Apple, HTC Are Found to be Violating Each Other’s Patents

Posted by at 10:47 am on July 27, 2011

The high-stakes patent dispute between HTC and Apple has become a stalemate, with recent rulings favoring first one company, then the other — though Apple may be slightly ahead overall in terms of leverage. Phone maker HTC agreed to buy S3 Graphics Company for $300 million just days after the latter firm scored a rare win over Apple in a preliminary ITC ruling, but two weeks later another ITC judge found in favor of Apple on a different set of patent violations.

More details have now emerged from the July 1st preliminary ruling against Apple in the lawsuit brought by S3, Bloomberg reports. The latter company initially sued Apple over a year ago, claiming that Apple had copied its texture-compression technology in its Mac and iOS operating systems and violated four patents.

In his preliminary ruling, ITC Judge James Gildea found that Mac OS X was indeed in violation of two of the four disputed patents — but that iOS, the platform used by the iPhone and Apple’s other mobile devices, was not. He also found that the other two disputed patents were invalid, and ruled that certain aspects of the two infringed patents were also invalid. Even Macs using NVidia video systems have a “implied license” to the disputed patents, meaning the number of current Mac models that could be affected by a future final ruling could be small.

On July 15th, a different ITC judge found that HTC itself had violated two of Apple’s patents related to scrolling and touch interfaces in a preliminary ruling. Just days before the ruling, Apple had launched a second ITC complaint against HTC for violations of Apple patents and trade dress (“look and feel”), this time targetting HTC’s forthcoming Flyer tablets and other Android-based devices. Some observers believe that Apple is using the HTC dispute as a proxy fight against Google’s mobile-device operating system, though Google has yet to be directly involved in the litigation.

With each company now having preliminary rulings against them for patent violations, the potential implications become more serious — though HTC would likely suffer more, as the company only makes mobile devices rather than having a diverse lineup of electronics as Apple does. If both preliminary rulings were to be upheld by the full six-member commission, the ITC could conceivably bar some imports of Macs — but not iOS devices — and also bar most HTC phone models from being sold in the U.S. The latter action would hurt HTC far more than the Mac ruling would hurt Apple — not only could Apple easily make manufacturing changes to avoid violating S3 patents, the majority of the company’s revenues now come from iOS devices, with Macs accounting for only 23 percent of its income.

The chances of the two parties taking the issues all the way to a full ruling are low, however. Both companies will likely use the preliminary rulings as leverage against the other to negotiate favorable terms in a settlement. The ITC has said it will make a full ruling on the S3 complaint in November, giving both companies time to potentially work out an agreement.

The full commission ruling on Apple’s original complaint against HTC will likely come around the same time, and preliminary rulings on the two companies’ other complaints are still pending. HTC officials have indicated that the two companies have held “off and on” settlement talks, and has recently indicated an increased willingness to reach a settlement.

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