Apple, HTC settle patent litigation, ink 10-year licensing deal

Apple (NASDAQ:AAPL) and rival smartphone vendor HTC agreed to settle all outstanding patent litigation between themselves around the world, and the two firms entered into a 10-year licensing agreement. 

The companies said in a statement issued Saturday night that the license extends to current and future patents held by both companies and that the terms of the settlement are confidential. "HTC is pleased to have resolved its dispute with Apple, so HTC can focus on innovation instead of litigation," HTC CEO Peter Chou said in the statement. 

"We are glad to have reached a settlement with HTC," Apple CEO Tim Cook said.  "We will continue to stay laser focused on product innovation."

An Apple spokesman told the Wall Street Journal that the company declined to comment on the agreement. An HTC spokeswoman also declined to comment but said the company doesn't expect the license agreement to have an adverse material impact on the company. Yet the Journal also reported, citing an unnamed source familiar with the matter, that HTC will have to pay Apple licensing fees as part of the deal, though it's unclear how much those fees will amount to. Still, news of the settlement sent HTC's shares up around 7 percent Monday in trading in Taiwan.

Apple first sued HTC in March 2010 as part of an ever-widening patent-infringement battle between Apple and other handset vendors, including Nokia (NYSE:NOK), and Samsung Electronics and Google's (NASDAQ:GOOG) Motorola Mobility unit. The suit against HTC, first filed with the U.S. International Trade Commission, was seen as a proxy battle against Google. Since then, HTC and Apple have filed suits against each other at the ITC and in federal court as well as in courts around the world.

Apple won a $1.05 billion jury verdict against Samsung in August in a patent-infringement trial. Apple has had less success with its patent battles against Motorola, which Google acquired last year as part of a bid to beef up its patent portfolio. Nokia and Apple entered into a settlement in June 2011 under which Apple agreed to pay Nokia a licensing fee.

The battle between Apple and HTC has produced wins and setbacks for both sides, though none of them decisive. In May, some of HTC's devices, including the One X and Evo 4G LTE, were briefly held up at U.S. customs due to an exclusion order Apple won against HTC from the ITC.

"The settlement is positive for HTC because the patent suits have been a major overhang and uncertainty on its share price," Daiwa analyst Birdy Lu told the Journal. "I believe HTC is likely to make payments to Apple even if what both agreed is of cross-licensing nature because Apple's patent portfolio is much stronger than HTC."

Some think the settlement could signal a shift for Apple. Former CEO Steve Jobs threatened to wage "thermonuclear war" to stop what he saw as Android's theft of Apple's mobile innovations. "For as long as Tim Cook has been CEO, Apple has been less interested in pursuing legal assaults against competitors, choosing increasingly to find ways to settle differences out of court," Yankee Group analyst Carl Howe told Bloomberg. "This settlement indicates a softening of Apple's legal thrusts."

Yet HTC could have as much of a reason to settle as Apple, given HTC's smaller financial stature and its troubles competing in the market. As The Verge pointed out, "at some point it's not worth it for Apple to fight a battle against an opponent that's falling behind in the marketplace anyway."

The settlement is unlikely to alter the smartphone landscape. After all, as Barclays analyst Dale Gai noted to the Journal: "Nokia settled with Apple in 2011 by winning royalties from Apple, but it did not change the landscape at all for smartphone competition."

For more:
- see this release
- see this NYT article
- see this WSJ article (sub. req.)
- see this Bloomberg article
- see this FT article (sub. req.)
- see this AllThingsD article
- see this The Verge article

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