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Wednesday, October 08, 2008
Dave Mock :: Townhall.com Columnist
InterDigital Loses Some Footing
by Dave Mock
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It's only just begun, but the legal case launched by wireless technology developer InterDigital (Nasdaq: IDCC) against Samsung , the world's second-largest mobile device maker, is already stumbling. This week's evidentiary hearing at the U.S. International Trade Commission (ITC) opened with a blow to InterDigital, as the commission staff recommended a finding of no violation by Samsung.

Of course, the finding is only a recommendation to the administrative law judge, not a binding decision. But many investors apparently saw it as a bad omen; they dumped the stock en masse, leaving InterDigital shares nearly 23% lower by the end of the day of the announcement.

InterDigital originally brought the legal dispute to the ITC in hopes of getting Samsung to pay up early in 2007. InterDigital alleges that certain devices Samsung manufactures violate five of its own patents. As a remedy, InterDigital is seeking an exclusion order to bar Samsung from importing those devices into the United States.

Fortunately for Sprint Nextel (NYSE: S), the order is unlikely to include Samsung's new Instinct smartphone. The struggling carrier and Best Buy (NYSE: BBY) are both dubbing Instinct a record-selling device, and it seems to be stealing some of the spotlight from Apple (Nasdaq: AAPL) and partner AT&T 's (NYSE: T) launch of the next-generation iPhone.

The setback in the ITC case came only a week after some good news for InterDigital: The company and Nokia (NYSE: NOK) agreed to dismiss some legal actions in England. While InterDigital still has other cases pending with Nokia, the two companies have come together to settle at least some of their disputes. Samsung, on the other hand, has apparently been less receptive to making nice with InterDigital. Even though a federal judge put some new teeth behind a separate $134 million arbitration award in InterDigital's favor, Samsung has remained slow on royalty payments.

So even though the ruling by the ITC staff is far from final, the early recommendation will likely only further invigorate Samsung's defense efforts. That makes any sudden settlement and windfall payment highly unlikely between the two parties. If it wants to get any cash from Samsung, InterDigital will probably have pay dearly in time and resources.

Call on further Foolishness:

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About The Author

Dave Mock is a Motley Fool contributor.

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