Neonode: The lawsuit is alive – with better chances than ever

Research Note

2024-08-28

15:12

Redeye estimates an 85% probability of the Neonode side settling against Samsung in mid-2025, which would give an estimated USD31 per share to Neonode. Further down the road comes Apple, which is more likely to go all the way to trial. A settlement against Samsung would, however, add pressure on Apple (and Google). Redeye estimates that winning in court against Apple can give as much as USD121 per share to Neonode. Redeye thinks chances against Apple are slimmer than against Samsung, and estimates a 20% chance of the Neonode side winning in court against Apple. After that, there is more to chase from not only Google, but likely all smartphone OEMs. Redeye raises its fair value range.

Jesper Von Koch

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Last week's ruling about a reversed decision from last year’s Markman hearing was a major victory for Neonode (through its partner Aequitas). While we immediately increased our Base Case from USD4 to USD7 on our first snap-shot impression, we believe we significantly underestimated the full impact of the decision. While we knew that this was likely the case, we did not want to draw too big conclusions too fast. As such, we will go through everything we know in detail in this update.

Let's refresh our memory of where we are

First, let's sum up where we are in the lawsuit:

Aequitas and Neonode signed an agreement in 2019 to let over Neonode's patents to Aequitas. In turn, Neonode would get 50% of the net proceeds that Aequitas would eventually obtain from the patents.

In June 2020, Aequitas sued Apple and Samsung in two separate lawsuits for infringing on Neonode's slide-to-unlock patent (through patents '993 and '879).

Apple and Samsung both requested that IPR processes be held for both patents - testing the validity of each patent. Even as it had not been sued (yet), Google also requested a similar IPR.

While patent '993 did not survive the IPRs, patent '879 survived all. It is typically much easier to win or settle a lawsuit after having survived IPR than it is to survive the IPR itself. As such, the chances of a successful outcome in the lawsuit increased significantly.

After the Markman hearing in July 2023, it was ruled that patent '879 was invalid - despite having survived several IPR processes. The decision was appealed against by the Neonode side.

Last week, on appeal, the Federal Circuit disagreed with the district court's conclusion, thus reversing the decision from the Markman hearing. The decision means that the lawsuits against both Samsung and Apple can proceed.

The typical time from the Markman hearing to trial is 9-13 months, i.e., to the jury trial against Samsung in this case. We believe the countdown for this should start any day from now.

What speaks for and against Neonode against Samsung and Apple - and what about treble damage?

Considering that Google accounts for a very small share of the total volume, we only give our view on Samsung and Apple. As a reminder, if a company knowingly infringes on a patent, 'wilful infringement' is decided, which means 'treble damage', i.e., 3x the initial value.

Below are some important points that we weigh in each lawsuit.

Disclosures and disclaimers

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