ParkerVision (PRKR)'s nearly decades-long lawsuit versus Qualcomm (QCOM), recently filed again on 7/20/11, is finally wrapping up and could potentially be a 5x return event for the stock by October of 2013.
After nearly a decade of litigation, 235 court filings, the recent decisive Markman hearing upholding all 92 of ParkerVision's claims against Qualcomm leaves the company poised to benefit from damages that can exceed $1 billion, or potentially treble that amount, for a company with a current market cap of ~$300mm.
First, the financial implications, then the legal details:
ParkerVision has 82.5 million shares outstanding. Using the historical licensing revenues of $650mm (based on 10 years ago), and grossing that up to Qualcomm's run rate today, you have roughly a $1b in license revenues tied to that technology.
The potential to treble damages aside, $1b represents about $12.10 a share incremental to ParkerVision, which would place the stock at around $15.50 or so, or ~4.5x higher than current values.
The potential to treble damages would represent further upside from this amount.
While ParkerVision has historically not turned an operating profit, it is my view that the normative cash value alone for the company would necessitate the company trading for at least cash value of $15-16 a share, plus potential for treble should put the stock into the $20 range by the end of the year.
Now, the legal background:
The main infringement by Qualcomm against ParkerVision's technology lies with its QSC6270 chip, which was introduced in November 2006. The chip, which is the basis for QCOM's 3G cell phone technology, has driven overall cell phone market share to 40%, including 50% in smartphones, and ~$20bb in annual revenues as of 2012. Essentially, court filings have shown that from 1998-2000, ParkerVision's CEO and colleagues taught QCOM how to use ParkerVision's technology, in an effort to win share, that QCOM copied and used for its own chip. The lawsuit names executives all the way from the top down, including Jeff Jacobs (son of CEO, head of development), and major execs.
A court filing from April estimated that if QCOM had licensed the technology from ParkerVision, it would have had to pay ParkerVision $636-$678mm in license revenues.... in 1999. Given that the mobile phone market is >10x as large as it was a decade ago, the amount today is quite meaningful.
While there is much to say regarding the legal claims on both sides, the most defining moment, and the real catalyst for this setup, is the Markman hearing, which took place in summer of 2012. A Markman hearing is a pre-trial hearing where the judge sets the definitions for patent infringement, and indicates a preliminary way the case is leaning. On this case, the judge found that Qualcomm violated EVERY SINGLE CLAIM , a highly unusual occurrence, and indicating that the trebling damages penalty is likely to be enforced if the ruling holds up.
Finally, on January 22nd, the judge dismissed with prejudice Qualcomm's disclosure allegations, and put the burden of proof of Qualcomm to prove misrepresentations.