Wed, Nov 23, 2011 page12

• HTC shares slump after US lawsuit loss

  BUMPS IN THE ROAD: A research analyst familiar with HTC said the firm would most likely have to settle with Apple by paying licensing fees to use its technology

  • By Jason Tan / Staff Reporter
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  Shares of HTC Corp (宏達電), the world’s No. 4 smartphone brand, tumbled 5.81 percent yesterday after a subsidiary lost a patent infringement lawsuit against Apple Inc in the US.

  HTC shares dropped to NT$600 on the Taiwan Stock Exchange, after the US International Trade Commission (ITC) on Monday overthrew a preliminary ruling by saying that Apple had not violated S3 Graphics Co’s patent rights, crushing HTC’s hopes of banning sales of some Apple computers, iPhones and iPads in the US.

  S3 accused Apple in May last year of violating four of its patents.

  The ITC determined in an initial ruling in July that Apple’s Mac OS X had infringed on two of S3’s texture compression patents, but the iPhone and iPad had not.

  “We are disappointed, but respect the ITC’s decision,” HTC general counsel Grace Lei (雷憶瑜) said in an e-mailed statement. “While the outcome is not what we hoped for, we will review the ruling once the commission provides it and will then consider all options, including an appeal.”

  The rise of HTC and Samsung Electronics Co — two strong contenders in the smartphone industry that use the Android platform — has irked Apple, which is resorting to patent suits to slow down their growth momentum, said Andrew Wang (王英裕), a research manager at the Industrial Economics and Knowledge Center (產業經濟與趨勢研究中心) at the Industrial Technology Research Institute (工研院).

  These tactics are also aimed at Google Inc, the developer of the fast-growing Android operating system that threatens Apple’s iOS, he said.

  “These lawsuits are not focused on standard patents, but smaller, minor patents that companies have dug up to accuse each other [of infringements]. Winning or losing litigation doesn’t necessarily measure the innovation or creativity of a company,” Wang said.

  He said the chances were huge that HTC would have to reach a settlement with Apple by paying licensing fees.

  HTC bought the Fremont, -California-based S3 Graphics in July for US$300 million.

  S3 makes image-compression technology. Its texture compression feature is used in Nintendo Co’s Wii and Sony Corp’s PlayStation portable gaming systems.

  HTC gained about 235 patents, mostly related to graphics technology, when it purchased S3.

  Some analysts have questioned the legitimacy of the S3 deal because HTC chairwoman Cher Wang (王雪紅) and her husband owned a stake in the company.

  HTC said its chairwoman did not run the company’s daily operations and was not involved in the decision to acquire S3.

  HTC CEO Peter Chou (周永明) said in July that the acquisition was one of many defenses the -smartphone maker was building up in the highly competitive industry, where lawsuits, which he called “little disturbances” to HTC’s growth, are “inevitable.”

  On Oct. 17, ITC ruled that Apple had not violated HTC’s four patents related to technologies for power management and phone dialing.

  A final ITC ruling is scheduled for Dec. 6 in an Apple lawsuit against HTC, in which the commission initially found that HTC had violated two patents owned by Apple.

  HTC may face an injunction against selling Android smartphones in the US if the outcome is in favor of Apple.
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