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Apple, HTC Swap Licenses to Settle Patent Case

Apple, HTC Swap Licenses to Settle Patent Case

Apple and HTC have settled their lawsuit in which each accused the other of patent infringement. A cross-licensing deal was the only term of the settlement that was disclosed. "I think the settlement between Apple and HTC shows two companies weighing the dollars and cents -- and sense -- of the whole fight and treating this as a pure business decision," said Douglas Panzer, corporate counsel at The Neat Co.

By Rachelle Dragani MacNewsWorld ECT News Network
11/13/12 5:00 AM PT

Apple and HTC agreed to a settlement this week, shelving their years-long patent battle and agreeing to a 10-year licensing agreement.

The mobile device makers have been engaged in courtroom battles over patents since 2010, when Apple accused HTC of copying certain features of the iPhone. HTC fought back, claiming Apple had infringed on several of its own wireless patents.

The lawsuits are part of Apple's larger global fight against Google's Android operating system, which companies such as HTC and Samsung install on many of their mobile devices. Former Apple CEO Steve Jobs famously declared "thermonuclear war" against Android, which he believed was copied from Apple's iOS. That war has Apple embroiled in similar actions around the world, and the settlement with HTC is considered a rare development.

The companies did not reveal any of the terms of the settlement beyond announcing the licensing agreement.

Both companies highlighted the opportunity to step away from costly courtroom battles and use their resources for product development as a result of the settlement. Apple will remain "laser focused" on innovation, CEO Tim Cook said. HTC is pleased with the settlement so it, too, can focus on "innovation instead of litigation," CEO Peter Chou said.

Apple and HTC did not respond to our request for further details.

End of War?

Even though Jobs is no longer head of the company, the settlement doesn't mean Cook and Apple are going soft or are looking to make friends in the industry, said Douglas Panzer, corporate counsel at The Neat Co. Instead, both sides are making a sound business decision that will help them better invest and produce products in the mobile space.

"I think the settlement between Apple and HTC shows two companies weighing the dollars and cents -- and sense -- of the whole fight and treating this as a pure business decision," he told MacNewsWorld.

HTC has to realize it lacks strategic advantages of the two dominant smartphone makers, said Colin Gibbs, analyst at GigaOm Pro.

"Apple has built an incredibly efficient chain of component suppliers, which helps it maintain incredible margins on its mobile devices. Meanwhile, Samsung produces many of its own components, giving it a lot of control in which components it uses and how much it pays for them," he told MacNewsWorld.

Given its place in the market -- not the fierce, growing Apple rival Samsung, but a competitor with a solid patent portfolio nonetheless -- HTC most likely determined that a fair settlement was a wiser choice than pursuing more court battles, Panzer pointed out.

"HTC is smaller and quite possibly does not see itself as the next potential behemoth in the smartphone space, but rather a strong, successful player in a market of many players," Panzer said. "Assuming, as most people are, that the terms of the settlement call for HTC to pay a per-phone royalty to Apple, this is a justifiable and reasonable business expense that heads off huge legal expenses and significant distraction in favor of moving forward with a business focus and a fixed cost."

Patent System Not Totally Broken

Chou was right that HTC could put more of its resources toward developing within the space, said Panzer, which is good for both parties.

"It seems a wise decision for both sides," he observed. "Cross-license. Shuffle some money back and forth. Go about the business of making your products better and more successful."

That is the way the patent system is intended to work, Panzer noted. While that is easy to forget in the wake of the global, billion-dollar intellectual property battles and threats of thermonuclear war, more tech companies might be wise to look to this model as an example of how to settle a dispute.

"Two competing parties held patents in related technologies. They confronted each other to say they would not simply allow those patents to be overlooked and violated. And then they settled from a pure business-decision viewpoint by determining the value of those patents and cross-licensing so that each party can implement the other's technology and continue to innovate for customers," he said. "Some people may point to this settlement as a great example of a functioning intellectual property system at work."


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