Sonos Inc. rose after winning a trade agency case against Alphabet Inc.'s Google, which analysts say could help push the companies into an eventual agreement over patent royalties for home audio systems.
The U.S. International Trade Commission has issued an order that Google must stop importing phones, smart home devices and laptops that use Sonos patented inventions without permission. Google has 60 days to implement pre-approved software changes in order to avoid having the ban in place, despite an unlikely reprieve from the Biden administration.
Sonos was up 4.71% to $30.23 at 9: 49 a.m. in New York trading. Alphabet was little changed.
Katy L. Huberty, an analyst with Morgan Stanley, said in a note to clients that the decision was a clear win for Sonos, and shows that the firm has industry-leading intellectual property that it can defend.
Huberty wrote that Sonos had seen its IP defend and negotiate licensing agreements with smaller competitors. A decision by the ITC against one of the biggest technology companies in the world is an important point in Sonos' path towards monetizing its IP portfolio. The import ban didn't have a public listing, but the case involved a wide range of Google products with sound systems, such as the Nest Hub, Nest Wifi point, Pixel phones and Pixelbook laptops.
The companies, which are working together on some products, are fighting over sound technology that has transformed the way consumers stream music and podcasts, listen to audiobooks, and demand theater-like sound while watching movies from home. 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 its patented ideas in its Home and Chromecast systems and Pixel phones and laptops. In district court, Google accused Sonos of trying to take credit for work owned by Google, and said Sonos misrepresented our partnership and misrepresented our technology. It won't be easy to reach an agreement. Tamlin Bason, an analyst with Bloomberg Intelligence, said that Google can work around the import ban means remote odds of a near-term pact.
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 be held to determine the strength of each side's case.