HTC to Appeal U.S. Agency Ruling on Apple Patent Infringements

HTC Corp. (2498) will appeal a U.S. International Trade Commission ruling that it infringed two patents of Apple Inc. (AAPL) in producing Android-based mobile phones.

HTC, Asia’s second-largest maker of smartphones, said it was found to have infringed two of 10 Apple patents originally asserted in the case. Administrative Law Judge Carl Charneski’s finding yesterday is subject to review by the full six-member commission in Washington.

HTC will “vigorously fight these two remaining patents through an appeal before the ITC commissioners who make the final decision,” Grace Lei, general counsel for the Taoyuan, Taiwan-based company, said in an e-mail. HTC will use “all means possible” to defend itself, it said in a separate statement.

Should the commission uphold the finding, the ITC may ban U.S. imports of some HTC phones that run on Google Inc. (GOOG)’s Android, the most popular smartphone operating system in the U.S. The HTC decision may serve as a barometer for other cases Cupertino, California-based Apple has against makers of Android devices, including Samsung Electronics Co. and Motorola Mobility Holdings Inc.

“This isn’t the worst-case scenario for HTC, which was found not to violate the other eight patents,” said Michael On, president of Taipei-based Beyond Asset Management Co., who doesn’t own the company’s shares. “They will probably resolve the issue by paying royalties, which will raise costs.” He declined to disclose the size of his assets.

‘Alternate Solutions’

The ITC is a quasi-judicial arbiter of trade complaints that has become the venue of choice for resolving patent disputes. Nokia Oyj (NOK1V), which had been targeted in the same ITC complaint, reached a settlement with Apple last month. Mountain View, California-based Google wasn’t a party in the case.

An Apple spokeswoman, Kristin Huguet, declined to comment on the HTC findings.

HTC believes it has “alternate solutions” for issues raised by Apple, according to today’s statement. “We look forward to resolving this case.”

HTC shares fell 2.4 percent to close at NT$907 in Taipei trading yesterday before the ruling. The stock has risen 0.8 percent this year, compared with a 4.4 percent decline in the benchmark Taiex index.

One of the patents in the HTC case involved data-detection technology used in e-mail and text messages, while another related to a data-transmission system.

Flyer Tablet

Apple earlier this month accused HTC in a separate complaint of infringing five patents related to software architecture and user interfaces, hardware for touch screens and movement sensors. Apple is seeking to block U.S. imports of the Taiwanese company’s new Flyer tablet computers as well as its Droid Incredible, Wildfire, EVO 4G and Desire phones.

HTC released the Flyer, its first tablet device, in the U.S. in March, competing against Apple’s iPad and Samsung’s Galaxy Tab. The Flyer has a 7-inch screen and uses Android.

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

S3 Graphics Acquired

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 Apple at the commission, with findings scheduled to be released Sept. 16.

HTC and Apple more than doubled revenue from mobile phones from a year earlier in the March quarter as they race to offer their products in more markets around the globe. 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.

The case is In the Matter Of Certain Personal Data and Mobile Communications Devices and Related Software, 337-710, U.S. International Trade Commission (Washington).

To contact the reporter on this story: William McQuillen in Washington at bmcquillen@bloomberg.net

To contact the reporter on the story: Yu-huay Sun in Taipei ysun7@bloomberg.net.

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