On April 4, a German court invalidated Apple's (AAPL) "Slide to Unlock" patent (#EP20080903, the European counterpart to Apple's U.S. Patent #7,657,849) due to Neonode's (NEON) prior art. This is the third time Apple was patent-blocked by Neonode in the last 20 months.In August 2011, a Dutch Court invalidated the AAPL patents for the same Neonode reason (the N1 phone was prior art) to the benefit of Samsung (SSNLF.PK). Meanwhile, a London (England and Wales) High Court did the same in July 2012 for the benefit of HTC.
While NEON's N1 and N2 "touch-only" handsets were introduced way too early (2004-08) and ultimately failed to sell (despite their prescience), its underlying optical touch and user-interface patents have become timeless and continue to be an expanding thorn in AAPL's side. Since re-emerging as a licensing company in 2009, NEON has quickly become a prolific patent filer (47 new patent applications in 2012, up from an aggregate of 17 in prior years), and has been granted 10-plus patents.
More significantly, its user interface patent ('879, which took a decade to be issued by an overly cautious USPTO in early 2012), which encompasses "Slide to Unlock," could potentially wreak havoc on Apple. It could also do the same to Samsung, Motorola/Google (GOOG), and HTC, all of which have been major beneficiaries of NEON's prior art (as they have avoided billions in potential liability).
While NEON management has been understandably (and characteristically) reticent about its patent-monetization strategy, as it certainly does not want to risk a declaratory judgment from Apple (or from every Android smartphone OEM, including "NEON-prior-art cheerleaders" like Samsung, HTC, and Google/Motorola), we know the company hired Quinn Emanuel (who also represents Samsung) almost a year ago to do a review. During NEON's last conference call, management indicated it was in the "latter stages" of this independent review (which likely augurs quite well for NEON's prior art results).
Thus, I wonder how long it is before NEON starts filing litigation, and/or gets some serious M&A attention. I am fairly confident there would be a long line of tier-one contingency litigators, experts, and litigation finance firms waiting to finance a patent-infringement run at the entire smartphone sector. NEON's strengthening patent position, along with the likelihood that its upcoming/anticipated PC touch solution be a savior for PC OEMs (which have to contend with the onerous touch requirements of Microsoft (MSFT) Windows 8 and Intel's (INTC) Haswell), should be enough of an M&A catalyst over the next few quarters.