A new round of patent infringement lawsuits broke out today between Sun MicroSystems and Network Appliance . According to reports, Network Appliance has filed a suit against Sun Microsystems intent on a ruling that NTAP is not infringing 3 of Sun's U.S. patents. The suit also seeks a ruling that JAVA infringes 7 NTAP patents related to data processing systems and software. In a statement, NTAP said that Sun's aggressive demand that we license some of their IP caused us to examine carefully whether we were infringing their IP rights and whether they might be infringing ours.
Both stocks are lower on the day, pressured mainly by selling pressure in the broader market. At last check, JAVA had lost about 1.6%, while NTAP was off about 0.6%. Neither security has held up well this year, but both are in the midst of a modest rebound due to the overall strength of the technology sector. Still NTAP is battling overhead resistance at the 30 level, while perched on its 10-day moving average, and JAVA has outrun its short-term 10-day trendline only to meet with resistance in the 5.50 region.
Sentiment doesn't favor NTAP at the moment, as its Schaeffer's put/call open interest ratio (SOIR) of 0.66 ranks below 75% of those taken during the past year. The shares will do well to hold support at the 30 level amid this new lawsuit. Meanwhile, JAVA has ample pessimism to spark a rally, as its SOIR of 0.60 ranks above 96% of all those taken during the past year. A breakout above 5.50 could well send the shares skipping higher.