved the patent means Google has a defense.
And if that's not good enough, Google may decide to cite US2010211960, for "Characterizing user information." Or maybe it will discuss several patents it owns that have to do with ad selection.
I could go on, but as I promised above, I don't want this to turn into a rehash of every single patent in question. These two examples make the bigger point -- while there's some similarity to what Vringo's patents describe and what Google looks and acts like, Google's behavior also looks and acts a lot like what Google's own patents describe. Vringo is going to have to disprove Google isn't using its own patented processes as much as it will need to prove Google is using Vringo's technology…. and that "disprove" hurdle's a heck of a lot higher, especially with a jury made up of regular people.
It's the quintessential complaint of modern patent law... anybody could argue almost anything, as patents are issued for everything, and overlap is rampant.
Said in simplest terms, Vringo is going to have to get very, very clear with a judge and jury to explain how its patented processes are the ones being used rather than Google's own patents. That's hard enough to do with the USPTO. Now Vringo wants to make their case for the non-experts, though Google has patents that look and feel about the same as Vringo's. You read them above -- this isn't a black and white science. Indeed, it's incredibly grey, and there's a ton of overlap (aka "prior art") in what all these patents accomplish.
I've got a feeling the complexity of the issue will be THE issue in the future, which will work for Google and against Vringo. In fact, the more patents Google can cite as being applied to their search and ad-placement process, the messier the issue becomes, to Google's advantage. That's not a prediction ... just a feeling. [My prediction is it will be settled out of court before the trial, making much of my opinion moot. It's still leverage for Google though, which could drive any settlement value downward.]
Oh, and while the Markman hearings bode well for Vringo, they don't necessarily bode poorly for Google. Google's existing patent portfolio wasn't part of the equation. James Altucher has a good synopsis of what the Markman hearing meant, and why it may have favored Vringo.
All right, that's it. Like I said above, I have no position in either stock, and I really don't care how it all unfurls. I just wanted to give you another perspective on the story, if only because nobody else has. The deck may still be stacked a little against Google, but I think the web-search giant still has some decent cards to play from its own patent library. It's going to be fun to watch no matter what.
So what do you think? As always, chime in below. Feel free to disagree too. Just please keep all the comments thought-provoking and well-founded, as I have above. If you're a rabid VRNG fan who thinks the stock is a guaranteed, bulletproof lottery ticket and you will do anything and everything to squash a counter-opinion, you probably won't have anything constructive to add. If you've got a well-reasoned contribution though, please share.
jbrumley has no positions in the stocks mentioned above. The Motley Fool owns shares of Google. Motley Fool newsletter services recommend Google. Try any of our Foolish newsletter services free for 30 days. We Fools may not all hold the same opinions, but we all believe that considering a diverse range of insights makes us better investors. The Motley Fool has a disclosure policy.If you have questions about this post or the Fool’s blog network, click here for information.