Apple’s HTC Patent Victory Is The Tip Of The IceBerg

Apple scored a victory in its intellectual-property battle against manufacturer HTC, with the US International Trade Commission ruling the latter violated two of Apple’s patents.

The ITC’s 15 July ruling is preliminary, and could still be reversed by the full commission. Nonetheless, HTC’s statements following the decision suggest the company is digging in for a long battle. “Now the course of action is to appeal,” HTC CFO Winston Yung told Dow Jones Newswires. “We believe we have a very strong case, the attorney agrees with us, and therefore we will appeal.”

ITC to ban importation?

HTC manufactures Google Android smartphones, whose rising market share threatens not only Apple’s iPhone, but also Research In Motion’s BlackBerry franchise and Microsoft’s nascent Windows Phone. Apple is locked in a similar intellectual-property battle with Motorola and Samsung, both of which offer a variety of tablets and smartphones running Android.

While most of these battles are being fought in traditional court, the legal counsels for the various tech companies also love sending their respective cases to the ITC, which under Section 337 of the Tariff Act of 1930 can ban the importation of goods that violate US patents. Given the sheer number of tech products manufactured outside the United States, that makes the involved companies particularly vulnerable to this particular legal avenue.

As Android continues to gain market share, companies like Apple and Microsoft have ratcheted up the pressure on manufacturers using Google’s operating system. Over the past few weeks, Microsoft has entered into royalty agreements with a growing number of Android device manufacturers, including HTC. According to a recent research note from Jack Gold, founder and principal analyst of J. Gold Associates, Microsoft’s claims that Android violates its patent portfolio could result in a revenue stream that dwarfs anything the company can collect from its own Windows Phone franchise.

Android has a long battle ahead

Pressure on Android could radically change the smartphone game in coming quarters, according to another analyst.

“If Android stumbles, the field of Apple competitors grows, and Hewlett-Packard’s webOS and Microsoft’s Windows Phone 7 and Windows 8 for tablets get a clearer shot,” Roger Kay, an analyst with Endpoint Technologies Associates, wrote in a July 18 blog posting. “If Google ends up having to charge its customers for Android and pay royalties to Microsoft, then Microsoft increases an already nice stream of revenue from Android.”

While the ITC preliminary ruling is a positive development for Apple, the company has a mixed record when it comes to legal victories. The company recently settled a high-profile intellectual-property dispute with Nokia. Under the terms of the resulting agreement, Apple will pay the Finnish phone manufacturer a one-time fee in addition to undisclosed royalties.

“We are very pleased to have Apple join the growing number of Nokia licensees,” Stephen Elop, president and CEO of Nokia, wrote in a June 14 statement.

In other words, no matter how the battle with HTC progresses, trust that these Android-related legal fights will continue well into the future.