Apple's (AAPL) "Pinch and Zoom" Patent Invalidation is a Setback

December 20, 2012 10:38 AM EST
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Wednesday afternoon, the US Patent and Trademark Office (USPTO) has rejected all 21 claims of Apple's (NASDAQ: AAPL) "pinch and zoom" patent (No. 7,844,915) and tentatively invalidated the patent.

Commenting on the news, analysts at Oppenheimer said that while Apple can contest the ruling, it is a setback for the company, especially in its IP battle with Samsung.

Earlier in the year a US federal court jury found Samsung to have infringed five Apple patents involving scrolling, pinching and zoom functionality, the home screen GUI and design aspects. "The infringement of the '915 patent was in part used by the jury in deciding to award Apple $1.05B in damages from Samsung," analyst Ittai Kidron notes. "Samsung's appealing that decision, and if a key patent used in the case is no longer valid, Samsung's case for overturning the decision, and the amount of the damages, is much stronger."

Kidron said having the '915 patent invalidated also likely impacts Samsung's and others willingness to pursue a licensing agreement with Apple. "Apple has been involved in several patent infringement cases with Android vendors (HTC, Motorola...), and while the results are mixed, it did use the courts to successfully push HTC to come to terms on a licensing agreement. We believe Samsung is unlikely to pursue a licensing agreement in the near term given Apple’s recent setbacks with the USPTO."

While the IP battle isn't over, this one is a setback for Apple, the analyst said. They legal could put some pressure on Apple’s shares. That said, the firm believe the shares are overextended to the downside and embed too much pessimism regarding headwinds and execution. They would buy on weakness and reiterated their Outperform rating and price target of $800.

For an analyst ratings summary and ratings history on Apple click here. For more ratings news on Apple click here.

Shares of Apple closed at $526.31 yesterday.

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