Apple Inc and HTC Corp have settled all global lawsuits and signed a 10-year licensing agreement, ending a dispute that threatened their shipments of mobile devices.
Apple, which had accused HTC of copying features that made its iPhone unique, “will continue to stay laser focused on product innovation,” Chief Executive Officer Tim Cook was cited as saying in a joint press release yesterday. HTC had accused the Cupertino, California-based maker of iPads and MacBooks of infringing its wireless patents.
An Apple complaint to the US International Trade Commission sought to block imports of HTC smartphones because the devices allegedly copied the iPhone’s pinch-to-zoom feature. HTC fought back, alleging infringement of patents it bought last year for ways to reliably transmit a larger amount of data. Both parties declined to provide details of the settlement.
“This is definitely a positive surprise for HTC,” said Daniel Chang, who rates the stock underperform at Macquarie Group Ltd. in Taipei. “The shares will probably get a bump on this news, though it doesn’t solve the structural problems at the company.”
Shares of HTC, the Taoyuan, Taiwan-based maker of One, Desire, and Sensation handsets, have fallen 55 per cent this year in Taipei trading, after a 42 per cent drop last year spurred by continued market-share losses, falling sales and lower profit.
“HTC is pleased to have resolved its dispute with Apple, so HTC can focus on innovation instead of litigation,” Chief Executive Officer Peter Chou said in the statement.
In May, HTC said availability of its HTC One X and HTC EVO 4G LTE handsets was delayed due to a US customs review required after an exclusion order by the ITC. The company had said it redesigned its devices to remove disputed technology while maintaining it breached no patents. The delay pushed back a release of the devices by Sprint Nextel Corp, which had planned to offer the LTE model to help boost its own subscriber numbers. Less than a month later, HTC cut its second-quarter sales projection by 13 per cent, citing a delay in U.S. shipments among the reasons for the second lowering of its revenue projection in three quarters. Weaker-than-expected sales in Europe amid heightened competition were named as the primary reason for the guidance cut.
In July, the ITC ruled that HTC could keep shipping its devices while the agency investigated whether the phones violate the exclusion order, denying an emergency request to have the handsets halted at the US border. Apple’s complaints included claims HTC copied the iPhone maker’s technology for detecting phone numbers in e-mails, allowing users to save the information or make a call without dialing. The dispute, which include a case filed in London, also had the US company accusing its rival of copying other features such as “slide to unlock,” multiple screen touches, and using various alphabets when sending messages.
HTC’s rebuttal included its $300 million purchase of 3G Graphics Co, a company part-owned by HTC Chairwoman Cher Wang, in a bid to leverage that company’s patent claims against Apple to bolster its own defence. The gambit failed when the ITC ruled in November 2011 that Apple’s Macs didn’t infringe two S3 Graphics patents.
A separate case before the ITC may have forced Cook to the negotiating table after a judge at the agency said Apple would likely face difficulty getting a series of HTC patents invalidated. HTC bought those patents, which covered technology used in LTE high-speed wireless devices, from ADC Telecommunications Inc. for $75 million. “The settlement is a big surprise and is likely due to HTC’s LTE patents which it bought from ADC last year, as Apple’s LTE patents are relatively weak,” said Jeff Pu, who rates the stock reduce at Fubon Financial Holding Co in Taipei. “What HTC still needs though is good products.”
Analysts project the company will post a record 37 per cent decline in revenue for the year. Its share of the global smartphone market fell to 5.8 per cent in the second quarter, from a peak of 10.7 per cent a year earlier, according to Bloomberg Industries data. Rated sell by 25 of 35 analysts surveyed by Bloomberg, HTC forecast sales for this quarter that are 20 per cent below the average of analyst estimates as it faces stiffer competition from Samsung Electronics Co and Apple. Only one brokerage has a buy rating.