The “End” of the HTC-Apple Patent Battle: Implications

15 Nov

Last weekend, HTC and Apple made major headlines by announcing an end to a series of patent battles that first begun on March 2010. Relief has been shown from both sides as bitter disputes and litigations are set aside, and as a ten year cross-licensing agreement—with undisclosed financial terms—has been reached. The only remaining issue, at this point, seems to be the unanswered questions that are left dangling in the background. Just how “beneficial,” exactly, is the licensing agreement for HTC, along with other Android-smartphone companies? Is the Cupertino firm really serious about softening Steve Job’s “thermonuclear” campaign, or is there a hidden message buried within the harmless-looking truce?

A Few Reasons to be Optimistic

No matter the motive, the good news –for HTC, in particular– is that the settlement will lift a hefty amount of weight and legal responsibility. Since the commencement of the back-and-forth infringement trials, HTC had only seen its performance deteriorate, experiencing not only notable dips in revenue, but also a market share that plunged and never looked back. In the US alone, the Taiwanese company’s shares had reportedly dropped from the once peak 23% mark to approximately 6.4%, according to CENS. The situation was not helped by the successive attempts to counter sue Apple, which only managed to increase the tension—along with the legal fees— between the two tech companies.

With the settlement agreement set in place, the Taiwan smartphone maker has less to worry about in terms of legal costs, distractions, and negative publicity. And with the Cupertino firm’s rescinded US shipment bans and accusations, there is now something to look forward to in terms of a revitalized market performance. HTC’s revenues are not necessarily projected to undergo major changes during 4Q12, although many around the tech community remain confident it will eventually recover at some point. Share prices, on the other hand, are reportedly going on an uptrend since the notable 6.86% jump on Friday. As suggested by various news sources, with the arrival of Windows8 phones, HTC’s performance will only continue to improve in the periods to come.

Some Slightly Worrying Indications

Now, the bad news: even with the supposed “peace treaty” implemented, where much of the pessimism is currently being directed is the ambiguity surrounding the “undisclosed terms.” At the moment, the general consensus is that the Taiwanese smartphone company, for better or worse, may have to pay royalties for each Android phone it releases, estimated by Stern Agree analyst Shane Wu to be around $6 to $8 USD. While this might not appear to be much upon first glance, considering that HTC is already paying around $5 to $10 USD to Microsoft (after experiencing a similar round of patent infringement cases), and keeping in mind the way small numbers tend to accumulate in the long run, HTC is far from immune when it comes to any potential issues involving its finances.

As brought up by Tech Crunch’s Ansel Haliburton, Apple’s truce with HTC can also be perceived as a part of an eventual plan to topple Android-based smartphone companies, in particular Samsung. While some may undoubtedly see the HTC-Apple settlement as indicating a future truce for the Korean company, Haliburton contends that whatever conditions HTC was forced to endure will likely be applied to Samsung as well. With its status as a major competitor to Apple, and with its tendency to ship and produce in large volumes, a situation like this will undeniably be hard to swallow, given all the potentially lost profits.

To add to all the royalty issues, one issue also worth pondering is why Apple actually decided to let HTC off now. Optimists have been inclined to attribute this to Tim Cook’s softened stance, and his intention to focus on innovation. At the realist’s camp, though, there is another indication: perhaps HTC is just no longer a “worthy” opponent anymore.

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