Apple’s Lawsuit Against HTC: Bad for Consumers?

By  |  Wednesday, March 3, 2010 at 9:28 pm

Apple’s lawsuit against Taiwanese handset manufacturer HTC is meant to prevent smartphones that resemble the iPhone from competing in the U.S. market, limiting consumer choice, but protecting Apple’s incentive to innovate, legal experts say.

Yesterday, news broke that Apple had filed suit against HTC with the U.S. International Trade Commission (ITC) and U.S. District Court in Delaware for allegedly violating a slew of iPhone related patents. HTC derives nearly half of its annual smartphone sales from the U.S. market, and the majority sold are Android phones, including Google’s Nexus One, according to UBS.

Any one of those patents could be enough to prompt the ITC to ask U.S. Customs and Border Protection to stop the shipment of imports, said Richard Field, a past chair of the American Bar Association’s section of science and technology law. “It’s like in Casablanca The Maltese Falcon: “some of these reasons may be insignificant, but there’s so many of them,” he said. “Apple went to town figuring out the infringement.”

Apple appears that it is not interested in the usual patent “horse trade” where one company sues another to receive licensing royalties then drops the suit, he said. “My gut feeling is that there’s more to why Apple is pushing this one,” he said.

“Apple wants to prevent anyone else from making smartphones that compete directly with the iPhone,” said James Grimmelmann, an associate professor at New York Law School. “It will raise prices and lower quality in the smartphone market.” He refused to speculate on the validity of the patents without a very detailed examination.

Field suggested that Apple might be attempting to eliminate a source of “generics” from the market in order to protect its iPhone revenue stream, which he said may be critical to the company. Apple sold 8.7 iPhones last quarter. “If you eliminate generics it affects the market”

“Apple is known for its creativity. If Apple cannot protect the creativity side of [the market] it also isn’t good for consumers,” Field said. When molded together, it could be argued that the patents are the essence of the Apple machine, he explained.

Grimmelmann saw it another way. “Overall, the move strikes me as a sign of weakness on Apple’s part; it fears the competition. Then again, Apple is an irrationally litigious company. For every reasonable lawsuit (Psystar), it brings an ill-advised one (Apple v. Does),” he concluded.

Apple v. Does is a lawsuit that Apple filed in 2004 against unnamed defendants that it accused of leaking information to news sites including AppleInsider and PowerPage.

My take is that Apple is waging a proxy war against Google while firing buckshot at so-called “generics” (I am hesitant to use that term). It might risk alienating customers, but, as Fields told me, there cannot be a backlash unless you can understand whether the suit has merit. I eagerly await more details about the case as it unfolds.

 
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15 Comments For This Post

  1. Chad Says:

    opening line is confusing?

  2. Eugene Says:

    “Google’s lawsuit against Taiwanese handset manufacturer HTC….”

    Typo. Should read Apple’s lawsuit. :)

  3. stuartm Says:

    Major typo in the first word of the article doesn’t bode well for the rest of the article…

  4. David Hamilton Says:

    Why is Apple going to court now? After all, it’s had a lot of these patents for a while. Is the timing particularly related to the arrival of the iPad?

    I’m wondering if they’re trying to give the iPad a clear run to establish itself before it gets cloned in the way that the iPhone was. These lawsuits will at least slow the arrival of the copy-cats. I would also assume iPad clones could arrive much quicker than the iPhone ones did – after all, the iPhone took the market by surprise, but most mobile companies are familiar with the paradigm now. So one could see Google, perhaps, producing a ‘knock-off’ pretty quickly.

    This may apply particularly to the educational market – if Apple can get the iPad into that market (and these things take time) then its competitors will have difficulty displacing it.

    Despite the mixed reception that the iPad has received, it is clear that Apple see it as a ‘game changer’ – a device that will extend computer usage to the masses of technophobes who elude the current PC market. That’s a big market, Apple may be trying to maximise its head start in this sector.

  5. IcyFog Says:

    Why isn’t the Nokia lawsuit against Apple perceived as bad as the Apple lawsuit against HTC?

  6. AG Says:

    A quick proof-reading might have been a good idea:

    “Google’s lawsuit against Taiwanese handset manufacturer HTC”
    “Apple appears that it is not interested in …”
    “Apple sold 8.7 iPhones last quarter”

  7. Baldguy Says:

    Never had any bad feelings for Apple before. Getting them now.

  8. Charles Anisi Says:

    I see HTC as the innovator.There many options of phones and multiple operating systems against the single i-phone.I think the consumer is really getting shafted if this suit happens!

  9. David Hamilton Says:

    If producing lots of models is ‘innovation’ then Nokia, with its 100+ different models, is some 100-times more innovative than Apple.

    To me, innovation is producing a feature or idea not seen before in the market-place. Combining lots of pre-existing features in different permutations to flood the market hardly seems innovative – unless the packaging is something completely new in itself.

  10. David Hamilton Says:

    In fact, Nokia’s explosion of models seemed to come about at about the time that it ran out innovative ideas.

    I think if you looked at the history of product development, you’d see that as a trend – a company saturating the market with variants once it loses its inner sense of what the consumer actually needs.

  11. tom b Says:

    “Why is Apple going to court now? After all, it’s had a lot of these patents for a while.?”

    Some of them were just granted. It can take a few years from when they are filed.
    “Why isn’t the Nokia lawsuit against Apple perceived as bad as the Apple lawsuit against HTC?”

    Nokia is a slow-growth company. In contrast, anytime Apple wins big in any particular market (phones, iPods), to some extent, it comes out of other compaany’s hide; thus, Apple makes enemies by being “disruptive”

    As for the HTC suit being “bad” for consumers by stifling innovation from other companies– where is that innovation? Droid is no great shakes; it is Dell’s DJ Ditty MP3 player to Apple’s iPod. If HTC– or somebody– could come up with something REALLY improved on the iPhone, more power to them. But, I haven’t seen it yet. Maybe a thought activated phone, or a phone with some kind of 3D, Natal-derived interface. The iPhone not only has a REALLY well thought-out UI, but the app store; the app payment system; and various hardware innovations. It is REALLY different from preceding “smartphones”.

  12. James Says:

    Also shows that comments are being read regularly.. Typo still there despite being pointed out HOURS ago…

  13. JimC Says:

    By the way, I’m the unfortunate sot who got the 0.7 iPhone in the last quarter. Let me tell you, it sucks! ;->

  14. Ken Says:

    Minor point, but wrong Bogart film. Maltese Falcon, not Casablanca.

  15. lynnc Says:

    I think this is ridiculous! Why HTC? Could it be the fierce competition? I think there are other phones on the market that have the same concept & they want to to sue now? If Apple wants to be the big dog of the cell phone industry they should expand their marketing by moving beyond AT&T.

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    [...] Apple’s Lawsuit Against HTC: Bad for Consumers? Published: March 3, 2010 Source: Technologizer Apple’s lawsuit against Taiwanese handset manufacturer HTC is meant to prevent smartphones that resemble the iPhone from competing in the U.S. market, limiting consumer choice, but protecting Apple’s incent… [...]

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    [...] Dave came to the reasonable conclusion that tech-industry lawsuits aren’t good for consumers. [...]