Shares in CSR dropped yesterday amid fears that a patent lawsuit brought against the company's key customers could cause the maker of wireless Bluetooth chips to lose market share.

Fears centre on legal action by The Washington Research Foundation, acting on behalf of the University of Washington, which is suing three of CSR's largest customers, Nokia, Samsung and Matsushita, for using CSR chips in their Bluetooth-based mobile phones, headsets and computers.

The Foundation claims these chips infringe patents held by the University and says the consumer electronics manufacturers should have sought a licence before including them in products.

Meanwhile, the Foundation has recommended the electronics companies switch to using Bluetooth chips made by Broadcom, CSR's California-based rival, which has obtained a licence from the university.

CSR said the suit was "without merit" and said it would "defend its products vigorously".

Shares in the company, which have lost 58 per cent of their value since June, fell by nearly 7 per cent during yesterday's trading before ending the day at 640p, down 19p.

The disputed patents are understood to concern a relatively small aspect of the functioning of a Bluetooth chip. The key patents for Bluetooth are held by the Bluetooth Special Interest Group, a not-for-profit trade association, and are available royalty-free.

Nevertheless, investors remained concerned about long-term prospects for CSR.

"We believe that this lawsuit specifically targets CSR's customers rather than CSR itself, because its underlying motive is clearly to try and move some share away from CSR to Broadcom," said analysts at Dresdner Kleinwort.

It would be difficult for manufacturers to shift from use of CSR's chips immediately. But the inconvenience and uncertainty of a court case could cause them to rethink supply arrangements for future products.

News of the lawsuit comes as a further blow to CSR, following two profits warnings in the past four months.