Last Friday, Google was found guilty of infringing on Sonos’ patented smart speaker technology in a preliminary ruling from the International Trade Commission (ITC), marking an early victory for Sonos in a case that stretches back to early 2020 — but the battle’s not over yet. And as the lawsuit moves forward, its outcome could shift the dynamics of the buzzing smart speaker market.
Sonos first sued Google for patent infringement in January 2020, accusing the tech giant of infringing on five of Sonos’ smart speaker technology patents for Google products including ones in the popular Google Home, Nest and Pixel lines. Sonos claimed that Google gained access to this technology during a 2013 partnership between the two companies. Sonos also claimed that Google attempted to shut Sonos out of the market by selling the allegedly infringing products for cheap.
Ultimately, Sonos is hoping to block the sale of the allegedly infringing speakers, which would deliver a huge blow to Google’s hardware business.
Sonos just got one step closer to that goal. In the initial ruling on Friday, ITC chief administrative law judge Charles Bullock found that Google had infringed on all five patents named in Sonos’ original complaint. Following the ITC ruling, Sonos stock (SONO) surged $9.6% to $41.79 in Monday trading.
“We are pleased the ITC has confirmed Google’s blatant infringement of Sonos’ patented inventions,” Sonos 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.”
It’s an early victory for Sonos, but a final ruling from the full ITC isn’t expected until Dec. 13, after which the ban Sonos seeks would take 60 days to go into effect. Sonos’ initial suit also set off fresh litigation which has yet to be resolved: Google filed a countersuit against Sonos in June 2020, claiming that Sonos had infringed on Google patents; and Sonos filed a second lawsuit that September, claiming that Google had infringed on five additional patents across the entire line of Nest and Chromecast products.
“We do not use Sonos’ technology, and we compete on the quality of our products and the merits of our ideas,” Google spokesperson José Castañeda said in a statement. “We disagree with this preliminary ruling and will continue to make our case in the upcoming review process.”
The smart speaker market is projected to reach 163 million units globally in 2021, according to technology market analysis firm Canalys, a year-over-year growth of 21%, and is currently dominated by Amazon, followed by Google and Apple. While Sonos has long lacked a voice assistant to compete with the leading trio, it’s rumored to be testing its own offering after acquiring the voice assistant platform Snips in 2019.
The lawsuits also come against the backdrop of the Department of Justice’s antitrust case against Google, and Sonos has long positioned itself as the underdog facing Big Tech — note Lazarus’ mention of “Big Tech monopolies” in his statement. In fact, the same month Sonos filed its initial complaint, Sonos CEO Patrick Spence argued in a testimony before Congress that technology behemoths like Google practice so-called “efficient infringement” by copying designs from smaller companies and selling them for cheaper prices, betting that the profit will outweigh any costs of resulting litigation.
Since Sonos went public in 2018, the company has repeatedly pitched its valuable patent portfolio — which includes more than 2,000 patents — as a key asset to investors. So it has employed an aggressive litigation strategy to protect those patents. Over the years, Sonos has settled patent infringement lawsuits regarding smart speakers against Sound United (settled in May 2018) and the parent company of Bluesound (settled in July 2020). Sonos has also noted similar issues with Amazon devices, but chose to focus its current litigation efforts on Google instead — at least, for now.
Sonos could eventually establish a new and lucrative revenue stream from licensing its patented technology to other companies. Sonos’ settlement with Bluesound included such a licensing deal. “We welcome and encourage competition, and want to make sure that all companies entering this space recognize the strength of our IP and provide appropriate compensation,” Lazarus said at the time of the settlement.
Sonos’ potential ability to monetize its patents, and its strong recent earnings, could also make it an acquisition target. The company has beat earnings expectations and raised guidance for three consecutive quarters, reporting $378.7 million in revenue for the third quarter of 2021, a 52% uptick year-over-year.
The patent infringement wars for smart speakers aren’t limited to Sonos, either. In October 2020, a jury ordered Amazon to pony up $5 million to the audio tech firm Vocalife for infringing on the company’s intellectual property for its Echo smart speakers line; and in March, Sonos itself was slapped with a patent infringement lawsuit from Cedar Lane Technologies Inc. over smart speaker tech.
Source
