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Summary:

The patent fights erupting in the smartphone industry aren’t going kill of any of the major players, nor are they likely to prevent smartphone users from having multitouch on non-Apple devices. For patent holders, the goal is to force competitors to pay if they succeed.

The patent fights erupting in the smartphone industry aren’t going to lead to the destruction of any of the major players, nor are they likely to prevent smartphone users from enjoying multitouch capabilities on non-Apple devices. Companies are using them to create a currency from their various patent filings, with lawyers for Apple, for example, trying to ascertain how much its multitouch patents are worth compared with the 10 patents Nokia has on radio technologies. In the end, your phone may cost more, but you’ll still have it.

So even though HTC sued Apple yesterday (after Apple sued HTC in March) and Nokia and Apple are continuing to go round in the patent courts, smartphone owners can sit back and watch the press releases and pleadings fly without fear of losing an essential feature, or an entire handset.

“We’ve seen this in the tech industry, with the LCD industry, and it goes all the way back to semiconductors. Patents aren’t a barrier to entry so much as patent holders want people to pay,” Craig Tyler, a partner in Wilson Sonsini’s IP litigation group, explained to me. “If you can tax your competitors with your royalty then you have set yourself up for profits. In a low-margin business, that’s important.”

Tyler noted that the patent issues have changed as the mobile industry has become more lucrative, with higher margins and more players. As a result, patent fights are increasingly more about features, such as multitouch, rather than technology, such as the semiconductors inside. In Apple’s case, rather than one or two radio patents, it has multiple patents associated with multitouch, but the effect may be the same. As Tyler put it, Apple may not have a “holy grail” patent, but its large stockpile renders a lawsuit effort “death by a thousand cuts.”

The good news is that Tyler estimates we’re in middle of the lawsuit storm, not at the beginning. For an example of where the industry will be soon, check out Microsoft’s patent deal with HTC by which it receives a royalty on each of HTC’s Android phones sold. Sure, Microsoft would rather sell its own phones, but if it can take a cut of HTC’s Android success, that will be fine, too.

Related GigaOM Pro Content (sub req’d): Who Owns Android’s Future? Google — Or Apple?

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  2. On the wireless side, the companies have all been suing each other for years. And will likely continue to do so for years to come. That these suits have popped up in the smartphone area should not be a surprise. At this point, most (if not all) of the “holy grail” patents (by which one could rule the industry) have already been cross-licensed.

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