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HTC has offered to enter into some sort of cross-licensing deal with Apple to settle the pair's legal baggage.  (Source: Kevin Weeks)

Apple chief executive Steven Jobs has openly bragged about his expertise at "stealing" great ideas from competitors. However, he appears to believe that right is reserved for Apple as he has said that HTC "[S]hould create their own original technology, not steal ours."  (Source: European Pressphoto Agency)

HTC's innovation officer, Horace Luke, has left the company for personal reasons.  (Source: Boy Genius Report)
Will Apple be cooperative and agree to cross-licensing?

HTC Corp. (SEO:066570) is locked in a heated international court battle [1][2][3] with rival Apple, Inc. (AAPL).  Now the Taiwanese company is extending and olive branching and calling for a cross licensing deal.  The big question is whether Apple will accept.

I. Deal or No Deal - IP Edition

HTC's biggest trump cards is its recent acquisition of S3 Graphics, a graphics chipmaker who recently won a case against Apple contested before the U.S. International Trade Commission (ITC).  

The ITC found that Apple violated two of S3's patents on graphics chips -- perhaps unsurprising for a company whose chief executive and co-founder, Steven P. Jobs, states [video], "Picasso had a saying - 'Good artists copy, great artists steal.' And we have always been shameless about stealing great ideas."

But Apple has accused HTC of stealing.  Mr. Jobs has commented, "Competitors should create their own original technology, not steal ours."

And the courts have been kind to Apple, thus far, in the HTC case.  Apple has won a preliminary one judge ruling in the case, despite a recommendation by reviewers to dismiss the case on lack of merit.  The judge apparently saw things differently -- upholding two of Apple's twelve patents.

The net result is that, pending a full-panel review of the decision, the score between the smart phone makers appears to be a draw: 2-2.

HTC clearly feels it's on a level playing field -- or is at least pretending as such.  Chief financial officer Winston Yung comments in a Bloomberg interview, "We have to sit down and figure [a deal] out [with Apple]. We’re open to having discussions. We are open to all sorts of solutions, as long as the solution and the terms are fair and reasonable. On and off we’ve had discussions with Apple, even before the initial determination came out."

II. Level Playing Field?

The question is whether Apple will bite.  The problem is that some feel that it will be easier for Apple to move to new kinds of graphics chips than for HTC to remove the very generic technology covered by the Apple patents (one of which covers turning phone numbers, etc into actionable links and another, even more generic, one which covers hardware and software to offload video/audio to an off-CPU chip).

And according to the legal experts at FOSS Patents, Apple may be unwilling to deal, preferring to try to kill its competitor, removing it from the American market with a permanent injunction.  Writes FOSS Patents's Florian Müller:
But I doubt that Apple will offer HTC a license unless HTC owns or effectively controls any patents that Apple needs, in which case the two companies would cross-license. A company named S3 Graphics recently obtained an ALJ determination against Apple and HTC is in the process of acquiring that company, but I'm not sure Apple absolutely depends on a license to those patents.
Other observers offer similar skepticism that a deal will be reached.  One issue is that Apple is much bigger than HTC and has much more cash, so it's much better prepared to make sweeping, expensive changes to keep its product on the market.  And Apple stands to directly gain in sales if it can ban HTC from the U.S. and possibly other markets.  While such litigious efforts clearly seem wrong from a consumer perspective, it's unlikely they violate any sort of competition laws -- in the U.S., at least.

On the other hand, Apple is awaiting the outcome of lawsuits against [1][2][3] and countersuits with Motorola Solutions Inc. (MSI) and Samsung Electronics Comp., Ltd. (SEO:005930) on the same patents, so it could see its IP vanish before it could strike against Samsung.  If Apple opts to refuse cross-licensing, it could miss out on potential revenue -- particularly if the court battle with Motorola and Samsung goes badly.  These companies are expected to post a far stiffer challenge to Apple in court, as Samsung, in particular, has many times as many patents as Apple, both in the U.S. and abroad.

So will Apple try to kill HTC, as some fear?  Or will it extend an olive branch of cross-licensing?  It remains to be seen.  But at the very least, cross-licensing should not be viewed as a certainty.

III. HTC Loses Key Executive

There's a saying that good luck -- or bad -- comes in bunches.  HTC appears to be in a bit of a bad luck slump.  It's just received news that Horace Luke was resigning from his post as chief innovation officer at HTC, as reported by the Boy Genius Report.

HTC released a brief statement, commenting:

Horace Luke, HTC’s chief innovation officer, has left HTC for personal reasons. Horace nurtured a culture of innovation at HTC and instilled a strong consumer design-focus among our employees who continue to raise the bar in designing products that capture our customers’ imagination.

We are grateful for Horace’s many contributions to HTC and wish him well in his future endeavors. Scott Croyle, HTC’s vice president of design, has taken over Horace’s responsibilities and will continue a tradition of design innovation at HTC.

Before HTC most of Mr. Luke's big successes came outside the mobile sector.  He had worked for 9 years for Microsoft Corp. (MSFT), where he was in charge of creative efforts with Windows XP, Windows Mobile, Xbox, and other projects.  Both the Xbox and Windows XP were massive successes, though Windows Mobile was starting to sink in market share by the time Mr. Luke left.

At HTC Mr. Luke was among the forces to drive HTC to become a top-tier smart phone maker.  The small company rose out of relative obscurity to become one of the most iconic handset makers in America, with high-profile devices like the Thunderbolt and EVO 4G.

Mr. Luke reportedly left the company on April 30 -- almost three months ago.


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RE: Such bullcrap
By ApfDaMan on 7/26/2011 10:25:09 AM , Rating: 3
quote:
Well Apple was granted the patents so they have a basis to sue.


A Legal basis but not a moral basis. That is the issue here.

quote:
And if the judges rule in Apple's favour then everything Apple's done has been following the rule of law and if people don't agree, maybe it'll give momentum to getting patent law reformed.


So a good company has to die before anything is done about it? A drunk four year old with a crayon could have write patent laws with more common sense.


RE: Such bullcrap
By ApfDaMan on 7/26/2011 10:26:07 AM , Rating: 5
Written*

Apparently a drunk four year old can write better than me too.


RE: Such bullcrap
By ltcommanderdata on 7/26/2011 10:51:40 AM , Rating: 2
quote:
A Legal basis but not a moral basis. That is the issue here.

Well ideally moral direction should be involved in the creation of laws, but in the application of law I don't believe morality can trump following the letter of the law.

And morals and companies have always been a wonky partnership. If all companies just follow the letter of the law, that's already a good starting point for me.

quote:
So a good company has to die before anything is done about it? A drunk four year old with a crayon could have write patent laws with more common sense.

The only way HTC would die in this case is that they are actually found guilty for acting against the law. At that point they can't just be let off scott free since that would set a dangerous precedent. People and companies just can't break laws whenever they like because they don't agree with them. The law needs to be followed until it can be changed, even if it takes time.


RE: Such bullcrap
By bah12 on 7/26/2011 12:48:23 PM , Rating: 3
quote:
At that point they can't just be let off scott free since that would set a dangerous precedent.
Aww but as you insinuated, a patent is not a law until it is validated by a court. So in this case how much to we punish a company that did not knowingly do anything wrong? Violating a patent that has already been upheld is one thing, sure IMO throw the book at them. However that is not what would happen in this case, as the patent is pretty vague and untested.


RE: Such bullcrap
By MrTeal on 7/26/2011 10:50:54 AM , Rating: 2
quote:
A Legal basis but not a moral basis. That is the issue here.


Oh man. You're going to have all kinds of problems with the legal system if you expect it to follow a "moral basis".


RE: Such bullcrap
By ApfDaMan on 7/26/2011 12:03:54 PM , Rating: 2
quote:
Oh man. You're going to have all kinds of problems with the legal system if you expect it to follow a "moral basis".


I dont expect it to, doesnt mean it shouldnt :) but a man can dream, right?


RE: Such bullcrap
By erple2 on 7/27/2011 8:49:05 AM , Rating: 2
We can't allow that, either. That leads down the path of "activist judging" as is so frequently bandied about.

It's not the job of a judge to be the "morality police".


RE: Such bullcrap
By geeg on 7/26/2011 1:44:50 PM , Rating: 2
a drunk 4-year old is morally very wrong, man.


RE: Such bullcrap
By melgross on 7/26/2011 8:31:38 PM , Rating: 2
If you own the patents, and someone steals the IP involved, not only do you have a moral right to sue, you have a moral imperative to sue. What strengthens the other company, weakens yours.


RE: Such bullcrap
By robinthakur on 7/27/2011 9:16:51 AM , Rating: 2
A drunk 4 year old with a crayon would not understand the intricacies of the patent system and clearly neither did HTC's legal and compliance department/lawfirm, whose job it was to navigate the fraught patent system. If they have used patented technology or concepts, then the law states that this is illegal. Ignorance of the law is not excusable and we are not talking about a kid running a business from his bedroom, this is a multi-national company. It is beholden on HTC to prove that they have not infringed on the patent or to prove that it is overly vague to the court. If you owned the patent for what they allegedly infringed, what would you do? Morality has no currency in the boardroom and in the markets,especially when Apple's patents and designs are being ostensibly 'copied' by Samsung and HTC and causing their market to erode. Morality is not the issue here in any sense unless you apply it to the act of taking something which doesn't belong to you without asking, aka theft.


"If you look at the last five years, if you look at what major innovations have occurred in computing technology, every single one of them came from AMD. Not a single innovation came from Intel." -- AMD CEO Hector Ruiz in 2007














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