Faro Technologies Inc. (FARO) announced Tuesday the principle claims in a patent lawsuit filed by its largest competitor, Swedish firm Hexagon AB’s subsidiary Romer-CimCore, were rejected by the U.S. Patent Office.If the patent rejection stands it will cause Faro to prevail in the ongoing litigation. The lawsuit was filed in 2003 and concerns a disagreement over a 3D machine rotation product manufactured by Hexagon subsidiary Romer-CimCore in San Diego, Calififornia.
Faro’s recently appointed CEO and President, Jay Freeland, said Tuesday, “The USPTO’s initial rejection substantiates our continuing belief that the ‘148 patent is invalid.”
Faro’s stock jumped nearly 2% yesterday on the news, and trading volume was 84% above its 90-day average.
Faro Technologies Profile: Faro has product in more than 13,000 installations and has over 5,700 customers globally. The company designs, develops, and markets portable, computerized measurement devices used to create digital models from existing parts. Using highly detailed 3-D measurements. Applications include: part inspection in factory applications, re-creation of historical sites, re-creation of historical sites, and surveying.
Faro’s products increase a company’s productivity by considerably reducing the man-hours required for on-site measuring In addition, their software enables users to process and present their results more effectively.
The company was founded in 1981 and is headquartered in Lake Mary, Florida.
USPTO Comments on Patent Dispute
In its rejection, the Patent and Trademark Office determined the disputed feature was already found in prior Faro patents and therefore resolved the claims were “obvious” in view of these prior patents. Hexagon can issue a response, with the eventual goal of appealing the claim rejections.
Competitors
Competitors for FARO include: Delcam plc (private), Hexagon AB (private), and Leica Geosystems Holdings AG (private).
Potential Trade
With the patent dispute apparently out of the way for the near term, FARO appears to be ripe for a covered calls stock options strategy. Using PowerOptions powerful stock options screening tools, the following covered calls stock options position was identified:
| FARO Techs. Inc. (FARO) $ 22.02 (38 days to expiration) | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
| OPTION | Expiration / Strike |
Opt. Bid |
%Dnsd. Prot |
%If Unch. |
%If Asgnd |
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| QEJAX | 07 JAN 22.5 | $0.80 | 3.60% | 3.80% | 6.00% | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
This is an out-of-the-money covered call providing reasonable downside protection of 3.6%. If the stock price is above $22.50 on the expiration day, this trade has the potential of returning 6% in only 38 days. Even if the stock price remains stagnant, the covered calls stock options position will return 3.8%.
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