(Bloomberg) — Sonos Inc. rose after winning a trade agency case against Alphabet Inc.’s Google that analysts including one at Morgan Stanley say could help push the companies into an eventual agreement over patent royalties for home audio systems.
The U.S. International Trade Commission on Thursday issued an order that Google must stop importing phones, smart home devices and laptops that are using Sonos’ patented inventions without permission. Barring an unlikely reprieve from the Biden administration, Google has 60 days to implement pre-approved software changes to avoid having the ban take effect.
Sonos was up 4.71% to $30.23 at 9:49 a.m. in New York trading. Alphabet was little changed.
The ruling was a “clear win” for Sonos, and provides further proof that the firm has industry-leading intellectual property that it can successfully defend, Katy L. Huberty, an analyst with Morgan Stanley, said in a note to clients.
“We’ve seen Sonos defend its IP and negotiate licensing agreements with smaller competitors,” Huberty wrote. The ITC ruling “against one of the largest technology companies in the world marks an important point in Sonos’ path towards monetizing its IP portfolio.”
Exactly which products are affected by the import ban wasn’t publicly listed by the agency, but the case involved a broad range of Google products with sound systems, such as the Nest Hub, Nest Wifi point, Pixel smartphones and Pixelbook laptops.
The companies, which continue to work together on some products, are fighting over sound technology that’s transformed how consumers stream music and podcasts, listen to audio audiobooks, and demand “theater-like” sound while watching movies from home. Sonos has been losing market share to lower-cost devices by Google and Amazon.com Inc.
Sonos claims Google learned of Sonos’s technology under the guise of a working partnership to integrate Google Play Music into Sonos products, but instead used the patented ideas in its Home and Chromecast systems and Pixel phones and laptops. Google has filed its own claims in district court accusing Sonos of trying to take credit for work owned by Google and said Sonos has “misrepresented our partnership and mischaracterized our technology.”
Reaching an agreement won’t be easy or fast. That Google can work around the import ban means “remote odds of a near-term pact,” Tamlin Bason, an analyst with Bloomberg Intelligence, said in a note.
He said Google is looking to chip away at how much it would have to pay in royalties. Bason said the next big catalyst is in one of the suits between the companies in California where a June hearing “will test the strength of each side’s case.”
The case is In the Matter of Certain Audio Players and Controllers, 337-1191, U.S. International Trade Commission (Washington).
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