UPDATE 1-Palm investors worry Apple may get touchy over Pre

NEW YORK Thu Jan 22, 2009 8:44pm GMT

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NEW YORK Jan 22 (Reuters) - Some Palm Inc PALM.O investors are worried that its highly anticipated new phone, the Pre, may face a legal challenge from Apple Inc (AAPL.O) over touch-screen technology.

Apple Chief Operating Officer Tim Cook said on a quarterly earnings call on Wednesday that the iPhone maker would use all its weapons to fight any rivals that "ripped off" its intellectual property (IP).

"That could be a warning shot across the bow," Peter Strand, an IP specialist at law firm Shook, Hardy & Bacon said on Thursday.

Analysts said Cook's comments could mean that Apple is planning a legal case against Palm for when the Pre comes on the market in the first half of this year.

Specifically, the concern is that Apple could assert IP rights against Palm over Pre's multi-touch interface, which lets users navigate a website by pinching their fingers together or spreading them apart on the phone's screen.

The Pre, which also has a slide-out keyboard, was unveiled with much fanfare at the Consumer Electronics Show in Las Vegas, more than doubling Palm's shares over about 6 days.

Palm shares were down 27 cents, or 3.4 percent, at $7.57 in afternoon trade on Nasdaq, after falling as low as $7.15 earlier in the session. Analysts said Cook's comments had weighed on the shares.

The retail price of the Pre has not been divulged.

Apple, which was careful not to mention a specific company in its comments, has been much lauded for the iPhone's multi-touch feature, launched in the summer of 2007.

"Palm is the first one that would spring to mind. You've got a new product with similar features to iPhone, and you have executives leading the charge from Apple," said Avian Securities analyst Matthew Thornton.

He was referring to Palm Executive Chairman Jon Rubinstein, who used to be a top hardware engineer at Apple. Fred Anderson, now a director at Palm, was previously Apple's chief financial officer.

Palm has a storied history in touchscreen devices. It is a pioneer of touch-controlled gadgets ranging from the Palm Pilot personal digital assistant to the Treo and Centro phones that allow consumers to manage data without using a keyboard.

"Apple was not the first to do multi-touch," Palm spokeswoman Lynn Fox said in an e-mail when asked to comment, adding that multi-touch has been around since the mid-1980s.

"Palm has been building its own intellectual property portfolio for 15 years, and we will defend it vigorously, if necessary," said Fox.

Pre, based on a new operating system from Palm, is a highly-anticipated device that analysts see as Palm's only chance of fighting back against competition from Apple and BlackBerry from Research in Motion Ltd RIM.TO.

"Palm, like Apple, has a rich heritage in touch technology," said JPMorgan analyst Paul Coster, adding that this may be a hotly contested area as "a lot of companies have intellectual property relating to multi-touch."

UBS analyst Maynard Um said that while Apple's comments seemed to be weighing on Palm investors' minds, they did not change his investment opinion on Palm so far.

"We don't have enough details about the technology from either Palm or Apple to tell if there is an infringement," he said. "It's a little premature to talk about because (Pre's) not even a commercial product yet." (Reporting by Sinead Carew and Franklin Paul; Editing by Gerald E. McCormick, Toni Reinhold)

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