The battle is won, but the war continues for Qualcomm Incorporated QCOM as it received the first favorable U.S. court verdict from a federal judge in San Diego for a long-standing patent dispute against the iPhone manufacturer. Per the verdict, Apple Inc. AAPL is liable to pay $31.6 million in damages to Qualcomm for three patent infringements.
Pertaining to a lawsuit filed on Jul 6, 2017, the U.S. District Court for the Southern District of California observed that Apple had unlawfully utilized the patents in some of its iPhone models to add innovative features, in order to fortify its foothold in the smartphone market. These include Qualcomm’s U.S. Patent No. 8,838,949, which enables "flashless booting" to eliminate the requirement of a separate flash memory and enables faster connectivity to the Internet. The U.S. Patent No. 9,535,490, which facilitates faster data recovery from the Internet for various applications, and the U.S. Patent No. 8,633,936, which enables high performance and rich visual graphics for games while increasing battery life, were the other two infringed patents.
These patents were allegedly used by Apple to improve the efficiency and reduce the manufacturing costs of iPhone 7, 7 Plus, 8, 8 Plus and X models. The recent favorable ruling boosts Qualcomm’s contention that its technology has been wrongfully used by Apple, as it gears up for a trial starting next month relating to non-payment of patent royalty rebate. An Apple spokesperson, however, viewed that the ongoing patent infringement claims were a clever ploy by Qualcomm to distract the jury from its unfair trade policies for which it faces trial.
Last week, Qualcomm received two symmetrically opposite court verdicts — one from a U.S. federal judge and other from the Japan Fair Trade Commission. While the domestic verdict was against the company, the international ruling was in favor, evoking mixed response from management. (Read More: Qualcomm Gets Two Court Verdicts: One Favorable, One Not)
Meanwhile, the stock has declined 3.1% on average over the past year, while the industry rallied 5.5%. Whether a core business focus and favorable verdicts can indeed help the company turn tables and improve its sagging shares remain to be seen. Nevertheless, we remain impressed with the inherent growth potential of this Zacks Rank #3 (Hold) stock.
Better-ranked stocks in the industry include Harris Corporation HRS and Motorola Solutions, Inc. MSI, each carrying a Zacks Rank #2 (Buy). You can see the complete list of today’s Zacks #1 Rank (Strong Buy) stocks here.
Harris has a long-term earnings growth expectation of 8%. It delivered average positive earnings surprise of 2.9% in the trailing four quarters, beating estimates in each.
Motorola has a long-term earnings growth expectation of 8%. It delivered average positive earnings surprise of 13.2% in the last four quarters, beating estimates on each occasion.
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