A Minute With...

Deepak Somaya, expert on technology patent disputes

8/2/2011  8:00 am

Does Apple’s recent patent victory over HTC at the U.S. International Trade Commission (ITC) represent a threat to Google’s Android mobile phone operating system?

Deepak Somaya is a U. of I. business professor who has studied technology-related patent disputes and the ITC as a venue for such disputes. He discusses the latest development in the brewing smartphone war between the tech behemoths with News Bureau Business and Law editor Phil Ciciora.

Apple just scored a big victory against HTC and, by extension, Google. What do you foresee happening next?

image of professor deepak somayaLet’s take the Apple-HTC dispute at the ITC in isolation. At this stage, the administrative law judge has only made an initial determination that HTC infringes two Apple patents; the ITC has not yet issued an exclusion order to bar imports of HTC products. So, there are essentially two possibilities – HTC can continue fighting the suit at the ITC, or they can settle the dispute with Apple by taking a license and making payments for past infringement.

HTC’s position has been that they are not infringing any of Apple’s patents and will appeal to the ITC’s six-member commission. The ITC’s commissioners have historically tended to leave this complex area to the administrative law judges. So, I don’t expect they will intervene in this case. One thing HTC does have in its favor is that the independent ITC staff attorney supported the company’s position, and the commissioners may consider that fact.

HTC can appeal an ITC decision to the U.S. Court of Appeals for the Federal Circuit, but once an ITC exclusion order is issued, HTC will essentially be out of the U.S. market for smartphones. So, those later appeals would come at a very high cost to HTC.

HTC could also try to hit back at Apple with some of its own patents. When Apple sued Samsung recently, it sued Apple back in foreign courts. In my research, I have found that such counter-suits can help to resolve patent disputes. But HTC has a smaller patent portfolio than Samsung, and may not have anything suitable in its armory for a counter-suit.

One of the bigger storylines that continues to play out is the battle between Apple and Google. How are Google and other handset manufacturers going to respond to the ITC’s ruling?

If HTC and Apple reach a settlement, Apple will most likely end up getting paid for each Android phone that’s sold. I understand Microsoft is already paid $5 per Android phone sold by HTC. Google only monetizes the Android platform through other Google Web services. So we could end up with a situation where Apple and Microsoft are getting paid more per Android phone sold than Google.

But Google’s Android platform is rapidly gaining market share, and controlling such an important and successful technology standard is pretty significant. Patents expire. The first of the Apple patents will expire in 2016. On the other hand, five years can be an eternity in technology, so it will be interesting to see who comes out on top in this tussle. I also wonder what Google’s patent strategy is in support of its Android partners?

Is taking a patent dispute to the ITC a way for firms to engage in a proxy war versus each other?

It is war – the only “proxy” part of it is that Apple targeted HTC, one of Google’s leading Android partners instead of Google itself. Ultimately, Apple is using its patents as leverage to jockey for position in the highly competitive smartphone marketplace.

In my research, I found that firms go to the ITC when they have patents with high strategic stakes because of the ITC’s patent expertise and quick decisions. The ITC usually provides a decision within 12 months, whereas district courts can take years to decide on a patent case. We are in a very crucial phase in the smartphone market, and there are a lot of players all jostling for position, so the strategic stakes are very high. That is why the “war,” as you called it, is being fought in the ITC.

Why are tech firms increasingly choosing the ITC to resolve patent disputes?

One reason may be an increasing number of patent disputes in which the strategic stakes are very high. Smartphone litigation certainly falls within this category, but there may be other reasons as well.

The ITC has always been something of a specialized institution, and the lack of knowledge about it seems to be somewhat of a barrier for firms to go there. Maybe that barrier is now breaking down. In my research, we found that previous experience at the ITC was a significant reason for targeting it in future litigation. Interestingly, Apple’s first experience with the ITC was when Nokia sued them at the ITC. But now Apple is taking many of its own patent infringement cases to the ITC. So you can see how this can become an accelerating process where firms start getting more familiar with the ITC and it becomes more popular as a venue. So not only are companies choosing to go the ITC over the district court for strategic reasons, but many that have gained experience with the ITC are going back.

Although the ITC is popular with companies right now, that can change. There was a time in the 1990s when the ITC’s caseload had decreased quite a bit, but then it picked up again from the early 2000s onward.

 

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