Shares of NXP Semiconductors (NXPI +0.46%) gained 18.4% in November, according to data from S&P Global Market Intelligence. The Dutch-American microchip maker posted solid earnings last month, but the fuel for NXP's fires actually came from a different source: a long-running legal dispute settled on Nov. 9. The outcome was not in NXP's favor, but investors applauded as the legal cloud dissipated at a modest financial cost.
NASDAQ: NXPI
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A lengthy courtroom drama moves forward
I'm talking about a patent infringement case that RFID technologist Impinj (PI 3.34%) filed against NXP in 2019. Impinj argued that its far-larger rival essentially copied important parts of its patent-protected RFID endpoints. A jury in Waco, Texas, sided with Impinj on Nov. 9, and the legal press got its hands on that verdict on Nov. 13.
Unconfirmed rumblings about the verdict drove NXP's stock 3.5% higher on Nov. 10, and the full-fledged announcement unleashed another 5.4% jump on Nov. 13. Of course, Impinj's investors embraced the news with more enthusiasm. The RFID expert's shares rose by 4.8% and 9.7% on the same two dates.
The courtroom tussle isn't over, and both sides may be working on their appeals right now. However, there's some light at the end of the legal tunnel, and the $2 million in penalties is much lower than the $18.5 million awarded by a California jury last summer. The relationship between the jury decisions in Texas and California is not crystal clear to me, but the proceedings did start with the same Impinj filing in 2019. Either way, the Texas verdict is another small step forward in a long, muddled legal dispute.
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Looking past the patent suit
I'm no lawyer, but I know investors hate uncertainty. Settling this mess, one way or the other, should let both Impinj and NXP investors sleep better at night.
The two companies may not have put this lawsuit behind them yet, but the end seems near. In an ideal world, the parties would sit down over lunch and settle their differences, perhaps including licensing agreements and patent royalty payments. But like I said, I don't have a law degree and have no say in how NXP and Impinj run their intellectual property operations.
It's nice to see this matter getting closer to a final resolution. However, RFID endpoints account for a small slice of NXP's sales, where automotive computing and industrial products generate three-quarters of the total revenue stream. So the Impinj conflict shouldn't move NXP's financial needle very far, regardless how the matter is settled.
Meanwhile, NXP remains a solid off-center investment in self-driving cars and industrial automation, with an affordable forward price-to-earnings ratio of 14.1.
