In the biblical battle vs. Goliath, David ultimately prevailed. However, he only had to defeat one giant, whereas Neonode’s pitted against Samsung, Apple and Google. Yet NEON somehow remains in the fight, which an insider said may carry a $50bn(!) prize.
How did this trio of tech behemoths get involved – and crucially, why should YOU care? After all, if you screen for NEON on Bloomberg or Yahoo Finance, you’ll find an anemic business half-heartedly trying to zig-zag its way to cash-flow breakeven. I mean, if we’re being generous, the intrinsic value of NEON’s core operation’s ~$1/sh (roughly equal to net cash.) Hardly the stuff of legends.
However, all those expensive BBG terminals (which really is a glorified chatroom) omit a story of epic proportions, ie an ‘option’ in MBA-speak – and as y’all know, options have value, potentially in the billions of dollars. Now is that something you might be interested in?
If so, let’s rewind to a 2007 keynote by the late Steve Jobs, who bedazzled the world w/ a magical, effortless fusion of his iPhone and your finger. Beaming with glee, Jobs quipped; ‘and boy have we patented it.’ As the room erupted in laughter, little did the audience know that underneath his black Issey Miyake turtleneck lay an even darker secret.
A famous Jobsian mantra goes; ‘a good artist copies, but a great artist steals’ (allegedly, he nicked that from Pablo Picasso himself.) As pertains to NEON, the ‘multi-touch’ magic that helped catapult the iPhone to world domination, was purportedly (you guessed it!) based on patents filed in 2002 by Swedish start-up Neonode. Befittingly, that very summer Avril Lavigne’s banger ‘Complicated’ topped the billboards – as the lyrics go; ‘Why'd you have to go and make things so complicated?’
A bit of added context before we fast-forward. In 2005, NEON’s novel tech had made its way up through the byzantine reporting lines of Korean chaebol Samsung, ultimately resulting in a signed license agreement, incl. a fixed up-front fee + EUR2 per device (which remains unpaid) for two foundational NEON patents; ‘879 and ‘993. True to form, Apple’s said to have pursued a different strategy -- in the poignant words of Avril Lavigne; ‘Honesty and promise me I'm never gonna find you faking, No, no, no...’ Picasso would (allegedly) be proud.
And then in 2010, Jobs made another maverick move when Apple sued Samsung claiming the Koreans were misusing the aforementioned ‘multi-touch’ magic patents. However, Samsung swiftly snapped back ‘아니요!’ it’s Saul Goodman because we’re using NEON’s patents from 2002 – and we got a license agreement signed in 2005 to prove it. Oh boy! It appeared Apple’s prodigal iCEO had shot himself in the New Balance clad foot.
Quick recap. Steve Jobs allegedly (presumption of innocence, etc) purloined NEON’s patents, then cheekily turned around and accused Samsung of poaching them from Apple. However, when Samsung flashed the license agreement w/ NEON, an ‘out of court settlement’ was promptly reached between the two tech titans.
OK, but so what for NEON? In the Old Testament, David used a sling and a stone to defeat the giant Philistine. Enter litigation financing firm Aequitas Technologies, founded by inscrutable genius Dooyong Lee. In 2019, AQ agreed to spearhead a string of patent lawsuits and fund the correspondingly chunky legal tab in return for a 50/50 split of potential net proceeds.
Now armed to the teeth, our swashbuckling David quickly took aim at both Samsung (who, lest we forget, had used the unsettled NEON license agreement as defense against Apple) and Apple (who, lest they forget, had sued Samsung for using those patents). After an initial scuffle, it was decided the Apple lawsuit be put on hold pending a ruling vs. Samsung. As a side note, Alphabet/Google tried to preemptively enter the arena, but briskly got knocked back.
So where are we today? Jury trial’s due to commence on October 24, 2025 before the honorable Judge Alan Albright in Texas. Let’s just hope AA’s better prepared than during the 2023 Markman snafu, where he willy-nilly rendered a cornerstone patent invalid – luckily, it was later reversed on appeal in 2024.
The upcoming trial in Texas will likely centre around two key questions; (i) did Samsung infringe upon NEON’s valid patent suite, and if so, (ii) did Samsung do so willfully (in which case a multiplier’s added to the baseline award.) The EUR2/device should act as an anchor (as stipulated in the 2005 license agreement,) although there are lots of moving parts.
If NEON’s successful, they’ll then go after Apple in California, and potentially Google after that. There’s also the question of how to define ‘devices’, ie units of smartphones + tablets and/or smartwatches sold infringing the patent, and whether those volumes are US-only, or global sales.
For the purpose of this write-up, let’s just break down into a simplified equation to get a sense of how much this whole thing might be worth:
Units (number of smartphones as well as eligible smart devices incl. tablets and watches sold by Samsung, Apple, and perhaps Google, roughly over the last decade; US-only or globally)
x Damages/unit (~$2 baseline’s a reasonable guess ref EUR2 stated in 2005 license agreement even if patent ‘993 got nixed, given inflation, etc; w/ up to 3x willful infringement multiplier)
x NEON’s share (AQ will initially deduct legal, success fees, etc pre-50/50 profit split, then we’ll need to adjust for taxes, and if you’re so inclined divide by ~17mn NEON shs)
x Probability (US legal system’s gnarly and so NEON may end up w/ donuts, also AQ could choose to settle at any point in time, although that’d be rather anticlimactical, wouldn’t it..)
Given all these known- and unknown- unknowns, the estimated range will necessary be quite wide, spanning from very little to a lot. None of the large banks cover NEON, despite being Nasdaq-listed, however a now infamous analyst (let’s save that story for another time) argued it could easily be worth >$100/sh. Just think about all the smartphones sold by Apple and Samsung in the last decade (it’s a humongous number!), multiple w/ your best guess value per unit, and divide by ~17mn shs outstanding. Now compare that to NEON’s current stock price, and you may find yourself eagerly cheering for David come October…
Please note I’ve consciously (and subconsciously) glanced over a ton of detail – there’s a lot more to this story, so give a holler if you’d like a shrimp-dive into specific areas.
Comments and questions always welcome.
Shrimp out.
Disclaimer: I’m long NEON. The content on this website is for informational and educational purposes only and is not created to meet your personal financial situation. Nothing should be considered as investment advice or as a guarantee of profit. You are advised to consult with your financial advisors to discuss your investment options and whether it would be a suitable investment for your personal needs. The information used in this publication is from sources that are believed to be reliable, but the accuracy cannot be guaranteed. It may include some errors, please make sure to do your due diligence. The opinions expressed are those of the author and the author only. These opinions are subject to change without prior notice.
What is your opinion regarding their chances of actually succeeding with this trial/settlement? Pros and cons for NEON?