Apple sues HTC over phones with Google software

SAN FRANCISCO (Reuters) - Apple Inc sued Taiwan’s HTC Corp, which makes touchscreen smartphones using Google software, accusing it of infringing 20 hardware and software patents related to the iPhone.

An advertisement for the Apple iPhone is shown at a retail store in Bordeaux, southwestern France, in this October 23, 2009 file photo. REUTERS/Regis Duvignau/Files

Even though the suit did not name Google Inc as a defendant, Apple’s move was viewed by many analysts as proxy for an attack on the Internet company, whose Nexus One smartphone is manufactured by HTC.

“I think this is kind of an indirect lawsuit against Google,” said Kaufman Bros analyst Shaw Wu.

Apple’s suit was filed with both the U.S. International Trade Commission and the U.S. District Court in Delaware on Tuesday, and seeks to prohibit HTC from selling, marketing or distributing infringing products in the United States.

The complaint filed with the ITC cited Google’s Nexus One, which was launched in January, and other HTC phones such as the Hero, Dream and myTouch -- which run on Google’s Android mobile operating system -- as infringing products.

In a statement, a Google spokeswoman said: “We are not a party to this lawsuit. However, we stand behind our Android operating system and the partners who have helped us to develop it.”

HTC said in a statement that it was looking at the filings.

“HTC values patent rights and their enforcement but is also committed to defending its own technology innovations,” spokesman Keith Nowak said.

In a statement in Taipei on Wednesday, HTC added that it had not had the opportunity to investigate the suit.

“Until we have had this opportunity, we are unable to comment on the validity of the claims being made against HTC.”

In a separate statement to the Taiwan stock exchange, HTC said it will not see any impact on its financial outlook for the first quarter from the lawsuit.

By 0250 GMT, HTC shares lost 1.4 percent in Taipei in a broader market up 0.4 percent. The stock had fallen as much as 3 percent in early trade.

“The news is having some impact on HTC’s shares but lawsuits are quite common among tech firms and I would say it is just a threat from Apple this time,” said John Chiu, a fund manager at Taiwan’s Fuh Hwa Securities Investment Trust.

“However, HTC is not a good buy in the longer term since its margins will be coming under pressure when competition intensifies.”


Apple’s move comes amid fierce competition in the smartphone market, as new players angle for a piece of the fast-growing segment.

Mark Simpson, a patent attorney with law firm Saul Ewing in Philadelphia, said HTC made for an easier target than Google.

“It’s probably simpler for them to go after the company making the infringing goods, which is HTC. It’s easier to prove at this point,” he said.

MKM Partners analyst Tero Kuittinen agreed.

“HTC is an optimal target for Apple -- it’s a relatively small vendor with a weak brand. It may be easier to push around than Samsung (which also makes Android smartphones). One question here is whether Apple can intimidate operators to back away from new HTC products by flashing the possibility of litigation trouble.”

Apple said HTC “knowingly induce(s) users of accused HTC Android products” to infringe on a number of Apple’s patents, some dating back to the mid-1990s. They cover user interface processes and other software and hardware components.

“We think competition is healthy, but competitors should create their own original technology, not steal ours,” Apple Chief Executive Steve Jobs said in a news release.

An Apple spokesman declined to comment beyond the complaints.

The iPhone held a 14.4 percent smartphone market share in 2009, according to research group Gartner.

Phones running Android comprised only 3.9 percent of the market, but were growing fast. Apple lost some share to Android phones in the fourth quarter.

“This move could be a sign Apple is getting rattled by Google’s recent momentum in the mobile space -- notably the avalanche of Android products unveiled at Mobile World Congress,” said Ben Wood from CCS Insight.

Apple’s lawsuit is the latest scrape over ownership of the underlying technology for smartphones -- handsets that play video and music, take pictures and send e-mail.

Eastman Kodak Co in January filed a complaint with the ITC, saying Apple’s iPhone and Research in Motion Ltd’s BlackBerry camera phones infringe the photography company’s patents.

Nokia, the world’s top mobile phone maker, has also sued Apple over patents. Apple has countersued.

That dispute, potentially involving hundreds of millions of dollars in annual royalties, reflects the shifting balance of power in the mobile industry as cellphones morph into handheld computers that can play video games and surf the Web.

In its ITC filing against HTC, Apple noted that some of the patents at issue are at the center of its legal fight with Nokia.

Shares of Cupertino, California-based Apple fell 14 cents to close at $208.85 on Nasdaq.

Additional reporting by Sinead Carew and Franklin Paul in NEW YORK, Tarmo Virki in HELSINKI and Jonathan Standing, Jennifer Yang and Baker Li in TAIPEI; Editing by Tiffany Wu, Gary Hill, Richard Chang and Anshuman Daga