Apple's $100 Million Patent Fight Yields Small Rewards

Apple is spending millions of dollars filing patent claims against Android phone makers, but its few wins in a handful of cases question whether the lawsuits are a wise investment.

The Cupertino, Calif.-based company spent a reported $100 million on just its first set of claims against HTC, according to lawyers, and likely will spend more as the cases advance.

However, the HTC cases are just a small part of Apple’s legal spending over the past year. It has filed cases against Samsung worldwide, trying to enforce bans to remove the South Korean company’s Galaxy line from the market.

Apple has won some of the cases, scoring temporary bans against Samsung’s tablets in Australia and the Netherlands, for the most part, but Apple’s wins are short-lived. For example, today a Dutch court overturned a ban against the Galaxy 10.1 tablet, denying Apple’s claims that the device copies the iPad’s design and saying that there were enough differences between the two tablets for them both to co-exist in the market.

Apple’s claims against HTC, though, haven’t been quite as publicized as its fights with Samsung. Apple filed its case with the International Trade Commission in February 2010, asking HTC’s products be banned from the United States.

Tech companies typically file with the ITC, which can enforce international import bans. However, Apple’s hopes for a product ban, which would have eliminated HTC’s smartphones from competing with the iPhone, haven’t been successful.

Apple originally filed 84 claims based on 10 patents against HTC. However, by the time an ITC judge heard the cases, only four patents were involved. Eventually, the ITC ruled that one of the patents should not have been issued to Apple, barring the company from suing other companies over it.

In the other two patents, the panel ruled Apple wasn’t using the patents themselves, therefore making it ineligible to seek injunctions based on them. ITC rules state companies must actively use a disputed patent in order to contest its usage by other businesses, which keeps patent holding companies from seeking widespread product bans and enables the ITC to protect domestic industry that would be endangered through improper patent use.

The ITC finally ruled that HTC infringed on just one of the patents, for software that allows callers to press on a phone number in an e-mail or Web page and bring up an options menu.

Apple hasn’t yet had much return on its $100 million legal investment, but lawsuits against HTC, Samsung and in essence, Android devices, may yield benefits in the future.

Typically, panels like the ITC and courts don’t enforce complete product bans. The bans that have been ordered are usually injunctive bans, meaning they’re temporary until a case hits the courts.

The threat of a product ban, though, is often enough to force settlements between companies, and Apple stands to earn far more than $100 million if courts order Android phone makers to pay for patents. HTC is already paying Microsoft $5 per Android phone, and likely will fight to keep from paying a similar amount to Apple, which still has a second set of cases pending against the Taiwanese company.

Apple’s litigious strategy could backfire, though, costing it a great deal more money if the courts rule the cases are without merit and order it to pay their rivals’ court and legal costs.

In addition, as a larger variety of smartphones and tablets are released, Apple’s cases may become moot as technology moves faster than the lawsuits proceed in court. The devices Apple is battling now likely will be out of date within a year or two, leaving Apple to pursue a new set of cases or eat its legal losses, if courts don’t agree on the bans.

Apple does have plenty of money with which to battle legally in court. Still, it’s only a matter of time before stockholders demand even more return on their investment, which could result in spending less money pursuing patent cases. At that time, Apple may rethink its strategy — and not follow the late Steve Jobs’ vow to fight Android at all costs.


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