Sonos Gains After Winning U.S. Import Ban on Some Google Devices

(Bloomberg) -- Sonos Inc. rose in post-market trading after it won a U.S. trade agency ruling that will limit the imports of some phones, laptops and speakers made overseas by Alphabet Inc.’s Google because they infringe patents for home audio technology.

The U.S. International Trade Commission issued the ban Thursday after affirming a judge’s findings that the devices were using Sonos’ patented inventions without permission. The Biden administration can veto the exclusion order on public-policy grounds, though that rarely happens. Otherwise, the ban takes effect in 60 days.

Google also must stop selling products that have already been imported, the commission said. While the order doesn’t name the products that will be banned, the case involved a broad range of Google products with sound systems, such as the Nest Hub, Nest WiFi point, Pixel smartphones and Pixelbook laptops. Devices without that audio system, such as the Nest thermostats, aren’t accused of infringement, and the commission said redesigned products found to not infringe the patents won’t be blocked.

Sonos rose as much as 5.8% in after hours trading. Its victory is the first time Google has faced an import ban at the trade agency. Last year it fended off a case brought by closely held EcoFactor Inc. involving smart thermostats.

Sonos, which called the ruling an “across the board win,” said the only way Google can avoid the import ban is to “degrade or eliminate product features.”

“While Google may sacrifice consumer experience in an attempt to circumvent this importation ban, its products will still infringe many dozens of Sonos patents, its wrongdoing will persist, and the damages owed Sonos will continue to accrue,” the company said in a statement. “Alternatively, Google can -- as other companies have already done -- pay a fair royalty for the technologies it has misappropriated.”

Google said it was disappointed in the ruling. In addition to the presidential review period, it can appeal the decision to the nation’s top patent court.

“While we disagree with today’s decision, we will ensure our shared customers have the best experience using our products and do not experience any disruption,” said José Castañeda, a Google spokesperson. “We will seek further review and continue to defend ourselves against Sonos’ frivolous claims about our partnership and intellectual property.”

The real-world impact had been hotly debated by both companies. The ITC judge had cleared changes Google made to its software to work around the patented inventions. Google has said that means none of its hardware will be halted at the U.S. border.

In its complaint with the agency filed two years ago, Sonos alleged that Google learned of Sonos’ technology under the guise of a working partnership to integrate Google Play Music into Sonos’ products, but instead used the patented ideas in its Home and Chromecast systems and Pixel phones and laptops. Google has filed its own claims in district court accusing Sonos of trying to take credit for work owned by Google.

Investors have been watching the ITC case closely, looking for hints that Sonos will be able to use its patents to maintain its market share and generate more revenue from patent royalties. Since the litigation began, Sonos has said it’s looking for an agreement in which Google would pay for using the technology.

Sonos said in a Dec. 2 filing that, while some software code changes may have been cleared by the judge, Google hasn’t implemented those changes into any actual products. It said Google should have to present those arguments to U.S. Customs officials after the import ban takes effect.

Google’s gadget sales are a small fraction of its business; the company doesn’t disclose revenue from devices. But Google has continued to invest in phones and home speakers as a strategy to fortify its search and media services against threats from Apple Inc. and Amazon.com Inc.  

Google told the commission that no import ban should be imposed at all. 

“Sonos chose to assert narrow software patents covering only very minor and specific audio playback features, against an extensive array of Google products that each contain thousands of times more features than what is accused,” Google said in the Dec. 2 filing. “Sonos’ business interests in asserting these limited patents against Google’s household products do not justify the harm to the public.”

Two of the five patents involve techniques to synchronize audio playback and thereby eliminate minor differences that the ear can interpret as echoes. The others involve ways to pair up speakers to create stereo sounds, adjusting volumes of either single or groups of speakers with a single controller, and a way to easily connect the system to a home’s Wi-Fi. Three of the patents expire in 2024, while a fourth expires in 2024 and the fifth in 2027.  

The case is In the Matter of Certain Audio Players and Controllers, 337-1191, U.S. International Trade Commission (Washington). 

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