Cambridge Silicon Radio, one of the UK's technology success stories of the last decade, has been caught up in a patent suit filed in America late last month.
Filed in the District Court for the Western District of Washington, by the Washington Research Foundation, the suit claims that Nokia, Samsung Electronics and Panasonic have infringed a patent on wireless communications technology.
The foundation, part of the University of Washington, claims the patent in question is based on work conducted by a student at the university in the 1990s. It's not immediately clear exactly which patent is involved, but it was reportedly granted by the US Patent Office.
According to the foundation, the three mobile-phone manufacturers infringe its patent because they use Bluetooth chips manufactured by CSR, which has not bought a licence from the foundation.
Shares in CSR dropped by over 6 percent in early trading in London, to 617p. By lunchtime they had recovered to around 634p, down almost 4 percent.
By Thursday afternoon, CSR had vowed to fight the Foundation's claims.
"CSR has taken advice from its attorneys. The suit is without merit in relation to CSR's Bluetooth chips and CSR will defend its products vigorously," said CSR in a statement released to the stock market.
The foundation has asked the court to bar sales of chips that infringe its patent, and is also seeking damages from Nokia, Samsung and Panasonic. It is not suing CSR directly, as the company will not necessarily know where the chips it sells to manufacturers might eventually be sold to consumers.
Broadcom, a CSR rival, has bought a licence from the Foundation.
CSR developed the BlueCore — a silicon chip with an in-built Bluetooth radio transmitter. Previously, such a device would not work because radio waves given out by the silicon chip would effectively deafen the Bluetooth radio. CSR's trick was to design the chip so that the electrical signals it emitted did not drown out other signals on the frequencies needed for Bluetooth communication.
Earlier this year CSR announced pre-tax profits of £65m, on turnover of £277m.