Sonos jumps 11% after ITC says Google infringed on 5 of its patents

• Sonos jumped as much as 11% on Monday after the ITC ruled that Google-parent Alphabet infringed on 5 of its patents.
• The lawsuit began in January of 2020 after Sonos alleged that Google stole its multi-room speaker technology after gaining access to it through a 2013 partnership.
• The preliminary ruling from the ITC could pave the way for Sonos to monetize its leading audio patent portfolio, according to Morgan Stanley.
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Shares of Sonos surged as much as 11% on Monday after the International Trade Commission issued a preliminary ruling that Google-parent Alphabet infringed on five of Sonos' patents.

The ruling stems from a January 2020 lawsuit, in which Sonos alleged that Google stole its multi-room speaker technology after gaining access to it through a 2013 partnership. Sonos said Google undercut it by incorporating the technology into its own phones, speakers, and laptops.

In a statement to The Verge, Sonos said the ruling "is only a first step in a lengthy battle" and called it "an important milestone in the ongoing effort to defend Sonos' technology against Google."

Meanwhile, a Google spokesperson said, "We do not use Sonos' technology, and we compete on the quality of our products and the merits of our ideas. We disagree with this preliminary ruling and will continue to make our case in the upcoming review process."

The ruling from the ITC still needs to be finalized, which is scheduled for December 13, and go through a potential appeal process. And there are still several outstanding lawsuits and counter-suits that the two companies are battling.

But according to Morgan Stanley analyst Katy Huberty, the win validates Sonos' patents and could lead to the audio company better monetizing its intellectual property.

Morgan Stanley rates Sonos at an Overweight with a $51 price target. The bank also has a bull case price target of $66, representing potential upside of 57% from current levels.