Judge Delays Review on Gemstar Patent Infringement Claim

Gemstar-TV Guide International Inc. said Tuesday that a judge representing the International Trade Commission had extended by three months his review of a patent infringement lawsuit filed by Gemstar, until June 21.

Gemstar shares, already down sharply on a disappointing earnings report Monday, plummeted further on the news. The shares dropped $5.69, or 26% to a 52-week low of $16.04 in Nasdaq trading.

Analysts said the delay could complicate Gemstar’s pending deals with major cable companies and put off any recovery of damages from a parallel federal civil suit for another quarter at least.

The ITC’s initial determination in the case, filed last year by Pasadena-based Gemstar against EchoStar Communications Corp., Scientific-Atlanta Inc., Pioneer Corp. and SCI Systems Inc., had been expected by Thursday.

Gemstar alleges that various products made or sold by those companies infringe Gemstar’s numerous patents for television interactive programming guides.

In a conference call Monday to discuss the company’s fourth-quarter results, Gemstar Chief Executive Henry Yuen said a favorable ruling from the ITC could mean a double- or triple-digit percentage increase in revenue from “catch-up” license fee payments from the respondents.

“You cannot infer which way [the judge is] going to rule from his request for more time,” said John Corcoran, an analyst with CIBC World Markets.

“He’s merely indicated he’s not ready yet ... however, it is also true that there are service providers waiting in the wings to see how the judge will rule before dealing with Gemstar,” he added.

In mid-February, administrative law Judge Paul Luckern, who is hearing the claim on behalf of the ITC, took the case under advisement without closing arguments, driving Gemstar stock higher in what analysts said reflected investors’ assumption he had already decided how to rule.

It was at that time that Luckern said he would rule in late March.

Before the announcement of the ITC delay, Gemstar shares had been down more than 16%, after posting fourth-quarter results Monday that some analysts called disappointing.

Salomon Smith Barney, SoundView Technology Group and CIBC lowered their ratings on the stock Tuesday and many brokerages cut earnings estimates for the company.

Besides the disappointing results, Gemstar also said Monday that its co-president, Peter Boylan, had resigned, and that it would take a $5-billion charge in the current quarter for the write-down of goodwill related to its July 2000 $14-billion acquisition of TV Guide.

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