Patent Progress: What Apple and HTC’s Landmark Pact Means for the Patent Wars

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LiSong / Imaginechina / AP

Apple CEO Tim Cook

Finally.

After years of lawsuits and untold tens of millions in legal fees, Apple, the world’s largest technology company, has agreed to cease all current patent litigation against Taiwanese hardware giant HTC, a major ally of Google, which controls Android, the world’s most ubiquitous mobile-operating system.

This deal, announced late Saturday night, could — I emphasize the word could — augur a new phase in the great digital intellectual-property wars that have roiled the technology industry for the past decade. At a minimum, the pact is a bold move by Apple CEO Tim Cook, who has helmed the Cupertino, Calif.–based tech juggernaut for slightly over one year, since the passing of his mentor, revered Apple co-founder Steve Jobs, who vowed “thermonuclear war” against those he felt ripped off the iPhone — including HTC.

This deal, the financial terms of which were not disclosed, is the most important strategic move that Cook has made during his tenure and signals a new and welcome pragmatism by Apple as it continues its proxy war against Google and Android. This agreement is not an end to overall hostilities between Apple and Google. In fact, it could just be the first step in a lengthy, complex and contentious series of patent-licensing deals between these two companies.

(MORE: Patent Peace: Apple’s Tim Cook, Google’s Larry Page in CEO Talks)

“With this win in hand, Apple has set a base price for what it wants to get in licensing revenue and will go after the real enemy: Google,” says Vivek Wadhwa, a tech-policy expert who holds appointments at Duke and Stanford.

For years, academics, analysts and business leaders have bemoaned the state of the current U.S. patent-law regimen. Until last weekend, most of the major tech giants, including Apple, Google, Microsoft, Samsung and HTC, were engaged in litigation and counterlitigation in dozens of jurisdictions worldwide. For the past several years, there’s been an escalating intellectual-property arms race gripping the tech world — and the weapons of choice have been patents.

Put simply, these patent wars have spun out of control. This could have detrimental effects to U.S. competitiveness. No less a legal authority than federal judge Richard A. Posner — who recently dismissed a major patent lawsuit between Apple and Motorola — recently wrote that “there appear to be serious problems with our patent system.”

Last year, for the first time, Apple and Google spent more on patent litigation and intellectual property than on research and development. That’s not healthy for either of these companies or the U.S. economy.

(MORE: Apple’s $1 Billion Patent Win over Samsung Rattles Google’s Cage)

Cook’s decision to strike patent peace with HTC marks a major transition from the warlike posture of his predecessor, Apple co-founder Jobs. As Jobs told his biographer Walter Isaacson, Google “f—ing ripped off the iPhone.” Jobs pledged to devote his “last dying breath” and spend all the company’s cash to “destroy Android, because it’s a stolen product.”

In August, Apple won a massive victory over Samsung when a San Jose federal jury found that the South Korea–based giant had infringed Apple’s smart-phone patents and awarded the Cupertino tech icon $1.05 billion. The size of that verdict generated intense scrutiny by experts and policymakers and put the spotlight on tech executives to explain why they are spending so much time, money and resources litigating, instead of innovating.

For his part, the Apple CEO declared earlier this year that he’s “always hated litigation, and I continue to hate it,” but said it’s his job to protect Apple’s inventions. Google’s executive chairman Eric Schmidt, meanwhile, told a New York audience last month that “these patent wars are death” and described the patent arms race as “bad for innovation.”

In late August, the faintest glimmers of potential patent rapprochement emerged when Reuters revealed secret intellectual-property talks between Cook and Google CEO Larry Page, as well as key lieutenants. Those talks appear to have borne fruit. HTC was one of the earliest and most important Google Android hardware partners, and this pact is unambiguously a de-escalation of Apple’s proxy-war against Google.

“We are glad to have reached a settlement with HTC,” Cook said in a statement. “We will continue to stay laser-focused on product innovation.” HTC CEO Peter Chou said his company is “pleased to have resolved its dispute with Apple, so HTC can focus on innovation instead of litigation.”

MORE: Why Apple vs. Google Is the Most Important Battle in Tech

2 comments
ocrates
ocrates

Yes, the patent system needs reform here. Patent wars are the dumbest move of all. The initiator of those wars will historically lose the markets as they seek to destroy consumer choice through litigation. That is the sole loser, the consumer; and they alone are the target that matters. When companies and litigants forget that fact, they do so at their peril. Consumers remember those that prevented access to product for litigation as "bullies" in legal wars, no matter what fanboys state online.  If this were not so, why did Samsung sales increase after the Apple verdict? Ask yourself that question and reflect on reality. It is never a good move to block a consumer of technology the right to use technology in any context. If you can sue the company without affecting the consumer, that is different. When you affect choice (as Apple is intending) you lose the war in the mind of the consumer as a bully, telling them what they can choose to own. You may not like that fact, but that is the perception. Sorry to defenders everywhere - but that is what happened here.

john_j
john_j

I am truly saddened to see Apple descend the ladder from Great Company down to lowly software patent troll.