ParkerVision v. Qualcomm: A Field Day for the Shorts?

ParkerVision v. Qualcomm is a unique patent dispute…

pitting two public IP licensing companies (PIPCOs) with decidedly different business models against each other. The case underscores an a weakness in the public IP licensing model. It can be addressed by providing better information about how the patent system works and managing shareholder expectations.

Qualcomm (QCOM), a certified tech giant that licenses chips used in practically every smart phone sold, and derives billions in profit from patent licensing. ParkerVision (PRKR) is a relative David vs.  giants,  with excellent rights but  more than $20 million in annual losses. It hast has never turned a profit.

Nose Dive

ParkerVision shares were down as much as 60% yesterday on almost 30 times its average daily volume because a Florida Central District Court in Orlando ruled that Qualcomm did not infringe willfully and that the damages award was “only” $173 million, about half of what was expected.

PRKR was up 75% on October 17, trading as high at $7.38 when the validity of its patents were upheld by the court last week.  PRKR had sought damages of $432 million and a wilfulness verdict, which  would have possibly tripled the award.

The market speculation regarding the damages that  PRKR could have won led to extreme volatility. Trading in PRKR shares was halted Wednesday afternoon pending the outcome of the court’s damages ruling. Ironically, a few other public licensing companies halted trading, too, in anticipation of the decision.

Costly Confusion

The audience that benefits most from confusion are the short sellers, who sometimes bid stocks up then bet they will dive, without concern for the fundamentals, or, for that matter, the facts.  As long as the shorts are a step ahead of other investors’ timing they usually wind up winning.  Investment bankers also may benefit from higher market capitalization because it increases the prospect of underwriting secondary or debt offerings.

One significant patent holder told me that a  JP Morgan had pegged the potential damages award with a willfulness finding as high as $2 billion. Flame fanning of this nature merely preys on those already confused about patents and the patent system, and is a blow to PIPCO credibility and long-term acceptance and reliability.

While the damages award is the largest patent jury verdict so far in 2013, and ninth-largest of all U.S. jury awards according to data compiled by Bloomberg, it’s less than half the $432 million ParkerVision was seeking.

That the market saw this otherwise resounding and well-deserved win in court as a something  less than a significant success suggests a failure many to manage expectations.  It can only serve to undermine confidence in IP-centric stocks.

ParkerVision, founded in 1989 designs, develops, and markets proprietary radio frequency (RF) technologies and products for use in semiconductor circuits for wireless communication products in the United States.

The court ruled that Qualcomm infringed on four patents of ParkerVision’s related to radio-frequency receivers and the conversion of electromagnetic signals in wireless devices and improperly used them in Qualcomm’s semiconductor chips.

Back in February, after a positive Markman ruling against Qualcomm, ParkerVision’s stock price rose 73%, from $2.43 to $4.21. PRKR’s market cap was around $300 million for most of 2013 and was recently as high as about $700 million. IP investors will recall a spike in InterDigital’s (IDCC) shares after Google bought Motorola for $12.5 billion, temporarily increasing its value by over $1 billion.

Both PRKR and QCOM (and IDCC) are in the IP CloseUp® 30.

Illustration source: parkervision.com