Apple squashes HTC complaint at ITC over S3 Graphics patents

Apple (NASDAQ:AAPL) notched another win in its long-running patent battle with HTC after the U.S. International Trade Commission ruled that Apple did not violate patents held by video and graphics firm S3 Graphics, which HTC acquired in July for $300 million.

S3 filed a complaint with the ITC in May 2010, accusing Apple of infringing on four patents related to compressing and decompressing data for transmission. S3 claimed the technology was used in Apple's iPod, iPhone and iPad. A preliminary ruling in July found that Apple had infringed on two of the patents but not on two others. The ruling Monday overturned that and dropped the investigation.

HTC's purchase of S3 (and S3's portfolio of 235 patents) was seen as armor that HTC could use in its patent battle with Apple, which has been ongoing since March 2010. However, some analysts noted at the time of the acquisition that S3 could have just licensed its patents to HTC.

"We are disappointed, but respect the ITC's decision," HTC General Counsel Grace Lei said in a statement. "While the outcome is not what we hoped for, we will review the ruling once the commission provides it and will then consider all options, including appeal."

In an interview with Dow Jones Newswires, HTC CFO Winston Yung defended the S3 purchase. "There are many [patents] that are very strong ... we think the acquisition is justified because of all the patents," he said.

For more:
- see this WSJ article (sub. req.)
- see this Bloomberg article

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