The latest round of the so-called ‘robot wars’ between Ocado Group PLC (LSE:OCDO) and Norwegian rival AutoStore has gone decisively in favour of the FTSE 100 group.
The case centred on the automated processes that whizz crates around the UK retailer's fulfilment centres, a technology the group is rolling out worldwide,
In an initial determination, a judge at the International Trade Commission (ITC) in the US found that three of the four AutoStore patents are invalid and a fourth is not infringed. In all, 33 claims against Ocado have now been rejected.
After the US ruling overnight, Ocado said: “This was a misconceived attempt by AutoStore to interfere with our business in the United States.”
The market reaction was a positive one with the stock up almost 9% mid-afternoon.
Citi’s technology analysts were heartened by the ITC’s stance, pointing out the Commission normally rules in favour of the plaintiff only to be overruled on appeal.
“As such, the ITC's initial determination that Ocado has not infringed any valid Autostore patents places Ocado firmly in the ascendancy,” they added in a note to clients.
“Whilst Autostore may appeal and the ITC's ruling is not binding in subsequent jurisdictions, it seems less likely that Autostore will have the ‘patent capital’ to enter into cross-licensing agreements or to impair Ocado's competitive or IP moat.
“Moreover, if Ocado succeeds with its counter suits relating to its patents on its tote-in-tote system, router technology and single-space bot it might instead be the recipient of remedies.
“With the spectre of litigation likely to recede, we reiterate our Buy rating on Ocado as a leader in a global online grocery market experiencing secular and structural growth.”
Citi repeated its ‘buy’ advice and £29 a share price target, a 67% premium to the current price.
In a separate announcement, Ocado provided an update on trading. While fourth-quarter sales were down 3.9%, held back by a shortage of drivers and warehouse staff, the online grocer is braced for its best ever Christmas. It expects to meet full-year profit expectations.