Ouch, first a product ban and now HTC's competitors have a clear view of its product path

They say loose lips sink ships.

Taiwanese OEM HTC Corp. (TPE:2498) doesn't need any extra help sinking.  Already forced to pay Microsoft Corp. (MSFT) and Apple, Inc. (AAPL)  licensing fees on every device it makes, snubbed by suppliers, burned by employee data-theft, and posting losses for the first time in its history HTC may still be afloat, but it's taking on water at an alarming rate.  Add in that HTC may have to pay a third licensing fee soon to Nokia Oyj. (HEX:NOK1V) to avoid having it's entire product line banned and the phonemaker needs all the help it can get to stay afloat.

Instead, what it got was loose lips, sinking it a bit deeper.

I. London Calling

When it comes to some high-tech products like CPUs, market players are a relatively open book, releasing roadmaps for all to see.  But for smartphone makers keeping the roadmap secret is paramount.  Tip your foes off too early and they can formulate a strategy to counter your plans.  While HTC doesn't go to the extremes that some OEMs like Apple reportedly do, it doesn't exactly have a track record of spilling its roadmap of upcoming launches either.

But now thanks to a UK justice the world has a pretty good idea not only when HTC will release its next flagship device, but also what it might name it.

The man behind the leak is none other than The Hon. Mr. Justice Richard David Arnold, of the Chancery division of the UK High Court [of Justice] in London.  The "Lord Justice", as the British call their high court judges, just finished up presiding over the patent infringement trial of Nokia v. HTC.

Lord Justice Richard Arnold
Lord Justice Richard David Arnold of the UK High Court [Image Source: UCL News/Flickr]

His verdict released at the end of the month found HTC guilty of infringing on a Nokia wireless transceiver patent on the modulator, a power electronics component that prepares the incoming alternating current signals for digital to analog conversion, and blend outgoing signals prior to the amplification stage.

Technically HTC didn't produce the infringing product -- the chips were made by Qualcomm, Inc. (QCOM) and Broadcom Corp. (BRCM).  And the real kicker is that Nokia licensed the patents in question to Qualcomm, but thanks to a legal technicality, Nokia was awarded a ban on HTC's devices anyways.  

HTC didn't exactly help its case, fumbling in its defense, and at one point failing to recognize a fundamental circuit component until Nokia's lawyers eventually explained the concept to them using a textbook.  The cash-strapped defendant tried its best to rally some strong legal support, hiring a second-tier legal team (a relatively prestigious ranking).  But in the face of Nokia's top-tier legal team it was not enough to save the embattled OEM.

II. HTC One Two is Coming February or March

In his ruling Justice Arnold issued a shipment ban on all HTC smartphones in the UK except for the company's flagship HTC One.  At the same time he showed some leniency allowing HTC to continue to sell its existing stock to customers while it makes one final appeal.

It was in justifying his ruling that the Lord Justice began to let secrets slip.

During the testimony Nokia countered HTC's assertion that an injunction would be a "catastrophic" blow to the company's local presence by reveal details it had learned of an upcoming product launch from HTC.  The Lord Justice writes in his ruling:

HTC paints a dramatic picture of what will happen.  I am bound to say I am somewhat sceptical about this evidence given that HTC will shortly be launching a new flagship phone which cannot be assumed to infringe and therefore be caught by the injunction.

Nevertheless, I accept that there is a period between now and February or March 2014 when HTC is vulnerable.

HTC One and HTC One Two

In other words the Lord Justice more or less outed HTC's launch window for its next flagship device as Feb. or March 2014.  He also refered to the device as the HTC One Two.  HTC's lawyers did not confirm either detail, but they also did not deny them, leading the Lord Justice to conclude they were accurate after further analysis.

II. Looking Ahead to 2014 -- Unknowns and the Smartwatch Rumor

It is unclear how Nokia captured these plans, but given past intellectual property and trade secrets theft at HTC, it would not be surprising if a former employee took them when he or she left.  Ever since its financial slide HTC has laid off a larger percentage of its global engineering, advertising, and management staff.  It also has been cutting the pay of those that have stayed behind, leading to yet more quitting.

Of course it's possible that the information is inaccurate, but given the stakes one would expect HTC's lawyers would contradict the information were it not true.  An HTC spokeswoman who BBC News contacted echoed this silence, saying she couldn't confirm or deny the details Nokia testied under oath of knowing.

It's puzzling why Justice Arnold wouldn't redact the critical secret from the public version of the verdict, particularly consider that he did redact large portions of the Appendices to the verdict which contained Nokia and HTC confidential secrets.

Samsung watches
Despite struggling to sell smartphones, HTC reportedly has its eyes on a new market -- wearables. [Image Source: Samsung]

In related news of a less confirmed variety, Bloomberg reported in late October that sources at HTC had revealed that the company was working on a camera-equipped smartwatch.  Like Samsung Electronics Comp., Ltd. (KSC:005930) $300 USD Galaxy Gear smartwatch, which launched in Sept., the HTC device would run a build of Google Inc.'s (GOOG) Linux-based Android operating system.

The report led some to question whether HTC should be focusing on smart devices, considering that it's struggling to even make tenth place in global smartphone sales by OEM.

But Juniper Research -- a bullish proponent of wearables -- attacks those criticisms, arguing that wearables will expand from $1.4B USD this year to $19B USD by 2018.  That's a controversial claim, to say the least, but if it's right that wearables could be the fastest growing and most pivotal growth sector of the personal electronics market today.

"I'm an Internet expert too. It's all right to wire the industrial zone only, but there are many problems if other regions of the North are wired." -- North Korean Supreme Commander Kim Jong-il

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