TSRA: A Small Win, But Patience Still Required

Implications: The market applauded this week when TSRA announced a patent settlement with one of the many firms that stand accused of infringing Tessera's beseiged patent portfolio.  But no one ought count their chickens yet.  The path toward championing TSRA's patent portfolio is path that favors the company, but it remains long and bumpy.

Analysis: With most investors waiting for news from the Amkor arbitration, TSRA offered a bit of surprise good news last week: a different patent settlement in hand.  That is of course good news for the firm.  But not all the news on the horizon looks as cheery.

Looming, after all, is what could be the final decision in the Patent Office's inquiry into the '419 patent.  This is a "final decision" in the sense that the patent examiner can, if he so chooses, end his part of the process now, and authorize TSRA to appeal their likely loss.  The company will appeal, of course, and has good odds on appeal.  But the news event will surely sound a lot like a conclusive loss; and the reality will be that TSRA has to weather an appeal and the obvious risks that come along with one.

Likely following the '419 news will be other negative news on some of the other TSRA patents.  Those, too, will be subject to plausible and maybe even strong appeals; but, again, that whole process will take time, and until it ends, the TSRA portfolio will be under a cloud, and the company will be spending potentially significant money on lawyers.

Do I think that means there won't be further settlements until the clouds lift?  No, not at all.  But the settlements will factor in the on-going risk, and investors will factor in the on-going costs of appeal; and all that will not dissipate for at least two and likely more years.