Qualcomm Inc. (QCOM), the most cash-rich semiconductor company, was told by a federal jury to pay $173 million to money-losing ParkerVision Inc. (PRKR) for infringing wireless-network patents used in smartphones. ParkerVision plunged.
While it’s the largest patent jury verdict so far in 2013, and ninth-largest of all U.S. jury awards according to data compiled by Bloomberg, it’s less than half the $432 million in royalties ParkerVision was seeking. Shares fell 59 percent, wiping out their gains since Oct. 16, the day before ParkerVision won the liability phase of the trial.
“Though this outcome will drive huge profits for shorts in the name like Chapman Capital, it required a terribly naive, unsophisticated and gullible jury to award anything at all to ParkerVision,” said Robert Chapman, a fund manager with Chapman Capital LLC in Manhattan Beach, California. “But I’ll take it.”
The federal jury in Orlando, Florida, rejected ParkerVision’s argument that the infringement was intentional. Had the jury found willfulness, it would have allowed U.S. District Judge Roy Dalton, who is presiding over the case, to increase the award by as much as three times the amount set by the jury.
“We are of course disappointed by the award of damages,” said Christine Trimble, a spokeswoman for Qualcomm. “We are grateful for the jury’s hard work throughout this trial and for the verdict of no willfulness. We will direct our efforts toward addressing the post-trial process and preparing our appeal.”
ParkerVision fell $4.19 to $2.90 at 4 p.m. in New York trading. Qualcomm fell 10 cents, less than 1 percent, to $66.94.
“Juries routinely split the baby on damages and proving willfulness is extremely difficult these days” because of appeals court rulings in other cases, said Dan Ravicher, executive director of the Public Patent Foundation in New York. Ravicher had held ParkerVision shares and sold them after the Oct. 17 jury’s finding that Qualcomm infringed the patents.
ParkerVision said it showed the technology to Qualcomm in the late 1990s during failed licensing negotiations, then discovered in 2011 that Qualcomm had incorporated the inventions in its smartphone chips. Qualcomm owns the most widely used technology standard in mobile phones with Internet access and its chips are used in phones by Apple Inc. and Samsung Electronics Co.
“This is a significant win for ParkerVision, proving that our technologies have a meaningful place in the wireless market,” Chief Executive Officer Jeffrey Parker said.
Qualcomm, based in San Diego, had more than $30 billion of cash and marketable securities at the end of its most recent quarter. It announced in September a $5 billion share repurchase program to return more money to investors.
The biggest maker of chips for mobile phones, Qualcomm gets the bulk of its profits from patent licensing and reported $6.24 billion in revenue in the second quarter.
ParkerVision, based in Jacksonville, Florida, lost $13.6 million in the first half of this year and had no revenue. Investors were counting on a big payout with Qualcomm, and sent ParkerVision shares up 61 percent after the verdict in the first phase of the trial, when the jury said Qualcomm infringed the patents and rejected arguments they were invalid.
Qualcomm argued that the inventions were worth little because they had never been adopted by the industry, and said ParkerVision wasn’t getting much cash from a technology agreement with Via Telecom Inc. It said the more appropriate figure was $17.8 million.
The four patents cover ways to convert electromagnetic signals from higher frequencies to lower frequencies. This makes receivers in mobile phones and tablets smaller, more power efficient and more effective. Qualcomm claimed it never used the technology and came up with its own ideas.
The suit targets Qualcomm transceiver chips, which have names like Astra, Hercules, Iceman, Magellan, Napoleon, Solo and Voltron, used in phones and other electronic devices. Qualcomm’s baseband chips are key components in phones such as Apple’s iPhone and high-end models in Samsung’ Galaxy line.
ParkerVision said the judge still has to consider whether to issue an order blocking Qualcomm from using the technology. Current Supreme Court law makes it difficult for companies that don’t make products to obtain such an order. In court filings, ParkerVision asked that, should the request be denied, Qualcomm be ordered to pay royalties through the life of the patents.
“The market, though, doesn’t seem to recognize the value to Parkervision of an injunction against, or future royalties from, Qualcomm,” Ravicher said.
The case is ParkerVision v. Qualcomm, 11cv719, U.S. District Court for the Middle District of Florida (Orlando).
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