Nov. 29 (Bloomberg) -- Steve Jobs made Apple Inc.’s iPhone one of the best-selling smartphones on the market with its touch screen, fast Web connection and access to more than 300,000 downloadable applications. Now he’s adding lawyers to the mix.
Apple is squaring off this week against Nokia Oyj, the world’s largest mobile-phone maker, before the International Trade Commission. The dispute, in which each side alleges intellectual property violations, is also a precursor to Apple patent battles with Motorola Inc. and HTC Corp.
At stake is leadership in the U.S. smartphone market. Cupertino, California-based Apple is trying to protect its right to import the iPhone, while shutting out rivals, particularly those with devices powered by Google Inc.’s Android operating system, the world’s most popular smartphone software. Android-based phones also are made abroad.
“These are very well-known, deep-pocketed, high-end manufacturers,” said Lyle Vander Schaaf, an attorney at Brinks Hofer Gilson & Lione in Washington, who handles cases before the commission. “Usually you have one 800-pound gorilla going after a new entrant. Here you’ve got 800-pound gorillas fighting each other.”
Apple has been the most-sued technology company since 2008, the year after the iPhone was introduced, topping Microsoft Corp., Hewlett-Packard Co. and Dell Inc., according to LegalMetric Inc., a compiler of litigation data based in St. Louis.
Fire With Fire
Jobs, Apple’s chief executive officer, is firing back by recruiting lawyers who have fought for and against some of the world’s largest companies, including Microsoft, Intel Corp. and Broadcom Corp. Broadcom won a patent dispute with Qualcomm Inc. last year that ended with Qualcomm paying $891 million in cash over four years.
Nokia, based in Espoo, Finland, took the first shot in the case before the ITC this week. The company sued in October 2009, claiming Apple infringed Nokia patents, and filed the trade complaint in December.
“Apple was a decade late to market for mobile phones,” Patrick Flinn, a lawyer at Alston & Bird who represents Nokia, said in opening arguments today in Washington. “You can undercut competition when you use the inventions of others.”
Apple contends Nokia’s real motive is to force it to surrender access to proprietary technology that differentiates the iPhone from competitors, a charge Nokia denies.
“Apple’s explosive success, especially in the smartphone market, came at Nokia’s expense,” William Lee, a lawyer at WilmerHale who represents Apple, said at the hearing. “Having failed in head-to-head competition, Nokia turned to litigation.”
The ITC staff, which acts as a third party in the public interest, has recommended that the judge find that Apple didn’t violate Nokia’s patent rights, said staff lawyer Rett Snotherly.
Apple has made its own patent-infringement claims that could result in Nokia phones, including those powered by its Symbian operating system, being blocked from the U.S. market. Apple’s claims against Nokia were heard by an ITC judge early this month. The staff also recommended that no violation be found in that case.
“Other companies must compete with us by inventing their own technologies, not just by stealing ours,” Bruce Sewell, Apple’s general counsel, said in a Dec. 11 statement on the Nokia case.
‘Clash of the Titans’
Sewell, who joined the company last year after almost 15 years at Intel, is leading Apple’s legal efforts. During his time at Intel, including as general counsel, the company was known to use lawsuits to bottle up rivals in costly legal disputes, said Rob Enderle, president of Enderle Group, a technology consulting firm in San Jose, California.
Before working at Intel, Sewell was a partner at Phoenix-based law firm Brown & Bain, which represented Apple in its copyright case against Microsoft.
While many of the technological features behind smartphones have been around for years, their surging popularity has led large companies to go after one another rather than upstarts, said Steve Perlman, CEO of online game company OnLive in Palo Alto, California. He holds more than 100 patents.
“Patents are a form of market power,” said Perlman, a former scientist at Apple. “We’re seeing a clash of the titans.”
The International Trade Commission, a quasi-judicial agency, was set up to protect domestic markets from unfair trade practices. It has the power to ban imports of products found to infringe U.S. patents.
“It’s really high stakes,” said Vander Schaaf. “It’s a ‘who’s going to blink first’ issue.”
Apple may have even more riding on ITC cases against HTC and Motorola, which use Android. Devices running Google’s software accounted for almost 26 percent of worldwide smartphone sales in the third quarter, compared with almost 17 percent for the iPhone, according to Gartner Inc.
“The effort here is to stop Android” through the trade commission, Enderle said.
In March, Apple filed an ITC complaint against Taiwan-based HTC, the world’s biggest maker of handsets using Google and Microsoft operating systems. Apple alleged HTC infringed several patents, including ones related to mobile phones. A trial, which will include additional claims against Nokia, is scheduled to begin in February.
Linda Mills, a spokeswoman for HTC, which has filed counter-complaints against Apple, declined to comment. Motorola spokeswoman Jennifer Erickson declined to comment.
IPhone Versus Droid
A unit of Schaumburg, Illinois-based Motorola filed an ITC complaint against Apple in October, alleging it infringed 18 patents. In response, Apple filed a case claiming the Droid and other Motorola smartphones are using Apple intellectual property without permission.
Apple has hired some of the nation’s top patent lawyers as outside counsel. They include Lee of WilmerHale in Boston, who successfully represented Broadcom in its fight against Qualcomm; Robert Krupka of Kirkland & Ellis, who negotiated a 2005 settlement in which Apple agreed to pay $100 million to Creative Technology Ltd., maker of the Zen music player; and Matt Powers of Weil, Gotshal & Manges LLP, who successfully defended the patent on Merck & Co.’s biggest product, the $4.7 billion-a-year asthma drug Singulair.
This year, Apple added an in-house attorney, Noreen Krall, to focus on intellectual property litigation. Krall had been chief IP counsel for Sun Microsystems Inc. and a staff attorney at International Business Machines Corp., according to the Intellectual Property Owners Association.
The most likely outcome is that the companies agree to end the litigation by licensing each other’s patents, said Enderle.
Until then, “it’s going to get a lot worse before it gets better,” he said.