HTC Corp loses patent lawsuit with Apple Inc

By Lisa Wang  /  Staff Reporter

Sun, Jul 17, 2011 - Page 11

HTC Corp (宏達電), the world’s No. 5 smartphone maker, lost the latest patent infringement lawsuit filed against it by Apple Inc as an initial ruling by the US International Trade Commission (ITC) said yesterday that HTC illegally used two patents held by Apple.

To safeguard shareholders’ interests, HTC said it would appeal the ruling. Apple originally alleged that HTC infringed 10 of its patents used in iPhones in a complaint filed in March last year.

“We are highly confident we have a strong case for the ITC appeals process and are fully prepared to defend ourselves using all means possible,” HTC general counsel Grace Lei (雷憶瑜)said in a statement released yesterday.

“We strongly believe we have alternate solutions in place for the issues raised by Apple,” Lei said.

In a counter-suit launched by HTC, the ITC ruled that Apple was infringing the patents held by HTC’s subsidiary S3 Graphics Co, HTC said.

On July 6, HTC said it would acquire S3 Graphics for US$300 million from subsidiaries of local chip designer VIA Technologies Inc (威盛電子). HTC chairperson Cher Wang (王雪紅) also chairs VIA.

Ahead of the ITC’s announcement, HTC shares tumbled 2.37 percent to NT$907 on Friday.

However, Samsung Securities analyst Chialin Lu (呂家霖) said investors have over-reacted to the potential impact of the lawsuit with Apple, a report said on Wednesday.

The likely scenario was that HTC would end up paying a license fee to Apple if HTC lost the case, while a ban on HTC exporting its phones to the US was unlikely, Lu said, citing historical rulings by the ITC on similar cases.

The licensing fee would be less than US$5 per device, which would lead to a less than 8 percent reduction of HTC’s net profits of NT$72.86 billion (US$2.5 billion) this year, according to the report. Lu’s forecast of patent licensing fees were lower than the range from US$5 per unit to US$10 per unit by other analysts, according to the report.

A patent lawsuit HTC previously lost to Microsoft Corp could set an example, Lu said. HTC has agreed to pay US$5 per Android phone for patent licensing from Microsoft, Lu said.

Lu reiterated his buy rating on HTC with target price at NT$1,430.