Tessera shares jump after patent lawsuit settlement

Shares of chip design company Tessera Technologies Inc. jumped Friday after it announced it settled a patent lawsuit against International Production Sourcing Group.

IPSG's parent company, Micro Electronics Inc., has agreed to pay royalties on all past and future sales of products that use Tessera technology.

Tessera said the settlement is not expected to materially affect its revenue figures.

Cowen & Co. analyst Seth Raj described the settlement as "tiny" but said it shows that negotiations are proceeding with the other companies in the case.

IPSG is the first company to negotiate a settlement. Tessera's legal action, filed through the International Trade Commission, continues against 13 other companies and is due to resume Sept. 22.

Raj said that the defendants have a strong incentive to settle as the hearing date approaches.

"If a defendant believed they even had a 50 percent chance of being enjoined from shipping product into the U.S., then a settlement might be a good financial decision," he said.

Lehman Brothers analyst C.J. Muse agreed that the settlement was small, it is a "step in the right direction and begs the question as to who's next," he said.

Tessera's risk-reward profile is quite favorable, Muse added.

Shares of San Jose, Calif.-based Tessera rose $1.37, or 7.3 percent, to $20.07. It has traded in the past year between $11.11 and $46.43.