Sonos Wins First Round in Patent Case Against Google at ITC (2)

Sonos Inc. shares jumped as the wireless audio company came one step closer to winning a global battle with Alphabet Inc.’s Google when a U.S. trade judge found the search giant infringes five Sonos patents -- a decision that could shut some Google smart home devices, phones and laptops out of the U.S. market.

U.S. International Trade Commission Judge Charles Bullock announced his findings in a one-paragraph notice on the agency’s website. The judge’s full decision won’t be available until both sides get a chance to redact confidential information.

Sonos rose more than 5% in after-hours trading on the news.

The judge’s findings are subject to review by the full commission, which is scheduled to issue a final decision by Dec. 13 and has the power to block imports of a wide range of Google products, including the Home and Chromecast systems, and Pixel phones and laptops. Google said it’s confident it will ultimately prevail.

“We do not use Sonos’ technology, and we compete on the quality of our products and the merits of our ideas,” said José Castañeda, a Google spokesman. “We disagree with this preliminary ruling and will continue to make our case in the upcoming review process.”

Investors have been watching the ITC case closely, seeing it as a test of Santa Barbara, California-based Sonos’ ability to enforce its intellectual property, protect its market from competitors and develop a new revenue stream in licensing. Sonos and Google have traded patent-infringement allegations in the U.S. and Europe and Bullock’s findings were the first major test of Sonos’s case.

Google is accused of ripping off Sonos designs since 2015, when the two were working together on ways to integrate Google Play Music into Sonos’ products. Google denied infringing the patents and said they covered old ideas.

“We are pleased the ITC has confirmed Google’s blatant infringement of Sonos’ patented inventions,” Chief Legal Officer Eddie Lazarus said in a statement. “This decision re-affirms the strength and breadth of our portfolio, marking a promising milestone in our long-term pursuit to defend our innovation against misappropriation by Big Tech monopolies.”

Google, based in Mountain View, California, also told Bullock it can easily make software changes to avoid the patents and asked him to weigh in on those redesigns. A victory on that issue would blunt the impact of any import ban imposed by the commission. The judge’s notice gave no indication either way on the redesigns.

Google’s gadget sales are a small fraction of its business; the company doesn’t disclose revenue from devices. But Google has continued to invest in phones and home speakers as a strategy to fortify its search and media services against threats from Apple Inc. and Amazon.com Inc.

In June Congressional testimony before an antitrust subcommittee, Lazarus accused Amazon and Google of selling their speakers below cost to undercut smaller firms, and then using those inroads to benefit from the personal data that the microphone-enabled products gather from consumers.

Sonos wants imports halted at the border and an order preventing sales of any Google products already brought into the U.S. An import ban can be overturned by President Joe Biden on public policy grounds, though that rarely happens. The 60-day presidential review period would end in February 2022, so any decision against Google wouldn’t affect holiday sales.

Two of the five patents involve techniques to synchronize audio playback, to eliminate minor differences that the ear can interpret as echoes. The others involve ways to pair up speakers to create stereo sounds, adjusting volumes of either single or groups of speakers with a single controller and a way to easily connect the system to a home’s Wi-Fi.

The case is In the Matter of Certain Audio Players and Controllers, 337-1191, U.S. International Trade Commission (Washington).

(Updates with Google statement in fourth and fifth paragraphs.)

--With assistance from Mark Bergen.

To contact the reporter on this story:
Susan Decker in Washington at sdecker1@bloomberg.net

To contact the editors responsible for this story:
Jon Morgan at jmorgan97@bloomberg.net

Elizabeth Wasserman, Susan Decker

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