Apple Ends Patent Dispute With HTC

on Nov 12, 2012

Much to the surprise of the tech industry, Apple (NASDAQ:AAPL) and HTC (TPE:2498) signed a 10-year licensing agreement, putting an end to the litigation battle between them. Shares in the Taiwanese manufacturer rose by 6.86 percent to NT241.5 on the news of the settlement.

According to sources of The Guardian, HTC may have agreed to pay between $5 (£3.15) and $20 (£12.57) per handset produced with Google’s Android operating system.
**Apple Focuses on Samsung**
Analysts believe Apple’s settlement with HTC is based on the tech giant’s desire to concentrate efforts on its patent war with major rival Samsung. “By settling with HTC, Apple makes sure it can focus all of its effort on being as disruptive as possible to Samsung,” opined Ben Wood, chief of research at CCS Insight. In contrast to the growing success of Samsung, HTC has seen its revenues plummet since peaking in September 2011. Quarterly revenues for July to September fell by 46 percent year-on-year to NT$70.2 billion (£1.5 billion) returning to levels seen in mid-2010 before its huge growth-driven sales of Android handsets. According to Mr Wood, for Apple, HTC is nothing more than an “irritant”. HTC’s global smartphone market share slipped to fifth place this year with a 4 percent market share down from 10.3 percent last year.

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The settlement with Apple gives the struggling Taiwanese phone-maker breathing space. “HTC is pleased to have resolved its dispute with Apple, so HTC can focus on innovation instead of litigation,” said Peter Chou, chief executive of the company.
!m[The iPhone Maker Focuses On Lawsuits Against Samsung](/uploads/story/768/thumbs/pic1_inline.png)Last week Apple renewed its challenge to Samsung in the San Jose court that already awarded it $1 billion (£628 million) in damages this summer. In filings on Friday, ahead of next month’s hearing, Apple said that it considered the patents involved to be “unique to its user experience and unavailable for licensing, particularly to competitors.” According to market researcher Strategy Analytics, Samsung’s Galaxy SIII overtook Apple’s iPhone 4S to become the world’s most popular smartphone in the third quarter. Apple’s iPhone 5 is expected to take the lead once again in the fourth quarter.

**Shift from “Thermonuclear War”**
The settlement with HTC, the first company Apple sued for violating iPhone patents and one of the catalysts that pushed Steve Jobs to adopt his “thermonuclear war” stance, suggests chief executive officer Tim Cook is willing to take a softer line compared to his predecessor’s. “For as long as Tim Cook has been CEO, Apple has been less interested in pursuing legal assaults against competitors, choosing increasingly to find ways to settle differences out of court,” said Carl Howe, an analyst at Yankee Group in Boston. “This settlement indicates a softening of Apple’s legal thrusts.”

License settlements could pave the way for the closing stages of the patent war in the smartphone market. Microsoft has already signed 14 patent licensing deals with Android handset makers.
License payments however also decrease profit margins for smartphone manufacturers. Phones priced for $500 or more are less affected but the cheaper alternatives selling for below $100 deliver increasingly thin margins. “The economics of the Android business model are weakened every time you have to pay a licensing settlement,” explains Mr Woods. Royalties are viewed as an Apple victory against Google with the Android operating system no longer considered “free” for manufacturers, who incur costs following Apple’s successful lawsuits.


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