RE Spectra Physics litigation
I can certainly understand how the trial and the earnings release which both are coming up over the next 2 weeks could scare off many investors. In order to determine the potential impact of the trial, I took a close look at the recent 10K, filed 2/24/97, and have noted a rather significant statement IMO:
" The Court also orally indicated that it would dismiss Spectra-Physics' claims against the Company for promissory estoppel and fraud and its claims for punitive damages. No written orders reflecting the December 19 or the February 7 rulings have yet been entered."
If, as I would assume, a written order to this effect emerges or has emerged (but hadn't been noted in 10K due to its filing only 2 weeks after the hearing), then in the worst case I would think that SDLI might only be required to license their pre '94 technology to S-P, which may certainly be injurious to SDL's competitive position, but at least SDL would be out of the woods as far as the posibility of having to pay out punitive damages. However there would appear to remain the possibility that SDL could be liable for ordinary damages if the court finds that SDL was in breach of contract. Not sure how damages might be calculated in such a situation since the calculation would be quite speculative.
Anyway, that is my worst case analysis at this point. Wall Street certainly detests uncertainty and the entire industry is one big IP litigation minefield. Unfortunately there are tremendous economies of scale in litigation. Not only does the larger firm have a much bigger litigation budget at its disposal, but the potential effects are much more harmful to the snaller company. Fortunately, this particular battle is getting nearer to a conclusion and I don't forsee particularly disastrous consequences for SDL. It will be a big positive when this expensive distraction is out of the way and management can proceed with business in what is arguably one of the most dynamic emerging industries in the world.
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