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HTC said it’s open to negotiating with Apple (s aapl) to settle a pitched patent fight between the two companies, but it’s unclear how willing Apple is to talk and how much HTC can extract from negotiations. HTC’s chief financial officer Winston Yung told Bloomberg that the Taiwanese company is open to discussing a deal that would resolve the legal issues that have embroiled the two manufacturers.
On July 15 Apple won an initial victory at the U.S. International Trade Commission when a judge ruled that HTC had infringed on two of Apple’s patents that appear to be related to HTC’s use of the Android operating system(s goog). A full commission will decide in December whether to confirm the ruling and potentially ban the sale of HTC products in the U.S. On July 1, the ITC also ruled in favor of S3 Graphics, saying that Apple infringed on its patents. HTC, less than a week later, bought S3 in a bid to give it more patent leverage.
“We are open to all sorts of solutions, as long as the solution and the terms are fair and reasonable,” Yung said. “On and off we’ve had discussions with Apple, even before the initial determination (against HTC) came out.”
Now settlements and cross-licensing deals are usually the norm in patent fights and it’s not unreasonable for HTC to assume that it can win some kind of deal from Apple. But I think it’s presumptuous that Apple is interested in following the normal rules of protocol in this case. Unlike Microsoft (s msft), which seems more than happy to force Android licensees to pay over royalties to use its patents, Apple seems more intent on stopping the use of its IP. Only in situations where it absolutely has to, such as the recent settlement with Nokia (s nok), will it strike a deal. And that was against a company with a huge trove of patents.
With HTC’s recent S3 pick-up, it will have more leverage against Apple, but it still doesn’t have a strong patent position. And it’s unclear what Apple will do. It could try to work around S3’s patents or buy chips from manufacturers that already have a license from S3. Or as patent expert Florian Mueller points out, perhaps Apple just offers a partial license that doesn’t completely cover HTC:
I could imagine a situation in which Apple might agree on a partial cross-license that would grant Apple access to all of HTC’s and S3’s patents while HTC would get access to only some of Apple’s patents: maybe just enough so that HTC can at least continue to sell Android-based products of some kind, but those products could be limited and there might be substantial degradations of the user experience.
If Apple comes to the negotiating table, that to me sounds like the most likely outcome. Apple is not interested in money at this point, and it’s only affected by patent strength. It has a lot to protect in the iPhone and iPad, which are now its dominant businesses, and so it will do whatever it takes to protect its edge. The fact that it plunked down $2.6 billion for the Nortel patents shows that it’s serious about bulking up even more on that front and you have to wonder what other patents it can toss into the HTC fight if it wants more leverage. It already filed a second complaint against HTC with the ITC and who knows, it could pile on more if it looks closely enough.
“We want people to invent their own stuff,” said Apple COO Tim Cook, during last week’s quarterly earnings call. “We’re going to make sure we defend our portfolio from everyone.”
A complete cross-licensing deal to end a patent fight is a last resort for Apple, I imagine. What Apple wants to do is either stop these Android devices that infringe on its IP from even hitting the market or force them to undergo crippling work arounds that degrade the experience. It’s not looking for a payout. So unless HTC can bring more heat to bear with the S3 patents and Apple can’t figure a way around them, I don’t see Apple making a big effort to talk at this point. Yes, they’ve chatted before. And they may talk some more. But the question is how cooperative will Apple be. My guess: not very.
Image courtesy of Flickr user Pfau