Investor Alert – Nintendo Wii and Game Console Stocks

August 21, 2008 by  
Filed under Investing

This is a quick post for investors in Nintendo,  Sony, and Microsoft, the leading manufacturers of the Wii, Playstation, and Xbox game consoles.

If you have read about me, you know that my day job is practicing patent law.  I keep up with developments in the technology world, particularly patented technology.  This week there was an important development that could have both short and long term negative impact on stock in Nintento Co., Ltd.  (NTDOY)

The Nintendo Wii May be in Legal Trouble

If you have paid any attention to the game console market in recent years, you know that the Nintento Wii has become all the rage, with its unique wireless remote handheld controller that incorporates accelerometers and other motion sensors.  These controllers allow for more realistic dynamic control of onscreen game movements.  The Wii has become popular even with older “gamers” because of this.  Nintendo has sold over 26 million Wii consoles since late 2006.

Well, this week Hillcrest Corporation commenced legal action in two separate venues against Nintendo, and specifically against the Wii controller.  Hillcrest initiated a proceeding in the International Trade Commission and in U.S. District Court, alleging that the Wii controller infringes four U.S. patents owned by Hillcrest.   The patents include broad claims directed toward pointing devices that use internal accelerometers to track movements (and the lack of movement).  The newest patent issued on August 19, 2008 and the claims in that patetnt appear spcifically directed at capturing the Wii.

If Hillcrest prevails on its claims, Nintendo will have to stop importing the Wii into the U.S., enter into a license with Hillcrest, or re-design its product to avoid infringement. 

If the ITC action moves forward, it will move expeditiously and will probably be resolved within a year.  The ITC does not award damages but its exclusion orders can be brutal.

Careful investors who have positions or who are considering taking positions in the game console industry should take this significant development into account.

Mr. ToughMoneyLove just thought you would like to know.

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3 Responses to “Investor Alert – Nintendo Wii and Game Console Stocks”
  1. Thanks for the heads up, Mr. ToughMoneyLove.

    Patent disputes can wreak havoc on share prices. Just look at RIM’s share price during its dispute with NTP…

  2. Interesting. I’m no lawyer, so I’m curious as to how a patent issued in August 2008 could give them precedence on a product introduced back in 2006.

  3. Nickel: The Hillcrest patent claims priority to a patent application filed in 2004.

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