3rd UPDATE: ITC Rules For Tessera In Patent Case

The U.S. International Trade Commission, overturning a prior judgment, ruled in favor of Tessera Technologies Inc. (TSRA) in a closely watched case involving patents associated with packaging computer chips.

Tessera shares jumped 21% to $20.10 after hours following the news.

The ITC ruled that defendants Qualcomm Inc. (QCOM), Motorola Inc. (MOT), Spansion Inc. (SPSN), STMicroelectronics NV (STM), Freescale Semiconductor Inc. (FSLB) and ATI Technologies, now owned by Advanced Micro Devices Inc. (AMD), violated Tessera's patents related to how certain chips were packaged.

"This is everything that we have set out to gain," said Tessera Chief Executive Henry Nothhaft in an interview with Dow Jones Newswires. "This is a material victory for us and the rights of innovators in general."

The commission issued a ban on the import of chips manufactured by or on behalf of any of the companies. Additionally, the commission issued a cease and desist order to Motorola, Qualcomm, Freescale and Spansion halting the sale of infringing articles out of their U.S. inventories.

The import ban, known as a "limited exclusion order," does not affect downstream manufacturers, such as mobile phone makers, which import products that already include the chips.

The ruling is subject to review by the Obama administration for 60 days. During that period, the companies can continue to import the chips if they post a bond in the amount of 3.5% of the imported articles.

Alex Rogers, legal counsel for Qualcomm, said while the company is disappointed with the decision, the ruling will not affect its chips shipments to the U.S.

In advance of the decision, Qualcomm shifted supply of the chips in question to Amkor Technology Inc. (AMKR), a Tessera licensee.

Nothhaft said since Amkor is now a licensee in good-standing of Tessera technology, Qualcomm's actions would be "very positive to us and result in higher royalties from Amkor."

Meanwhile, Qualcomm will evaluate whether to appeal after sifting through the arguments.

"I would expect that we would appeal, but we'll have to look at it," Rogers said.

Tessera's chip technology is currently used in mobile phones, set-top boxes and other electronics equipment.

Nothhaft declined to provide any estimates or revenue guidance, but said the ruling will materially impact the company financially. In addition, he said the ruling was a positive signal that Tessera will come out ahead in a separate ruling related to memory chip technology expected in July.

Wednesday's ruling overturns a previous ruling from December that found two Tessera patents were valid, but weren't infringed by the defendants.

Motorola, while disappointed with the decision, said that it expects its suppliers to bring the matter to a close.

"This is a dispute between Tessera and certain semiconductor chips suppliers. As a major customer of these suppliers, we have made it clear that we expect them to act in the best interests of their customers and the industry and resolve this matter as quickly as possible," Motorola said in a written response.

Motorola previously entered into a license option agreement with Tesera that covers the technology in question. Motorola said it will consider whether to exercise the option "in the coming days."

A spokesman for STMicro said "they are obviously disappointed with the ruling," but wouldn't comment further regarding ongoing legal matters.

Representatives of Spansion, Freescale and Advanced Micro Devices weren't immediately available for comment.

-By Jerry A. DiColo, Dow Jones Newswires; 201-938-5670; [e-mail]