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Fingerprint Cards: Files patent infringement complaint

Fingerprint has filed a patent infringement complaint against competitor Goodix and a distribution company. Below are our initial comments.

To us this was expected and perhaps also a bit overdue. We believe the preparations have been lengthy because FPC wants to protect its customers and customer relations from any negative effects. This could be why the name of the distributor is not mentioned.

We note that the complaint is filed with the Beijing IP Court and not in Shenzhen where Goodix has its headquarter. The patent in question is a Chinese patent so it does not relate to eventual IP problems outside of China. The general picture of China is that IP protection is completely neglected. However, things have actually improved during the recent years as large, global tech companies from China have become big holders of IP and therefore requested better IP regulation as well as improved enforcement. In addition, Western companies have actually won several cases during the past years, whereof some of them were high-profiled. Thus, we believe FPC believes it has a good chance of winning the case. Otherwise it would never have filed the complaint in the first place.

The press release did not include any information of timeframe or any quantification of how much is at stake etc. We also note that the press release is not MAR-classified, meaning, looking at the MAR rules, that FPC does not define the complaint as insider information. There are several MAR criteria and we do not know which one that is not met according to FPC. Perhaps FPC does not consider the information to be non-public but it could also be that the specific patent is not one of FPC’s most important ones and that it therefore does not have material share price effect. We do not know and FPC cannot comment. Regardless, we view the infringement complaint as an important signaling tool to show customers, competitors, investors and the whole world that FPC is serious about defending its IP. The eventual infringement has already taken place so we see no particular downside from the litigation but we believe it should make customers think twice before working with Goodix.

All in all, today’s news are positive and, as mentioned, we see no downside from the complaint, besides lawyer costs. However, it is hard for us to know anything about the outcome of this infringement complaint. We will therefore not make any changes in our estimates or valuation based on today’s news. The future of FPC is decided in the smart card business - not in a Chinese courtroom.

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