Wednesday morning, a microcap developer of mobile applications called Vringo - the name comes from a combination of video and ring tones - announced a deal to merge with Innovate/Protect, a company that owns a group of patents acquired from Lycos, a search engine that last had significant market share in the 1990s. Innovate/Protect's CEO/CTO Andrew Lang, is a former Lycos CTO.
Now, the thing is that in September 2011, Innovate Protect filed a patent infringement lawsuit in the Eastern District of Virginia against Google, AOL, IAC Interactive, Gannett and Target for "unlawfully using systems that incorporate features claimed in two patents" held by the company. The patents relate to relevance search technology that the company says has become "the dominant technology used in search advertising to position high-quality advertisements."
As I reported in a post last year on the lawsuit, an Innovate/Protect unit called I/P Engine in 2011 acquired for $3.2 million a portfolio of patents from Lycos, which in turn had obtained them via the acquisition of WiseWire in May 1998 for $39.75 million. WiseWire was founded by Lang and Donald Kosak, both of whom joined Lycos after the acquisition – and both of whom now are part of the I/P Engine management team. Lycos is currently owned by Ybrant Digital, a company based in Hyderbad, India.
Vringo will issue 16,972,977 shares in exchange for all shares of Innovate/Protect, along with preferred convertible into another 21,026,637 shares, and a warrant covering another 15,959,838 shares.
On completion of the deal, former Innovate/Protect holder will own 55.41% of Vringo, not counting the covert or the warrants.
The company's board will include, among other people Donald Stout, the founder of NTP, a patent troll which milked Research In Motion for $612.5 million in a patent infringement settlement reached in 2006.
So, class, are we following here? Vringo, a third-tier app company, which somehow is publicly traded, basically has converted itself into a public held bet on a piece of litigation against a variety of large companies in hopes of wringing out a giant financial payday. This is unfolding just days after Yahoo filed a mammoth patent infringement case against Facebook. Makes you proud to be an American, doesn't it?
I know what Mark Cuban would think.
Completion of the transaction, which is expected to occur in the second quarter, will be subject to approval by Vringo’s shareholders and customary closing conditions.
Investor Teleconference
The Company will host a teleconference on Wednesday, March 14, 2012, at 8:45 am EDT to discuss today’s announcement.
To access the live conference call, participants may dial 866-770-7051 or 617-213-8064, passcode 62161274.
A simultaneous webcast will be available and can be accessed through the Investors section of Vringo’s website at www.vringoinc.com <http://www.vringo.com> . It can also be accessed via the following link:
http://www.media-server.com/m/acs/748729f15d3395743b29d00f5d843e1b <http://www.media-server.com/m/acs/748729f15d3395743b29d00f5d843e1b>
· A recorded replay of the teleconference will be available from 10:45 am EDT until March 21, 2012. The replay may be accessed through the Investors section of Vringo’s website, www.vringoinc.com <http://www.vringoinc.com> , or by dialing 888-286-8010 or 617-801-6888 and entering passcode 21675695.
For Additional Information: www.VringoIP.com
About Innovate/Protect Inc.
Innovate/Protect Inc. is an intellectual property firm founded in 2011 whose wholly-owned subsidiary, I/P Engine, holds eight patents that were acquired from Lycos Inc.
About Vringo
Vringo (NYSE Amex: VRNG) is a provider of software platforms for mobile social and video applications. With its award-winning video ringtone application and other mobile software platforms - including Facetones™, Video Remix and Fan Loyalty - Vringo transforms the basic act of making and receiving mobile phone calls into a highly visual, social experience. Vringo's video ringtone service enables users to create or take video, images and slideshows from virtually anywhere and turn it into their visual call signature. In a first for the mobile industry, Vringo has introduced its patented VringForward technology, which allows users to share video clips with friends with a simple call. Vringo's Facetones™ application creates an automated video slideshow using friends' photos from social media web sites, which is played each time a user communicates with a friend using a mobile device. Vringo's Video ReMix application, in partnership with music artists and brands, allows users to create their own music video by tapping on a Smartphone or tablet. Lastly, Fan Loyalty is a platform that lets users interact, vote and communicate with contestants in reality TV series with which Vringo partners, as well as downloading and setting clips from such shows as video ringtones. Vringo's video ringtone application has been heralded by The New York Times as "the next big thing in ringtones" and USA Today said it has "to be seen to be believed." For more information, visit: www.vringoip.com <http://www.vringoip.com> .
Important Additional Information Will Be Filed with the SEC
This communication does not constitute an offer to sell or the solicitation of an offer to buy any securities of Vringo, Inc. ("Vringo") or Innovate/Protect, Inc. ("Innovate/Protect") or the solicitation of any vote or approval. In connection with the proposed transaction, Vringo will file with the U.S. Securities and Exchange Commission ("SEC") a Registration Statement on Form S-4 containing a proxy statement/prospectus. The proxy statement/prospectus will contain important information about Vringo, Innovate/Protect, the transaction and related matters. Vringo will mail or otherwise deliver the proxy statement/prospectus to its stockholders and the stockholders of Innovate/Protect when it becomes available. Investors and security holders of Vringo and Innovate/Protect are urged to read carefully the proxy statement/prospectus relating to the merger (including any amendments or supplements thereto) in its entirety when it is available, because it will contain important information about the proposed transaction.
Investors and security holders of Vringo will be able to obtain free copies of the proxy statement/prospectus for the proposed merger (when it is available) and other documents filed with the SEC by Vringo through the website maintained by the SEC at www.sec.gov. In addition, investors and security holders of Vringo and Innovate/Protect will be able to obtain free copies of the proxy statement/prospectus for the proposed merger (when it is available) by contacting Vringo, Inc., Attn.: Cliff Weinstein, VP Corporate Development, at 44 W. 28th Street, New York, New York 10001, or by e-mail at cliff@vringo.com. Investors and security holders of Innovate/Protect will also be able to obtain free copies of the proxy statement/prospectus for the merger by contacting Innovate/Protect, Attn.: Chief Operating Officer, 380 Madison Avenue, 22nd Floor, New York, NY 10017, or by e-mail at info@innovateprotect.com.
Vringo and Innovate/Protect, and their respective directors and certain of their executive officers, may be deemed to be participants in the solicitation of proxies in respect of the transactions contemplated by the agreement between Vringo and Innovate/Protect. Information regarding Vringo's directors and executive officers is contained in Vringo's Annual Report on Form 10-K for the fiscal year ended December 31, 2010, which was filed with the SEC on March 31, 2011, and in its proxy statement prepared in connection with its 2011 Annual Meeting of Stockholders, which was filed with the SEC on May 25, 2011. Information regarding Innovate/Protect's directors and officers and a more complete description of the interests of Vringo's directors and officers in the proposed transaction will be available in the proxy statement/prospectus that will be filed by Vringo with the SEC in connection with the proposed transaction.
Cautionary Note Regarding Forward-Looking Statements
Statements in this press release regarding the proposed transaction between Vringo and Innovate/Protect; the expected timetable for completing the transaction; the potential value created by the proposed merger for Vringo's and Innovate/Protect's stockholders; the potential of the combined companies' technology platform; our respective or combined ability to raise capital to fund our combined operations and business plan; the continued listing of Vringo's or the combined company's securities on the NYSE Amex; market acceptance of Vringo products; our collective ability to protect our intellectual property rights; competition from other providers and products; our ability to license and monetize the patents owned by Innovate/Protect, including the outcome of the litigation against online search firms and other companies; the combined company's management and board of directors; and any other statements about Vringo's or Innovate/Protect's management teams' future expectations, beliefs, goals, plans or prospects constitute forward-looking statements within the meaning of the Private Securities Litigation Reform Act of 1995. Any statements that are not statements of historical fact (including statements containing the words "believes," "plans," "could," "anticipates," "expects," "estimates," "plans," "should," "target," "will," "would" and similar expressions) should also be considered to be forward-looking statements. There are a number of important factors that could cause actual results or events to differ materially from those indicated by such forward-looking statements, including: the risk that Vringo and Innovate/Protect may not be able to complete the proposed transaction; the inability to realize the potential value created by the proposed merger for Vringo's and Innovate/Protect's stockholders; our respective or combined inability to raise capital to fund our combined operations and business plan; Vringo's or the combined company's inability to maintain the listing of our securities on the NYSE Amex; the potential lack of market acceptance of Vringo's products; our collective inability to protect our intellectual property rights; potential competition from other providers and products; our inability to license and monetize the patents owned by Innovate/Protect, including the outcome of the litigation against online search firms and other companies; and other risks and uncertainties more fully described in Vringo's Annual Report on Form 10-K for the year ended December 31, 2010 and its Quarterly Reports on Form 10-Q for the quarters ended March 31, 2011, June 30, 2011 and September 30, 2011, each as filed with the SEC, as well as the other filings that Vringo makes with the SEC. Investors and stockholders are also urged to read the risk factors set forth in the proxy statement/prospectus carefully when they are available.
In addition, the statements in this press release reflect our expectations and beliefs as of the date of this release. We anticipate that subsequent events and developments will cause our expectations and beliefs to change. However, while we may elect to update these forward-looking statements publicly at some point in the future, we specifically disclaim any obligation to do so, whether as a result of new information, future events or otherwise. These forward-looking statements should not be relied upon as representing our views as of any date after the date of this release.
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