No News Is Great News for iRobot

By Rich Smith
August 11, 2008 | Comments (2)

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Come back with me, dear Fool, to the heady days of December 2007.

Back then, Motley Fool Rule Breakers recommendation iRobot (Nasdaq: IRBT) was enjoying successful partnerships with Deere (NYSE: DE), Boeing (NYSE: BA), and SAIC (NYSE: SAI). The threat from General Dynamics' (NYSE: GD) robotic division hadn't yet arisen, but iRobot was nonetheless fighting for survival, embroiled in a major legal dispute with former employee Jameel Ahed and his company, "Robotic FX."

Stop!
After leaving iRobot's employ, Ahed had set up his own shop. Allegedly using pilfered iRobot technology, he developed a clone to iRobot's successful PackBot robot, and began raking in big bucks marketing this "Negotiator" to U.S. law enforcement. Then Ahed went one step too far, horning in on iRobot's dominant position in the military robots market.

iRobot fought back by filing multiple lawsuits against Ahed and his company. iRobot quickly prevailed on all counts against its mini-nemesis. It won:

  • A permanent injunction forbidding Robotic FX from selling products incorporating iRobot trade secrets, including the Negotiator product.
  • An injunction against Ahed's competing against iRobot again for five years.
  • Dissolution of Robotic FX and a transfer of "certain residual assets" to iRobot.

It all happened so quickly that one risk I mentioned at the time -- that Intuitive Surgical (Nasdaq: ISRG) might sue Robotic FX for patent infringement on its robot's controller -- never had time to materialize. I sure hope, though, that iRobot made sure whose IP it acquired, because ...

Haven't we met?
Fast-forward nine months, and take a gander at the press release iRobot issued on Wednesday. iRobot just "introduced" a "new" robot. But unless I'm mistaken, we've already met.

The robot's name is still "Negotiator." Its target market remains law enforcement and other public-safety organizations. Although iRobot makes no mention of the connection, I think there's little doubt that this is Ahed's baby in disguise.That tells me that all of those legal costs arising from its lawsuit against Robotic FX that iRobot complained of last year might as well have been termed "R&D." The effect is the same: a new product. A new market. New revenue streams and profits for iRobot.

Grand news all around -- even if it isn't really "news" at all.

Read all about it in:

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Fool contributor Rich Smith owns shares of iRobot. SAIC is a Motley Fool Inside Value selection. The Motley Fool has a disclosure policy.

Comments from our Foolish Readers

Help us keep this a respectfully Foolish area! This is a place for our readers to discuss, debate, and learn more about the Foolish investing topic you read about above. Help us keep it clean and safe. If you believe a comment is abusive or otherwise violates our Fool's Rules, please report it via the Report this Comment Report this Comment icon found on every comment.

  • Report this Comment On August 11, 2008, at 5:45 PM, capitalgorilla wrote:

    Rich,

    you are right: The picture and video seem exactly the same i saw on the FX webside way back when except the logo. The tracks, color, design all look the same as the FX Negotiator.

    Nice comment especially on ISRG's potential lawsuit. Tells me how easy it is to miss pieces of info that can hurt or help.

    Im glad it seems IRBT carefully though through what to do with what they got for their $2.5M(?) or more(?) in legal cost. It is easy in the stress of expanding into the water (seaglider) and underground (oil drilling) to leave the FX "junk" aside. Never easy to inherit technology from someone demotivated to help.

  • Report this Comment On August 12, 2008, at 1:01 AM, JFrazer1 wrote:

    Excellent strategy on the part of iRobot. They've got a lock on robotics in military, emergency services, and domestic markets. Nobody else is selling anything but overpriced toys and iRobot is mass producing useful products. Nice. I think I'll buy in now.

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