Sonos Gains After Winning U.S. Import Ban on Some Google Devices

Sonos Inc. rose in late trading after it won a U.S. trade agency ruling that will limit the imports of some phones, laptops and speakers made overseas by Alphabet Inc.’s Google, though Google says the order will have no impact.

The U.S. International Trade Commission issued the ban Thursday after affirming a judge’s findings that the devices were using Sonos’s patented inventions for home-audio systems without permission. The Biden administration can veto the exclusion order on public policy grounds, though that rarely happens.

Google has 60 days -- the presidential review period -- to implement pre-approved software changes to avoid the ban. The internet giant also must stop selling products that have already been imported that infringe the Sonos patents, the commission said.

While the ITC order doesn’t publicly name specific devices that will be banned, the case involved a broad range of Google products with sound systems, such as the Nest Hub, Nest Wifi point, Pixel smartphones and Pixelbook laptops. Devices without that audio system, such as Nest thermostats, aren’t accused of infringement, and the commission said redesigned products found to not use the patents won’t be blocked.

Google maintains it can work around the patents, but it’s still been labeled a copycat by the commission. It wouldn’t need to make any changes, and could avoid further headache, by settling the case -- Sonos has said its ultimate goal is to have Google pay royalties.

The real-world impact has been intensely debated by both companies in filings with the agency. The ITC judge had cleared some changes Google proposed to its software to avoid using the patented inventions. Google has said that means none of its hardware will be halted at the U.S. border. Sonos said in a Dec. 2 filing that, while some software code changes may have been cleared by the judge, Google hasn’t implemented those changes into any actual products. The Santa Barbara, California-based company said Google should have to present those arguments to U.S. Customs officials after the import ban takes effect.

Shares of Sonos rose more than 5% in extended trading. The company’s victory marks the first time Google has faced an import ban at the trade agency. Last year Google fended off a case brought by closely held EcoFactor Inc. involving smart thermostats. Alphabet shares were little changed after hours.

Sonos, which called the ruling an “across-the-board win,” said the only way Google can avoid the blockade is to “degrade or eliminate product features.”

“While Google may sacrifice consumer experience in an attempt to circumvent this importation ban, its products will still infringe many dozens of Sonos patents, its wrongdoing will persist, and the damages owed Sonos will continue to accrue,” the company said in a statement. “Alternatively, Google can -- as other companies have already done -- pay a fair royalty for the technologies it has misappropriated.”

Google, based in Mountain View, California, said it was disappointed in the ruling. In addition to the presidential review period, the company can appeal the decision to the nation’s top patent court.

“While we disagree with today’s decision, we appreciate that the International Trade Commission has approved our modified designs and we do not expect any impact to our ability to import or sell our products,” said José Castañeda, a Google spokesperson. “We will seek further review and continue to defend ourselves against Sonos’s frivolous claims about our partnership and intellectual property.”

Among the varied lawsuits between the two companies is one Sonos filed as a companion to the ITC case that has been on hold while the trade agency conducted its investigation. The commission’s findings of infringement will be taken into account by the trial court, where Sonos is seeking unspecified royalties.

In its complaint with the agency filed two years ago, Sonos alleged that Google learned of Sonos’s technology under the guise of a working partnership to integrate Google Play Music into Sonos products, but instead used the patented ideas in its Home and Chromecast systems and Pixel phones and laptops. Google has filed its own claims in district court accusing Sonos of trying to take credit for work owned by Google.

Google’s gadget sales make up a small fraction of its business, and 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.

Two of the five patents in question involve techniques to synchronize audio playback and thereby 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. Three of the patents expire in 2024, while a fourth expires in 2025 and the fifth in 2027.

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

(Updates with Google saying order has limited impact in first paragraph.)

To contact the reporters on this story:
Susan Decker in Washington at sdecker1@bloomberg.net;
Mark Bergen in San Francisco at mbergen10@bloomberg.net

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

Elizabeth Wasserman, Jillian Ward

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