The bitter intellectual property fight between Intermec Technologies Corp., and Symbol Technologies Inc., has escalated to the U.S. International Trade Commission (ITC), which late last week revealed that it is investigating whether Symbol has violated U.S. trade practices by allegedly marketing patent-infringing products.
The latest legal dispute comes at a bad time for Symbol. The Holtsville, N.Y. supplier of hand-held mobile computing yesterday revealed that its CEO, William Nuti, has resigned to become CEO at NCR Corp., replacing Mark Hurd who recently took the helm at Hewlett-Packard Co.
Nutti's departure preceded Symbol's disclosure earlier today that the company lost $30.5 million in the second quarter ended June 30, on sales of $427.8 million. This compared with net earnings of $28.8 million on revenues of $432.8 million for the like period last year.
Symbol's Q2 results represented a complete reversal from the prior period, when its profits tripled, on strong revenue growth.
Intermec and Symbol have battled over intellectual property over the past few years, with each filing suits over RFID technology.
The latest complaint filed by Intermec on June 30, 2005, alleges that Symbol has violated section 337 of the Tariff Act of 1930. Section 337 states that imported products that allegedly violate U.S. intellectual property rights can be barred from entry into the U.S.
The case before the ITC is related to three Symbol handheld mobile computing devices: the MC50 Enterprise Digital Assistant; the MC9000 series of industrial class mobile computers; and the PPT8800 wireless PDA. Intermec officials declined to comment on the matter.
During a conference call earlier today with financial analysts on its Q2 results, Symbol executives said they firmly believe they do not infringe on any of Intermec's patents. And in the event the patents in question are valid, company officials said they believe its engineers can "design around those patents."
The extended stream of litigation hasn't impacted orders for Symbol products to date. For instance, bookings were up 6.3% in Q2 compared to the year ago period. The company attributed its depressed Q2 revenues to continued challenges in Europe and in retail -- one of the company's primary vertical markets.
Symbol recently refreshed its industrial mobile computer products that are in question, and executives didn't appear fazed by the latest lawsuit. "To date, booking trends for these products are encouraging," said Sal Iannuzzi, Symbol's senior vice president, chief administrative and financial officer, who was appointed interim president and CEO following Nuti's departure.
Nuti's resignation, however, came as a surprise, Symbol executives said. His depature will have no impact on the company's turnaround plans. "The Board, the senior management team and myself are aware of what needs to be done at Symbol and we are fully committed to doing it," Iannuzzi said in his closing remarks on the conference call. "We are confident with the restructuring effort well underway, we'll achieve the results we set out to achieve."
Nuti joined Symbol three years ago from Cisco Systems Inc. to straighten out a company reeling from an accounting scandal that implicated the company's former management team. Symbol, in fact, was forced to restate earnings for 1998 through the first nine months of 2002. A suit charging former company officials with accounting wrongdoings is expected to come to trial in November, according to today's Wall Street Journal.
Roughly $7 million of Symbol's Q2 loss was tied to expenses incurred in prosecuting former company officials named in the suit. Other expenses include a pre-tax restructuring charge of $31.2 million and a pre-tax asset impairment charge of $11.6 million.
The potential impact of the ITC litigation was unclear at press time. The case will be referred to the Honorable Sidney Harris, an ITC administrative law judge, who will hold an evidentiary hearing at the "earliest practicable time," according to a ITC press release. At that time, Judge Harris will make an initial determination as to whether or not Symbol is violating Section 337.