InterDigital Loses First Round in Patent Case Over Nokia

InterDigital Inc., developer of fundamental mobile-phone technology, lost the first round of its latest effort to get patent royalty payments on sales of Nokia Oyj phones. InterDigital fell the most since December.

Nokia phones, now made by Microsoft Corp., and ones by ZTE Corp. didn’t violate InterDigital patent rights, U.S. International Trade Commission Judge Theodore Essex said in a notice posted on the agency’s website. The judge’s full findings, which are not yet publicly available, are subject to review by the commission, which has the power to block imports of products that infringe U.S. patents.

This is the third case InterDigital has filed at the Washington-based ITC over the latest generation of mobile phones since 2007. It lost the first, which was later revived on appeal, and is appealing a loss in the second case. The company got almost all of its $325 million in sales last year from patent licensing with companies such as BlackBerry Ltd. and HTC Corp.

InterDigital called the decision “unfortunate” and pledged to challenge the judge’s findings. Two of the three patents in the case were already upheld by an appeals court in another case.

The decision “does not align with the validation of our portfolio and licensing practices that is reflected in our numerous agreements with major wireless companies worldwide,” InterDigital Chief Executive Officer William Merritt said in a statement.

Shares Fall

InterDigital fell 6.6 percent to $45.06 at 4 p.m. in New York trading of more than 3 million shares, almost seven times the three-month daily volume average. It was the biggest one-day drop since Dec. 20, when the ITC ruled against InterDigital in its second case against Nokia.

Microsoft bought Nokia’s handset business in April and has told the agency it agreed to assume all of Nokia’s liabilities and have “sole control over the defense, including sole authority to resolve this action.” David Cuddy, a spokesman for Redmond, Washington-based Microsoft, said the company had no comment.

Nokia is accused of infringing a patent for a method to improve transmissions. ZTE is accused of infringing that patent as well as two others for mobile-phone technology. The judge said there was no violation “by reason of infringement” without providing more information.

In 2006, Espoo, Finland-based Nokia agreed to pay InterDigital $253 million to end a licensing dispute over earlier phone technology. A year later, InterDigital filed suit again over technology not covered by the earlier agreement and they’ve not been able to reach an agreement since.

ZTE, Huawei

In December, the commission rejected patent-infringement claims against Nokia, ZTE and China’s Huawei Technologies Co. That case, as it pertains to Nokia and ZTE, is on appeal. InterDigital and Huawei settled their part of the dispute.

Samsung Electronics Co. also was named in this case, and settled last week by agreeing to pay royalties to InterDigital.

The company has been swept up into a broader debate over whether patents for aspects of standardized technology should be treated differently than other inventions. Because the judge’s full report isn’t yet public, it’s unknown whether that was a factor in his decision.

The case is In the Matter of Certain Wireless Devices with 3G and/or 4G Capabilities, 337-868, U.S. International Trade Commission (Washington).

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