Apple Settles with HTC: What Does It Mean for the Smartphone Wars?

November 12, 2012

Over the weekend, Apple and HTC settled all of the long running patent suits that both companies had filed against each other in multiple jurisdictions. Although few details of the settlement were released in the two sentence press release that included brief quotes from HTC and Apple, the companies did state the the they had reached a "global settlement" that included dismissal of all current lawsuits. The companies also specified that the license extends to current and future patents held by both parties for the next ten years. The remainder of the terms, including the financial terms, are confidential.

And so one of the earliest and longest patent battles over smartphones ended quietly. Although no monetary terms were disclosed, it is likely that HTC is paying a royalty to Apple in order to put an end to the litigation. The impact on HTC from the Apple lawsuits was significant, hurting both its stock price and its ability to timely ship product due to the exclusion order Apple obtained at the ITC. As a result of the settlement, HTC will now be able to focus on making and selling products instead of litigation. That can only be a positive for HTC.

But what about Apple?

Apple pursued HTC vigorously and with much success, although HTC ultimately was able to avoid the exclusion order with minimal changes to its phones and continues to ship products. Nonetheless, HTC is a relatively small competitor in the smartphone market and Apple probably believed that now was the time to reach a resolution to avoid continuing costly litigation that HTC had also filed against Apple.

In addition, Apple suffered some very high profile losses recently, including having two injunctions against Samsung overturned as well as having another lawsuit against Motorola dismissed on the eve of trial. With these litigation set backs, the time was right for Apple to resolve its issues with HTC and focus its efforts on Samsung and Google/Motorola.

Although Apple now has additional bandwidth to focus on Samsung and Google/Motorola, the settlement with HTC also demonstrates that, under the right circumstances, Apple is willing to put aside litigation and resolve disputes with a smartphone competitor. If Apple can settle with one manufacturer that utilizes Android, then it can settle with others. To be sure, the competition between Apple and Samsung and the bitter fight between the the two in the marketplace will be much harder to resolve. Indeed, the battles between Samsung and Apple in the courtroom and in the marketplace dwarf those between Apple and HTC.
But the HTC settlement demonstrates that a resolution can be achieved--and ultimately will occur. Nonetheless, it is not likely that we will see an end to the disputes between Apple and Samsung until a few more hands are played in the high stakes litigation.

It will be even harder to resolve the disputes between Apple and Google/Motorola. Motorola has recently initiated several lawsuits in federal district court and at the ITC against Apple to combat Apple's aggressive tactics against Google and Android. These lawsuits, although they are in early stages, may provide the leverage that will be necessary to resolve all of the disputes between Google and Apple. A broad cross license between Google and Apple will also have to address the Motorola patents that Apple was seeking to set a royalty rate for in the case that was just dismissed in the federal district court in Wisconsin.

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With the resolution of the HTC lawsuits, there is finally light at the end of the tunnel that the smartphone wars may be coming to an end. But there are likely a few more battles to be won and lost before the smartphone war is over.