Some stock market gurus seem to have a fatal attraction to technology patents. While technology patents can certainly add to the performance of a stock, that attraction often fails to account for a number of factors affecting the value of the patents.
Technology patents are very complex and understanding them requires expertise. Patent law is even more complex. A further layer of complexity is added by the idiosyncrasies of a patchwork of legal systems across the globe that even intellectual property attorneys find hard to master.
For investors, the complexity does not end there. How large are the legal fees in relation to net profits?
Motorola Mobility /quotes/zigman/3019788/quotes/nls/mmi MMI +0.52% , which is being bought by Google /quotes/zigman/93888/quotes/nls/goog GOOG +0.47% , just reported lower than expected earnings. Motorola cited large legal fees as a key reason. How much is management being distracted by the patents? Which existing products violate patents? What are the damages that they may become liable for? What will happen if an injunction is obtained?
Recently, Apple /quotes/zigman/68270/quotes/nls/aapl AAPL -0.42% obtained an injunction against HTC. What is the effect on future product plans? How large will be the ongoing legal expenses? Is the balance sheet strong enough to fight patent wars?
The fatal attraction for technology patents among some stock market gurus is so strong that none of the above deters them. Ill equipped as they might be, they keep on making bold pronouncements that are plain wrong.
This has created a dangerous situation for some investors. After all, it is the money of the investors and…Read More at MarketWatch
