Patent Litigation Weekly: Digging Beneath the Surface of Apple v. HTC

This week: Good luck getting any lawyers in Silicon Valley to talk--even on deepest background--about this week's hot patent litigation story. That doesn't mean there isn't plenty of history and context to consider when assessing Apple's risky gambit.

Apple's lawsuit against HTC comes well into the Internet age, after a 10-year run of "troll" lawsuits has transformed the patent litigation landscape to the point that such suits now make up the bulk of many Silicon Valley litigators' practice.

It's fairly unusual in the modern era for a market leader to initiate a patent suit. Which is not to say large operating companies don't sue for patent infringement. They do. But on the relatively rare occasions when they do launch such litigation, it tends to fall into a couple of categories.

First, there are big companies with established licensing programs (IBM, Honeywell) that sometimes sue companies they don't directly compete with as a way of extracting licensing revenue. Second, big companies with slightly more Industrial Age roots sometimes sue in a bid to win some tribute from the new breed of technology companies (see, for example, Kodak's patent claims against Samsung, LG, Apple, and RIM over cell-phone cameras or Xerox's lawsuit against Google and Yahoo over search engine technology). Finally, there are a handful of suits in which a large patent-holder goes after a true rival in the hopes of protecting a deteriorating market share (see Nokia v. Apple).

The indirect targets of Apple's lawsuit, of course, are Google and its Android operating system. Still, the suit doesn't fit cleanly into any of the above categories, because right now Apple, along with Blackberry maker Research in Motion, is top dog in the smartphone market. But the company may be getting nervous about the long-term security of its position--or it may just be interested in using patents to to make life difficult for its competitors.

In any case, this litigation is less like most types of Internet-era patent suits, and more like a throwback to the way tech-sector patent wars were waged ten and even twenty years ago. Like Apple's move against HTC, some of those old-school lawsuits were initiated by market leaders. In the 1980s, Texas Instruments and IBM both won big cases against Japanese and Korean rivals. Some of the victories were large enough that the companies started to see patent-licensing as a lucrative business in and of itself. Those suits continued into the early 1990s, when Texas Instruments filed lawsuits against competitors like Tandy, Micron, Daewoo, and Sanyo, and IBM launched a patent attack on hard-drive manufacturer Conner Peripherals--something that was a likely contributor to that company's 1996 demise. The most famous example to date of a market leader using patents to solidify its position remains Polaroid's long and ultimately successful battle to wipe out the Kodak 's Instamatic line of cameras. That litigation also resulted in Polaroid winning a $910 million award, which, until recently, was the largest patent verdict ever.

In a way, Apple is taking a page out of the past in order to safeguard its future. One thing that makes this a risky gambit, though, is that while patterns of litigation have changed, so have attitudes toward patents. That's especially true in the software arena. And if Apple's move is the beginning of an all-out patent war, it's not going to be popular with the tech sector's independent developers and commentators.

Was HTC the Perfect Target for a Patent Attack?

Apple generates an enormous amount of revenue selling gadgets, and the company has never previously shown an interest in developing a real licensing program. So it's unlikely that the purpose of this lawsuit is to create a new, ongoing royalty stream from a hot product. It's almost definitely based on a genuine desire to shut a competitor out of the market, or to at least throw enough obstacles in HTC's path so that Apple keeps its edge in the marketplace. After all, patent litigation creates added burdens on in-house counsel, as well as on the engineers and other technical employees who will be deposed and be drawn into participating in the suit in less direct ways. Apple may even be focused on forcing HTC to removed certain critical features from its phones. (See, for example, cell-phone blog reporting that Google initially deactivated some multi-touch features in HTC phones at Apple's request.

Apple may well have decided it has good reason to worry about the HTC-Google partnership: Analysts have praised HTC's phones as being technically strong, and, by all accounts, Google's Android operating system offers a powerful open-choice alternative to proprietary cell-phone software made not just by Apple, but also by Research In Motion and Microsoft. Some reports argue that Android's adoption in handset makers new phones will soon outpace those competitors.

More immediately, the Taiwanese company's large revenue stream (about $4.5 billion in 2009) and nearly nonexistent relatively small U.S. patent portfolio probably helped persuade Apple that it is a perfect target. A search of U.S. Patent and Trademark Office records shows that HTC has only been issued 25 102 utility patents. While that number doesn't include whatever patents HTC may have recently acquired—or be in the process of acquiring—to hit back at Apple and gain some leverage in this patent battle, it's a stunningly low number when compared to other major handset makers such as Palm Inc. (almost 300 patents) and Motorola Inc. (which, like Apple, has accumulated a stockpile of thousands of issued patents over the years). (PTO data nerds, my search methodology is below.)

Finally, that HTC is a Taiwan-based company makes it easy for Apple to raise the stakes of the game by heading to the International Trade Commission in addition to federal court. Patent litigation gets expensive quickly at the ITC. Also working in Apple's favor is the fact that the agency's entire raison d'etre is to enforce 1930 laws that protect domestic industry.

Waiting for the Google Shoe to Fall

The biggest question hovering over this suit is just what Google means when it says "we stand behind our Android operating system and the partners who have helped us to develop it." Does it mean, "We hope HTC does alright in court? Or does it mean, "We'll help by hitting back at Apple?"  While Google is still known mainly for its dominance in Internet search, its patent portfolio isn't solely focused in that area. Somewhere among the nearly 300 issued U.S. utility patents in its portfolio, Google surely has patents it can assert against Apple.

So while its partner HTC may be the "perfect target" for a patent attack, this is clearly a proxy war with Google—a company that has made clear that it's determined to push into the cell-phone market. That makes Apple's gambit a truly risky one.

Photo via Wikimedia

PTO Search Methodology.

The Prior Art measured the patent portfolio of companies mentioned in this column by searching for the company's name in the "Assignee Name" field in the USPTO database of issued patents.

To measure Apple's patents, TPA searched for both AN/apple-computer$ (2,131 patents) and AN/apple-inc$ (849 patents). Other searches performed included AN/google-inc$ (316 patents: 298 utility, 18 design), AN/palm-inc$ (323 patents: 277 utility, 42 design), AN/htc-corp$ (58 patents: 25 utility and 33 design patents), and AN/motorola-inc$ (19,660 patents).

[Note: The "$" is the PTO search system's 'wildcard' symbol for catching any string after that point. A search for "apple-computer$" therefore catches patents that are assigned to both "Apple Computer" and "Apple Computer Inc." Similarly, searching for "htc-corp$" catches anything assigned to "HTC Corporation" as well as just "HTC Corp."]

EDIT 3/12: Some commenters suggested searching under HTC Corp.'s earlier name, High Tech Computer Corp. This showed an additional 77 issued utility patents. The relevant part of the story has been updated to reflect these additional patents. 

 

Comments

[Kyle Fleming]

Joe-

Another nice post. I don't think I am a PTO data nerd (although denial may be a sign that I am). Anyway, just FYI for you and your readers, the AN/ search only retrieves assignee at issuance information. Some companies actually like to keep the assignment quiet until after issuance just to keep folks a little in the dark.

[Kyle Fleming]

I forgot to add that you can search for all assignments, including after issuance, that are recorded at the PTO:

http://assignments.uspto.gov/assignments/?db=pat

[Joe Mullin]

Thanks Kyle, I didn't know that and it's a good thing to keep in mind. Part of the reason I included my search methodology is because I knew I'd have readers like you who know these databases best and could make helpful suggestions.

I have used the assignments database many times... But my understanding is that there's no requirement for patent holders to register assignments there either, right? (though clearly they often do)

[Steve Sereboff]

"Another nice post."
Agreed.

"there's no requirement for patent holders to register assignments there either"
Right.

[Atrawog]

I think the next step will be to see if OIN http://www.openinventionnetwork.com will get involved into this case.

The did so in the TomTom vs. Microsoft case http://blogs.computerworld.com/tomtom_gets_allies_in_microsoft_linux_patent_lawsuit_fight and they would be the perfect vehicle to fight a proxy war for Google.

OIN is pretty secretive about who is a member of OIN and who isn't and they still haven't added Google to there members list two years after it officially joined OIN http://googleblog.blogspot.com/2007/08/joining-oin.html and I wouldn't wonder if HTC is already a member of OIN or will be on it's member list pretty soon.

[anon]

Joe--

HTC's corporate (legal) name until recently was "High Tech Computer Corporation." Did you search for patents assigned to this name?

[anon]

Joe--

A disappointing article in one respect. The "stunningly low number" of HTC patents you report was the result of not realizing that HTC's corporate name used to be "High Tech Computer" before it was shortened to HTC. I am surprised you missed that, Joe, since both the district court and ITC complaints filed by Apple refer to HTC as as "High Tech Computer Corp. a/k/a HTC Corp."

A search of the USPTO database (using the string AN/"High Tech Computer") reveals 108 issued patents.

[Joe Mullin]

Anon and anon,

Thanks for your comments. I wasn't aware of HTC Corp.'s previous name (though I should have caught it from the complaint) and I am updating the post with the additional patents that a search for "High Tech Computer" shows. Like the searcher above, I found 108 patents, 77 of which were utility patents.

I don't think it changes the accuracy of the overall thesis, which wasn't just based on my patent search; it was also based on interviews with patent practitioners who told me their opinion of the HTC portfolio.

But I did change the patent count and some of my wording in the relevant section, with the changes marked. Thanks for helping make this more accurate.

[anon]

Hi Joe, this is the second "anon" poster above. I agree that the overall point of your article isn't significantly affected by the actual patent count. But one of the best things about this Internet medium is the ability, in the hands of a good journalist like you, to adjust things on-the-fly to make them more accurate.

[Anon]

Apple is very aggressive in asserting its IP. It has filed several suits as a plaintiff over the years.

[Mallika, Choir de Law Pvt. Ltd.]

Apple has been at the forefront for its IP rights. To keep its edge in the market this patent suit has come up.