AMSTERDAM Dutch navigation systems company TomTom said on Thursday Microsoft had launched a patent lawsuit against it in the United States, but denied it had breached any patent rights.
"We reject the claim and will vigorously defend ourselves," TomTom spokesman Taco Titulaer said, adding that Microsoft sent a letter to TomTom's U.S. office informing it of the action.
Microsoft said it was taking the legal steps against TomTom, which makes portable navigation devices for cars and mapping software for handheld computers, after the two failed to reach a patent-licensing agreement after more than a year of talks.
"When a reasonable business agreement cannot be reached, we have no choice but to pursue legal action to protect our innovations and our partners who license them," Horacio Gutierrez, deputy general counsel of Intellectual Property and Licensing at Microsoft, said in a statement.
Microsoft filed a complaint in a U.S. District Court in Washington and at the International Trade Commission.
Shares in TomTom were down 6 percent at 3.10 euros at 1113 GMT (6:13 a.m. EST), near an all-time low of 2.81 euros and compared with a 0.3 percent rise in the Amsterdam AEX index.
"We fear this news could depress the TomTom share price for a long time," RBS analyst Wim Gille said.
Martijn den Drijver, analyst at SNS Securities, said given that TomTom rival Garmin has already licensed technology from Microsoft, it is likely that TomTom will settle the case and pay a license fee.
"A prolonged legal battle at this point, with an uncertain outcome, does not make sense," he said in a note.
Microsoft said the patents involved in the case related to innovations in car navigation technology and other computing functionality that Microsoft has licensed to other companies.
TomTom reported this week a 989 million euro ($1.3 billion) fourth-quarter net loss as it made a 1 billion euro writedown on digital map supplier Tele Atlas, which it acquired last year.
The company is now exploring options to prevent a breach of its loan covenants.
(Editing by Mike Nesbit, John Stonestreet)