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National trade court dismisses HTC's counter-claim against Apple with no explanation

In Washington D.C. court on Monday, the U.S. International Trade Commission struck down [PDF] a ruling by an administrative law judge, which found Apple, Inc. (AAPL) to have infringed on a pair of patents owned by S3 Graphics, a wholly owned subsidiary of Taiwan's HTC Corp. (TPE:2498).  

I. An Early Victory is Erased

The case began back in May 2010, and had previously culminated with a July 1 ruling by an administrative law judge (ALJ) who ruled that Apple was indeed in infringement of section 337 of the Tariff Act of 1930.  Summarizes the court in the recent ruling:

On July 1, 2011, the ALJ issued a final ID in this investigation finding that Apple violated section 337.  Specifically, the ALJ found that Apple computers utilizing an image compression format called DXT infringe claim 11 of the ’978 patent and claims 4 and 16 of the ’146 patent.  The ALJ recommended that the Commission issue a limited exclusion order and a cease and 2 desist order.  The ALJ found no violation with respect to the other asserted claims, which are claim 13 of the ’146 patent, claims 14 and 16 of the ’978 patent, claims 7, 12, 15, and 23 of the ’417 patent, and claims 1 and 6 of the ’087 patent.  On September 2, 2011, the Commission determined to review the ID in its entirety.

("ID"=="initial determination")

In other words, Apple reportedly had infringed on two patents (U.S. Patents 6,683,978 and 6,658,146) covering the DXT file format -- an image/texture compression method -- but not the other two asserted patents.  The ruling cleared the way for S3 to seek an import ban on certain Apple computers under the Tariff Act.

The lawsuit was dealt a setback when Advanced Micro Devices, Inc. (AMD), a supplier of Apple graphics cards, claimed to own the intellectual property in question.  AMD filed a series of image compression patents in 2009 (e.g. U.S. Patent 7,505,624).  In September, at least one of S3 Graphics' asserted patents was marked invalid, according to Ian Romanick, an Intel Corp. (INTC) executive.  

It is unclear whether this is correct, and if so what patents were invalidated and why.

It is equally unclear why precisely the ITC panel overturned the ALJ's ruling.  They merely write:

Having examined the record of this investigation, including the ALJ’s final ID and the submissions of the parties and non-parties, the Commission has determined to reverse the ALJ’s finding of a violation of section 337 and find no violation.  Additionally, the Commission has determined to deny AMD’s motion to file public interest comments out of time, to grant AMD’s motion to file a reply in connection with its motion to intervene and terminate, to deny AMD’s motion to intervene and terminate, and to deny Apple’s motion to terminate. 

About the only thing that's clear from this is that the commission did not dismiss directly due to AMD's ownership claims (it denied AMD's motion to intervene and terminate).  The ruling does indicate, though that either the claims have been found to be invalid or Apple and/or its suppliers were found to have properly licensed the patents.

II. Lawsuit Advances Apple's Quest to Block HTC's Smartphones

So what does all this mean?  Well, it's primarily a major setback for HTC.

Taiwan's HTC Corp., the second largest maker of Android smartphones and currently the top U.S. smartphone maker, surprised some when it decided to acquire S3 Graphics this last July.  The purchase can be viewed in a few lights.  In one sense it may be the company's bid to dabble in differentiating itself with unique graphics chips, must as competitor Samsung Electronics Comp., Ltd. (KS:005930) does with CPUs.  While S3 long struggled to compete in the graphics market during its time as a VIA Technologies, Inc. (TPE:2388) subsidiary, the American unit carries a rich graphical legacy that dates back the early 1990s.

S3 Graphics "Savage" card
A "Savage4" 3D graphics card from S3 Graphics, released in 1999.
[Image Source: Wikimedia Commons]

On the other hand, most believe that the purchase was primarily motivated by HTC wanting legal leverage over Apple.  At the time when HTC agreed to pay $300M USD to acquire the VIA subsidiary, S3 Graphics had just clinched its ALJ victory.

HTC is currently embroiled in a global legal war, which was initiated last year when Apple attacked in U.S. court.  HTC filed a counter complaint to the ITC in May and Apple filed a second complaint in June.  

Apple seeks to ban HTC's shipments into the U.S., much as S3 Graphics was trying to do to Apple.

Late Apple CEO and co-founder Steven P. Jobs in his authorized biography is quoted as stating that he would spend all of his company's fortune, if needed, to destroy the Android smartphone makers in court.  He said his burning hatred arose from the fact that he felt that Android is a "stolen product".

Source: ITC



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Mr Jobs calling the kettle black
By M Farkus on 11/22/2011 1:48:31 PM , Rating: 4
"He said his burning hatred arose from the fact that he felt that Android is a "stolen product"." Don't we all remember Steve's trip to Xerox Parc where he stole the GUI and mouse? In fact his own words were (sic)"...good artists copy - great artists steal". I guess turn-around is fair play. So where ever you are S.J., relax and have a steaming hot cup of STFU.




RE: Mr Jobs calling the kettle black
By messele on 11/23/11, Rating: 0
By adiposity on 11/23/2011 1:44:20 PM , Rating: 2
Maybe I'm just being petty, but where did Steve ever say he had a "burning hatred" for anything? Jason has used that phrase a couple times, and it seems like he borrowed it from here:

quote:
http://www.idevicenews.org/steve-jobs-wanted-to-de...


Now, I'm not saying it's wrong, but reusing the phrase "burning hatred" seems a little silly, given that Steve Jobs never described his feelings that way.

What he said was
quote:
“I will spend my last dying breath if I need to, and I will spend every penny of Apple’s $40 billion in the bank, to right this wrong,” Jobs reportedly said. “I’m going to destroy Android, because it’s a stolen product. I’m willing to go thermonuclear war on this.”


Steve Jobs did not say anything about his "burning hatred."


By Tony Swash on 11/24/2011 6:27:51 PM , Rating: 1
The Apple team only spent an hour and half at PARC watching the demo. And you guys still talk about! How desperate and a bit sad.

The main impact of that short meeting was that the guys from PARC finally met some people who understood their work and it's potential and more or less all of them decamped to new jobs at Apple.

What the Apple team saw was the seed of a great product. But a seed is not plant and an acorn is not an oak. The only place the ideas from PARC could take hold and lead, eventually, to world changing products was Apple.


RE: Mr Jobs calling the kettle black
By lukarak on 11/25/2011 1:03:53 AM , Rating: 2
As usual, you completely misunderstood the statement. "Stealing" an idea, and then investing time and money to develop a market ready product is not the same thing as copying a developed product.


By FishTankX on 11/25/2011 7:27:49 PM , Rating: 2
I don't see how apple "stole" the GUI, when they in fact licensed it. I believe the belief that apple stole the GUI, was due to the fact that while Apple licensed the GUI, they create one similar to Xerox's and I don't believe that Xerox's GUI was on the negotiating table, just the GUI idea.


Pay-off the judges...
By Amiga500 on 11/22/2011 11:15:45 AM , Rating: 5
Its cheaper than paying the lawyers.

Not that I'm insinuating anything....




RE: Pay-off the judges...
By Solandri on 11/22/2011 11:41:36 AM , Rating: 2
People have complained in the past that the ITC is biased in favor of U.S. companies. This is the same body which ruled against Research in Motion (causing RIM to enter into a huge licensing agreement to prevent Blackberry service from being shut down in the U.S.) based on the "email over wireless" patents which the USPTO eventually overturned. RIM is Canadian, while the patent holder was U.S. I do wonder how much of the Blackberry's current troubles are due to RIM having to have paid nearly $1 billion in licensing costs for patents which most in the tech industry considered ludicrous. $1 billion can buy you a lot of product development.

The real test will be how Apple fares against these other companies in their home countries, or in neutral third countries. Or if Google and Apple ever face off directly in the U.S.


RE: Pay-off the judges...
By drycrust3 on 11/22/2011 2:20:17 PM , Rating: 2
quote:
People have complained in the past that the ITC is biased in favor of U.S. companies.

The problem could also be the judge just didn't understand what the argument was about, so he made a judgment that was least likely to blow up in his face.
The idea of a patent is to compensate and reward someone (or a company) for the costs associated with development of some technological advancement, but it is becoming apparent that a lot of these "technological advancements" are less about advancing technology and more about stifling competition.
If the RIM case is true, and it sounds credible, then it stands to reason that RIM was the company that actually got email working reliably over wireless by developing their software and hardware so their handset could do it, but they had to pay some other patent holder for the right to use what they themselves had developed.


.
By sprockkets on 11/22/2011 12:39:12 PM , Rating: 1
Supposedly AMD claimed they owned the patents that HTC thought they bought, which really sucks. AMD has no interest in suing apple over it, of course.

Of course, why AMD did this is beyond me, as if they kept their mouth shut, Apple would suffer from MAD in the patent wars. Thanks for being a douchebag!




RE: .
By Mitch101 on 11/22/2011 2:26:20 PM , Rating: 2
I think AMD/ATI somewhere along the way sold the rights or patents and probably cant re-enter the space or its some sort of non-compete. There have been a few things Ive wondered why AMD/ATI doesn't have a product line in but again I think its a non-compete issue. As for Apple they were a potential supplier to Apple and Supply Apple with graphics cards today probably not a good business decision to go after potential suppliers especially one like Apple who isnt so forgiving in these matters. Below is only one item I found about the AMD/ATI selling off in the mobile space but as I recall there was another incident that took place a while back solely from AMD prior to the ATI acquisition.

http://www.eweek.com/c/a/Mobile-and-Wireless/AMD-S...

Advanced Micro Devices has agreed to sell its struggling handset division to Qualcomm for $65 million, according to the chip makers. AMD plans to sell the handset division that includes graphics, multimedia and other technology. AMD inherited the ATI’s handset division in 2006 and the division had underperformed since then and the losses have had a significant impact on AMD’s bottom line. AMD also sold its digital television division to Broadcom in 2008.


RE: .
By nocturne_81 on 11/23/2011 1:31:06 PM , Rating: 2
quote:
Advanced Micro Devices has agreed to sell its struggling handset division to Qualcomm for $65 million, according to the chip makers. AMD plans to sell the handset division that includes graphics, multimedia and other technology. AMD inherited the ATI’s handset division in 2006 and the division had underperformed since then and the losses have had a significant impact on AMD’s bottom line. AMD also sold its digital television division to Broadcom in 2008.
Wow... I never caught any of that.. seems downright crazy to sell off any form of handset division nowadays.. And I had no idea the digital tv chip div was sold off -- was a time when an ATI chip was inside nearly every good lcd tv, and been wondering what happened.

Idiots..


lol
By NellyFromMA on 11/22/2011 11:57:02 AM , Rating: 2
Chances are if not the judge, perhaps relatives or other family have investments in Apple stock. Or maybe they just like the toys? Another bewildering decision in favor of Apple. Meh -_- no explanation necessary, right?




RE: lol
By rcc on 11/22/2011 12:44:04 PM , Rating: 2
Perhaps, perhaps not.

The real question is, which judge(s), the one making the ID, or the followup.


This entire patent war is a sham
By masamasa on 11/22/2011 1:44:37 PM , Rating: 2
Bunch of greedy bastards on all sides. All it promotes is more abuse of the consumer and higher pay to execs when they will that big dollar lawsuit based on patents that never should have been granted to begin with. Lame, lame, and lame.




By masamasa on 11/22/2011 1:45:12 PM , Rating: 2
...I meant win that lawsuit.


Huh..?
By nocturne_81 on 11/23/2011 1:26:55 PM , Rating: 2
quote:
Headline: Apple's Victory Over S3 in Court Gives It More Leverage Over HTC, Android

Subtext: National trade court dismisses HTC's counter-claim against Apple with no explanation

Opening paragraph: In Washington D.C. court on Monday, the U.S. International Trade Commission struck down [PDF] a ruling by an administrative law judge, which found Apple, Inc. (AAPL) to have infringed on a pair of patents owned by S3 Graphics, a wholly owned subsidiary of Taiwan's HTC Corp. (TPE:2498).


I know I just got up, and am still a bit torn up from last night, but this just doesn't read right.. perhaps:

quote:
In Washington D.C. court on Monday, the U.S. International Trade Commission struck down [PDF] a ruling by an administrative law judge, which originally found Apple, Inc. (AAPL) to have infringed on a pair of patents owned by S3 Graphics, a wholly owned subsidiary of Taiwan's HTC Corp. (TPE:2498).

or:
quote:
In Washington D.C. court on Monday, the U.S. International Trade Commission struck down [PDF] a ruling by an administrative law judge, which ultimately found Apple, Inc. (AAPL) to not have infringed on a pair of patents owned by S3 Graphics, a wholly owned subsidiary of Taiwan's HTC Corp. (TPE:2498).




Unfortunately
By Estienne Taylor on 11/27/2011 12:30:57 AM , Rating: 2
Their victory will be short lived. They can't win every lawsuits they throw against their competitors without bribing the judges.




Windows phone
By Xuhome on 11/22/11, Rating: -1
RE: Windows phone
By JasonMick (blog) on 11/22/2011 11:12:52 AM , Rating: 5
quote:
HTC should just abandon android & focus on Windows Phone, IMHO.

Abandon its best-selling product line for a low volume product line?

You must be quite the business man.


RE: Windows phone
By Xuhome on 11/22/2011 11:50:56 AM , Rating: 2
quote:
Abandon its best-selling product line for a low volume product line? You must be quite the business man.

Thought we were talking about the same thing.

quote:
Apple seeks to ban HTC's shipments into the U.S.

What if HTC´s shipments got banned into the U.S.?
What hey will have? Only windows phones with low volumes?
They will have to switch to survive?


RE: Windows phone
By JasonMick (blog) on 11/22/2011 12:44:07 PM , Rating: 2
quote:
What if HTC´s shipments got banned into the U.S.?
What hey will have? Only windows phones with low volumes?
They will have to switch to survive?

True if that happens (and it exhausts its appeals/redesign efforts), it will have no choice but to go solely with Windows Phones in the U.S. (which are immune to lawsuits due to Microsoft's cross-licensing pact with Apple....)

UNTIL that happens, though, it makes absolutely no sense financial sense for HP to turn its back on Android. Their best-selling products in the U.S. and abroad are Android phones. They can't just suddenly change that, even if they wanted to. Pulling out of Android would lead to a massive drop in sales -- at least in the short term -- unacceptable for a publicly held company.

As for the profitability concern....
HP actually, according to reports, has one of the more favorable licensing deals from MSFT, as it was one of the first. Yes it pays $10 or so to MSFT in licensing fees per Android sold, but the Android license is free, so I'm willing to bet that it makes slightly more net profit still per Android handset than per Windows Phone handset (which comes with a discrete license cost for WP7).


RE: Windows phone
By Xuhome on 11/22/2011 1:00:19 PM , Rating: 2
Yeah.
If true, and HTC had moved slightly to windows phone (and i think they´re doing it; htc radar and titan... with big banners in some of their websites..)

With all this nokia ads for windows phone, people will start looking with other eyes for windows phone´s (more likely seeing for the first time).

It´s a risk for HTC both ways.
Stay with android, or moving slightly to windows phones... and here is my point.


RE: Windows phone
By JasonMick (blog) on 11/22/2011 1:53:52 PM , Rating: 2
quote:
It´s a risk for HTC both ways.
Stay with android, or moving slightly to windows phones... and here is my point.

Fair enough. What you're really getting at though is that business -- particularly the electronics business -- is always a hostile environment.

Diversification is one key to survival.

That's the real issue I took with your original point. Suggesting a complete switch at this point just makes no sense in that it limits HTC's flexibility and would certainly hurt sales. The more gradual hedging you describe in your followup comment here is a far more reasonable suggestion -- in fact, as you assert, that's what HP appears to be doing.

I think HTC needs both Android and Windows Phone 7 at this point, but Android is definitely what is paying most of the bills.


RE: Windows phone
By Estienne Taylor on 11/27/2011 12:16:24 AM , Rating: 2
If HTC is really committed to bringing the best Windows Phone they would have showned that by now but with their sales in danger of being banned I think they will start with Windows Phone 8. They are a amazing company but if you compare a HTC Windows Phone vs a high end HTC Android you will see the differences in term of quality and design.


RE: Windows phone
By senecarr on 11/22/2011 5:27:44 PM , Rating: 2
First, HTC, not HP (you mistyped it twice, odd, as I know you know who's who).
Second, Android is not free to license the way you think it is. You can put Android Open Source on a phone for free, but market access, and the normal suite of Google apps (maps, Gmail, etc.), has a licensing fee.


RE: Windows phone
By NellyFromMA on 11/22/2011 11:58:05 AM , Rating: 2
He clearly says IMHO and yet you crap on him? WTH?


RE: Windows phone
By V-Money on 11/22/2011 12:27:08 PM , Rating: 3
quote:
He clearly says IMHO and yet you crap on him? WTH?

He presented a valid point, and its clear the OP's comment was based on personal preference and not on what's best for the company. I wouldn't call that crapping on someone.

As a consumer, I happen to like HTC phones and I will be using android for the foreseeable future. I hope that this doesn't change what phones are available to me in the future, I might end up despising apple even more than I already do now.


RE: Windows phone
By The Raven on 11/22/2011 11:17:34 AM , Rating: 2
+6

You are right. Hell, they should just get out of the phone business altogether. Who needs money? </sarcasm>


RE: Windows phone
By Xuhome on 11/22/2011 11:30:23 AM , Rating: 2
quote:
Who needs money?

Microsoft

They´re paying for every android phone they sell, right?

And HTC Titan is a great smartphone. They could be switching to windows phone.


RE: Windows phone
By nafhan on 11/22/2011 11:35:22 AM , Rating: 5
A great smartphone is not the same as a great SELLING smartphone.


RE: Windows phone
By Da W on 11/22/2011 1:46:54 PM , Rating: 2
BUT WHY DOESN'T IT SELL?


RE: Windows phone
By nafhan on 11/22/2011 4:33:47 PM , Rating: 2
Well... Generally stuff doesn't sell because no one wants to buy it. How to get people to want to buy stuff... that's the real question.


RE: Windows phone
By its tom hanks on 11/22/2011 6:47:18 PM , Rating: 5
quote:
How to get people to want to buy stuff... that's the real question.


by turning what could have been a good tech product into a fashion accessory which carries more social status if you show everyone the half eaten apple logo on it as you walk around using it with your other iProduct carrying friends... sold


RE: Windows phone
By Estienne Taylor on 11/27/2011 12:25:48 AM , Rating: 2
A lot of carrier reps I see and heard from Windows Phone buyers tells me they force consumers in buying a Android/iPhone and refuse to sell them a Windows Phone when they requesst one. Everywhere you go you see a banner for Android and iPhone but none for Windows Phone. Microsoft/Carriers need to step up in promoting Windows Phone to get consumers interested.


RE: Windows phone
By The Raven on 11/22/2011 12:08:02 PM , Rating: 3
Well to be honest they should just allow their customers to choose their OS by supporting both platforms. But alas, the phone market is so screwed up thanks to the big telecoms.


RE: Windows phone
By senecarr on 11/22/2011 5:32:01 PM , Rating: 2
Titan is a little screwed by having a huge screen that has to have only 800x480 resolution because of WP7's rigid HW limitations.


RE: Windows phone
By TakinYourPoints on 11/23/2011 6:08:31 AM , Rating: 1
Tougher to break in with customers at first but it certainly would result in a higher quality product.


RE: Windows phone
By Estienne Taylor on 11/27/2011 12:28:14 AM , Rating: 2
Couldn't say it better myself. If only Windows Phone OEM's care more about quality instead of quantity in their products.


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