Because the realm of technology is so diverse, technology stocks often find themselves infringing on each others' patents, either willfully or accidentally. These patent infringements can have ramifications on stock prices for each company concerned, whether it is the perpetrator of the infringement or the victim. In this article, I will look at patent wars involving Nokia (NYSE:NOK), Google (NASDAQ:GOOG), Apple (NASDAQ:AAPL), Microsoft (NASDAQ:MSFT), and Motorola (NYSE:MMI) and have a look at the past, current and potential future impact that these battles may have on each companies' stock values.
Let's start with Google, a company that is involved in more than one patent dispute at the moment. In most recent news, Nokia raised concerns that Google's new Nexus 7 tablet violates its patents, although, at this point in time, it remains unclear on exactly what aspect of Nokia's patents are being violated by Google. In addition, we do not know if there are any legal proceedings underway to deal with the situation. At this point in time, it is merely a situation that investors need to keep a close eye on. Nokia shares are down, however, from over $6 this time last year to just above $2 per share. There has been a noticeable and consistent decline in the company's stock value of late. Whether or not the patent battle directly impacts on this situation remains unclear at this point.
Google is also faced with a threat from Apple at the moment. Recently, Apple was granted a patent for a head-mounted display apparatus that is very similar to Google's Glass prototype. In addition to simply facing an increase in competition as a result of this news, it seems to me that, on examining the specifics of the Apple product, it has a much wider application than the very specific Google Glass offering. I think that Google will take the lead at first, because it will be the first one on the market, but more and more, people will soon start to purchase the Apple product, because it can be used with a wider variety of media, giving Apple the lead in the long run. However, Apple still lags behind Google rather considerably in terms of the stock market figures at the moment. But, as usual, Google remains unaffected by the bad news, at least from the point of view of its stability on the stock market. Despite accusations of patent violation and despite losing its advantage in the head-mounted display apparatus arena, Google still remains a strong stock with market capital of $191.64 billion. Google's been up lately, and has reached over $587 per share. Although it has experienced a decline in recent weeks, Google is still going strong. It seems that the stronger the company (here, read "Google"), the less likely a patent problem is to affect it in a serious manner.
Microsoft and Motorola have also been engaged in a patent dispute recently. The U.S. International Trade Commission made a ruling in April of this year regarding supposed patent infringements in relation to Microsoft's Xbox. This is an extremely important case and, as one source puts it, it has
attracted a lot of attention including from the U.S. Federal Trade Commission on the issue of licensing of standards-essential patents.
Essentially, the ruling that was passed stated that there would be a complete ban of Xboxes in the US as a result of the patent violation that Microsoft was responsible for. However, it appears that the ruling is being reviewed, which means that Microsoft may not, after all, have to suffer the huge loss that a ban on Xboxes will create. Currently, Microsoft is up to over $30. Overall, the company's share prices are higher this year than they were in the second half of last year, and, apart from a dip in June, the company has been going strong. The current increase could be due to the news that the decision to ban Xboxes is being reviewed.
If the review produces a result that is in the favor of Microsoft, I suspect that we will see a further increase in the company's share prices over the next few weeks and months. Microsoft has a lot of competition to face from several angles, but with a market capital of $258.41 billion and dividend and dividend yield of 0.80 (2.60%), I feel that it will be able to maintain its position as a major player in the market.
Patent disputes are a major theme in the market today, as companies do not want to lose out on profits that are rightfully theirs. However, it seems that these disputes are not having a huge impact on the majority of stock values. I feel that investors are becoming used to patent disputes and assume that the situation will be resolved sooner rather than later with little or no change caused by it in the fortunes of the company in which they have an interest. Either way, tech companies getting wrapped up in court does not strike fear into investors the way an oil company or a pharmaceutical company might. Stick with these tech stocks through any legal troubles, unless, of course, that company is Nokia.
Disclosure: I have no positions in any stocks mentioned, and no plans to initiate any positions within the next 72 hours.