A U.K. court ruled that the Nintendo Wii gaming console infringed on hand gesture and motion tracking system patents filed by Philips.
Judge Colin Birss, however, ruled that the company did not file a third patent in question pertaining to creating a model body within a virtual environment.
"It's about a patent for motion, gesture and pointing control that we make available to manufacturers of set-top boxes and games consoles through a licensing programme," said Philips spokesman Bjorn Teuwsen.
"We'd been trying to come to a licensing agreement with Nintendo since 2011, but since it didn't work out we started legal action in Germany and the UK in 2012, France in 2013 and in the U.S. last month," Teuwsen added.
Nintendo remains firm on their belief that the two patents filed by Philips are invalid, and the company will seek to appeal the court's decision.
The company believes that combining a motion sensor with a camera is "common general knowledge," but the court ruled that Nintendo's reasons to put the two components together were unconvincing.
"Nintendo has a long history of developing innovative products while respecting the intellectual property rights of others," said the company.
"Nintendo is committed to ensuring that this judgment does not affect continued sales of its highly acclaimed line of video game hardware, software and accessories and will actively pursue all such legitimate steps as are necessary to avoid any interruptions to its business."
Nintendo is facing the possibility that it will have to give Philips a portion of the sales for each product that uses the supposedly infringed patents, which would be every Wii and Wii U console that has been sold.
The Nintendo Wii console has sold over 100 million units since its launch in late 2006, while the Wii U has sold over 6 million units since its launch in late 2012.
Judge Birss will release the ruling on how much in damages Nintendo owes Philips next month.
The lost case comes at a very unfortunate time for Nintendo, as the company has just received a boost in the sales of its struggling Wii U console with the release of the much-acclaimed Mario Kart 8.
Nintendo of America president Reggie Fils-Aime believes that the upcoming release of big titles such as Hyrule Warriors, Bayonetta 2 and Super Smash Bros. within the year, along with an upcoming Legend of Zelda game next year, will continue to drive up Wii U sales to recover from its dismal sales during the console's first months.