While at the forefront of the fight against the patent portfolio being wielded by solid-state lighting leader Color Kinetics (NASDAQ:CLRK), competitor Super Vision (NASDAQ:SUPVA) has been taking it on the chin in court all along. On Friday, the company took another blow to the head as the district court hearing the ongoing legal arguments awarded Color Kinetics attorney fees and court costs of $1.4 million.
Yet the court didn't let it go at that. Indeed, the judge wrote, "I conclude without hesitation that this case is 'exceptional,' and that Super Vision has perpetrated a 'gross injustice' by its egregious abuses of the discovery phase and vexatious litigation strategy. An award of attorneys' fees is appropriate to remedy the 'gross injustice' Color Kinetics has suffered at the hands of Super Vision's vexatious and bad faith litigation."
Super Vision's sufferings
Of course, the court hasn't been very responsive to Super Vision's claims from the start. It has handed the company setback after setback, though the leader of the LED Alliance -- an industry group seeking to have Color Kinetics' patents invalidated -- gamely vows to battle on. They say they anticipated the court's latest ruling and that it will not impede their filing more lawsuits against Color Kinetics.
Solid-state lighting -- the use of light-emitting diodes (LEDs) to illuminate homes, offices, and businesses -- is one of those future technologies here today. Already in use in many hotels, such as Marriott (NYSE:MAR), casinos (Harrah's (NYSE:HET)), and restaurants, solid-state lighting promises longer lifetimes than incandescent bulbs, low maintenance, and lower total costs of ownership over their lifetime despite the initial higher cost outlays. In theory, solid-state lighting could cut in half the 22% of electricity now consumed by lighting.
Additionally, LEDs may have some important uses in the fields of medicine, communications, transportation, and agriculture. We're already seeing specialized brake lights in cars for better safety. There's also improved image clarity in microscopy to think about, and the control of the composition of the light spectrum to permit the cultivation of crops out of season. In all, the solid-state lighting industry is expected to more than double by 2009 to be a $7 billion industry.
The patent battles between Color Kinetics and Super Vision are seen as determining who controls that industry, and right now, Color Kinetics has been winning handily.
Super Vision and the LED Alliance it formed says that Color Kinetics patents are not only defined by prior art in the field, but infringe on its own patents as well. The courts have seen fit to rule differently and have said that in fact Super Vision was the one infringing on Color Kinetics, who will now seek to have a permanent injunction against the company imposed.
Super Vision has a high obstacle to hurdle in invalidating the patents of its competitor. Patents, once issued, are deemed valid, and it's up to the challenger to show by clear and convincing evidence that they were improperly issued. Super Vision's case has not swayed the district court in this matter at all, though the company feels it will prevail on appeal. So says every company that is smacked down, but the legal costs of attacking the patents are mounting for the firm, and it posted a great loss per share this year than it did the year before. With its stock below $3 a share as a result of the latest ruling, it's fast approaching literal penny-stock territory as investors flee.
The sweeping nature of the court's rulings, coupled with the tough talk in awarding fees to Color Kinetics, should indicate that despite the griping from competitors, the patents have validity and will form a strong basis for the company's future prospects.
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Fool contributor Rich Duprey owns shares of Color Kinetics but does not own any of the other stocks mentioned in this article. You can see his holdings here. The Motley Fool has a disclosure policy.
