Apple, HTC sign 10-year patent cross-licensing deal: mutually beneficial?

November 11, 2012
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Not all court litigation ends in costly legal fees and court-determined payment of damages. Some choose to end it early on and just settle out-of-court. While Apple has won a whopping billion dollars in its landmark patent infringement case against Samsung, it’s not the same case for other mobile manufacturers. For one, even as Apple has sued HTC for infringing some of is software patents, the two companies have now agreed to a cross-licensing deal that is viewed as potentially mutually beneficial.

With the cross-licensing deal, HTC will now be allowed to use the following technologies and UI elements on smartphones during the term, among others:

  • Slide to unlock
  • Universal search
  • Bounce scrolling
  • Scroll locking

The terms of the cross-licensing deal are still confidential, although given the companies’ joint press release, the deal is  a “global settlement” that will dismiss “all current lawsuits” and a “ten-year licensing agreement.” The cross-licensing deal also extends to future patents that either company may hold.

But while the press release does not indicate any amount, we believe that at least some money will exchange hands. For one, HTC representative Jeff Gordon says HTC “does not expect this license agreement to have any adverse material impact on the financials of the company,” in a statement to The Verge, indicative that the deal does involve some payments on HTC’s part.

Digging deeper into the Apple-HTC cross-patent licensing deal, some analysis may put better light into the decision to settle rather than pursue litigation full-on.

HTC is not Samsung. Apple’s victory over Samsung may have set a precedent, but it does not mean that Apple will necessarily use this as a gauge of how to deal with other companies. For one, Samsung is a bigger competitor, and Apple was able to adequately present evidence in court, including (1) internal communication that Samsung intended to copy Apple designs, and (2) Samsung products that had visual similarities with Apple’s. Moreover, the large volume of Samsung sales has assured Apple of a hefty fee. With lower sales volumes by HTC, Apple may not expect a big enough fee to be worth pursuing a protracted court case.

HTC is small fry. Well, maybe not exactly, but it’s smaller than Samsung, at least. As such, Apple may have thought it better to just deal with HTC lightly rather than go into “thermonuclear war” like what it has done with Samsung. Similarly, HTC has better priorities and may have decided it would have better use of its resources into innovating rather than paying costly lawyer’s fees.

HTC is Samsung’s competition. Given Samsung’s performance in terms of volume and market share, the Korean company is Apple’s prime competition at this point. HTC is also struggling to compete with Samsung in both Android and Windows Phone marketplaces, and it might be better for Apple to help HTC eat into Samsung’s market share.

Windows Phone 8 may have been a factor. HTC has a long history with Microsoft, having manufactured the first ever Windows Mobile handsets (including as ODM for the HP iPAQ). With the launch of Windows Phone 8, and HTC’s Windows Phone 8 branded smartphones, the Taiwanese firm may have replaced Nokia as Microsoft’s prime smartphone manufacturer (although the rumored Microsoft-developed smartphone may change that in the future). Given Apple’s disdain for all things Android, it might have helped that HTC’s renewed partnership with Microsoft means it might take some of its resources away from Android development. Apple and Microsoft actually have a healthy business relationship, including cross-licensing agreements, and of course a colorful history since the dawn of the PC age.

These are mostly speculation and analysis, though. Given the confidential nature of the deal, what may be more important at this point is to expect better innovation from both Apple and HTC — and for the latter, both in Android and Windows Phone. With this settlement, Apple has so far had cross-licensing deals with Nokia and HTC, and has pursued full litigation with Samsung. The only big competitor left in litigation is Motorola Mobility — effectively a proxy for Google.

Will this settlement deal mean Apple is gearing up to focus its resources in litigation against Motorola/Google?

Show Press Release

HTC and Apple Settle Patent Dispute

All Patent Litigation Between the Companies Dismissed

TAIPEI, Taiwan and CUPERTINO, California—November 10, 2012—HTC and Apple® have reached a global settlement that includes the dismissal of all current lawsuits and a ten-year license agreement. The license extends to current and future patents held by both parties. The terms of the settlement are confidential.

“HTC is pleased to have resolved its dispute with Apple, so HTC can focus on innovation instead of litigation,” said Peter Chou, CEO of HTC.

“We are glad to have reached a settlement with HTC,” said Tim Cook, CEO of Apple. “We will continue to stay laser focused on product innovation.”

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