Shares of Sonos (SONO) - Get Sonos, Inc. Report jumped on Monday after the manufacturer of high-end audio products won a round in a patent fight against Alphabet's (GOOGL) - Get Alphabet Inc. Class A Report Google.
If the ruling stands, it could set the company up for lucrative licensing deals, according to analysts.
An U.S. International Trade Commission judge ruled that Google infringed five Sonos patents.
It was a preliminary ruling in a lawsuit that Sonos brought in January 2020, claiming that the Mountain View, Calif., search, advertising and tech giant infringed its smart-speaker patents.
The suit alleged that Google improperly incorporated those patents in its products. The complaint sought to stop sales of several of those Google products, including Nest home speakers, Pixel smartphones and Chromecast streaming-access devices.
The ruling could lead to a ban on Google importing those products from China.
Sonos shares at last check were 9.5% higher at $41.78. Alphabet shares were down 1% at $2,726.
Sonos said that it was pleased with the ruling, which it said "confirmed Google's blatant infringement," Reuters reported.
A final decision on the company's lawsuit is expected from the ITC around mid-December. The federal agency advises the president and Congress on trade matters and investigates complaints that imports are injuring a U.S. industry or intellectual-property rights.
"We believe Google is likely one of many companies infringing on Sonos's patents, and suspect their win against Google will set a precedent for other infringers," Jefferies analyst Brent Thill recently wrote, according to Yahoo.
"Today, less than 5% of Sonos's revenue comes from licensing, but believe it can become a larger portion over time as infringers cut deals with Sonos."
Last week, the company posted a surprise quarterly profit, swinging to fiscal-third-quarter net income from a year-earlier loss on 52% higher revenue.
For the quarter ended July 3, the Santa Barbara, Calif., company earned 12 cents a share, compared with a loss of 52 cents a share in the year-earlier quarter. The latest adjusted earnings were 27 cents a share.