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HTC’s Flyer Tablet, Droid Accused of Infringing Apple Patents

HTC Corp. (2498), Asia’s second-largest maker of smartphones, was accused of infringing Apple Inc. (AAPL) patents in a case that may halt U.S. imports of the Taiwanese company’s phones and its new Flyer tablet computers.

Apple claims HTC is infringing five patents related to software architecture and user interfaces in portable electronic devices, hardware for touch screens and movement sensors, according to a complaint filed July 8 with the U.S. International Trade Commission in Washington. The complaint is the second Apple has filed against Taoyuan, Taiwan-based HTC.

Apple has been using the trade commission, which has the power to block products from the U.S. market, to pursue makers of mobile phones that run Google Inc. (GOOG)’s Android operating system and compete with its iPhone. With the filing of the complaint against HTC, and one filed July 5 against Samsung Electronics Co., Apple is expanding the battle to tablet computers that challenge the market position of the iPad.

“HTC is dismayed that Apple has resorted to competition in the courts rather than the marketplace,” said Grace Lei, HTC’s general counsel. “HTC continues to vehemently deny all of Apple’s past and present claims against it and will continue to protect and defend its own intellectual property as it has already done this year.”

Shares Fall

HTC shares lost 5.9 percent to trade at NT$925 as of 12:30 p.m. in Taipei, headed for their lowest close since Feb. 11, after falling as much as their 6.9 percent daily limit. The stock has added 2 percent this year, compared with a 5.2 percent drop in the benchmark Taiex index. Apple lost 1.6 percent to $354 in Nasdaq Stock Market Trading.

In March, HTC released the Flyer, its first tablet device in the U.S. to rival Apple’s iPad and Samsung’s Galaxy Tab. The Flyer has a 7-inch screen and uses Android, while HTC’s second tablet, called EVO View 4G, offers faster connections over Sprint Nextel Corp. (S)’s fourth-generation network.

The latest Apple complaint, which also names mobile phones including the Droid Incredible, Wildfire, EVO 4G and Desire, doesn’t list the EVO View tablet among the targeted products.

HTC agreed last week to buy S3 Graphics Co. for $300 million after the maker of video-game graphics chips won an infringement ruling at the trade agency against Apple. HTC also has its own patent complaint against Cupertino, California-based Apple at the commission, with findings scheduled to be released Sept. 16.

Ruling Expected

A trade commission judge is expected to issue a decision in Apple’s earlier case against HTC on Aug. 5. Those findings are subject to review by the full commission.

The newest case claims infringement of patents that cover “groundbreaking technologies developed by Apple in conjunction with the development of its innovative iPhone, iPad and iPod touch products,” Apple said in the complaint.

Apple, which has accused competitors of “widespread imitation,” also has patent battles at the trade agency with Samsung Electronics and Motorola Mobility Holdings Inc., both makers of Android-based phones. The Samsung complaint targets both the Galaxy phone and Galaxy tablet computer.

Android is the most popular mobile-device operating system in the U.S., accounting for 38 percent of the market in the three months ended in May, according to Reston, Virginia-based researcher ComScore Inc. Apple’s iOS, used in the iPad and iPhone, made up 27 percent of the market.

Profit Beats Expectations

HTC reported on July 6 that sales and net income surpassed analyst expectations for the second-quarter ending June 30, after it released models with faster download speeds and better displays. Both HTC and Apple more than doubled revenue from mobile phones in the March quarter from a year earlier as they race to offer their products in more markets globally.

Seeking to expand its patent portfolio, HTC said in April it paid $75 million for wireless communications patents from ADC Telecommunications Inc. According to the U.S. Patent and Trademark Office’s database, 171 patents have been assigned to HTC. The most recent are two issued on July 5 for audio signal processing and an electronic device with a user input device.

Apple, once best known for its Mac computers, now relies on its iPhone for about 50 percent of sales and the iPad tablet for 12 percent, according to first-quarter figures compiled by Bloomberg.

Public Issues

The commission issued a notice yesterday seeking information on any public issues raised by the complaint. Such requests have become standard, to allow the agency to determine if an exclusion order should be granted should Apple win the case.

Apple named HTC Corp., its U.S. unit HTC America Inc. and Houston-based Exedea Inc., a fully owned subsidiary, in its latest action.

The new complaint is In the Matter of Portable Electronic Devices and Related Software, Complaint No. 2828, U.S. International Trade Commission (Washington). Apple’s earlier case against HTC is In the Matter of Certain Personal Data and Mobile Communications Devices and Related Software, The HTC case against Apple is In the Matter of Portable Electronic Devices, 337-721, both ITC.

To contact the reporter on this story: Susan Decker in Washington at sdecker1@bloomberg.net; Tim Culpan in Taipei at tculpan1@bloomberg.net

To contact the editor responsible for this story: Allan Holmes at aholmes25@bloomberg.net; Young-Sam Cho at ycho2@bloomberg.net

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