Apple’s Lawsuit Against HTC: Bad for Consumers?
Apple's lawsuit against Taiwanese handset manufacturer HTC is meant to prevent smartphones that resemble the iPhone from competing in the U.S. market, limiting consumer choice, but protecting Apple's incentive to innovate, legal experts say.
Yesterday, news broke that Apple had filed suit against HTC with the U.S. International Trade Commission (ITC) and U.S. District Court in Delaware for allegedly violating a slew of iPhone related patents. HTC derives nearly half of its annual smartphone sales from the U.S. market, and the majority sold are Android phones, including Google's Nexus One, according to UBS.
Any one of those patents could be enough to prompt the ITC to ask U.S. Customs and Border Protection to stop the shipment of imports, said Richard Field, a past chair of the American Bar Association's section of science and technology law. "It's like in Casablanca: "some of these reasons may be insignificant, but there's so many of them," he said. "Apple went to town figuring out the infringement."
Apple appears that it is not interested in the usual patent "horse trade" where one company sues another to receive licensing royalties then drops the suit, he said. "My gut feeling is that there's more to why Apple is pushing this one," he said.
"Apple wants to prevent anyone else from making smartphones that compete directly with the iPhone," said James Grimmelmann, an associate professor at New York Law School. "It will raise prices and lower quality in the smartphone market." He refused to speculate on the validity of the patents without a very detailed examination.
Field suggested that Apple might be attempting to eliminate a source of "generics" from the market in order to protect its iPhone revenue stream, which he said may be critical to the company. Apple sold 8.7 iPhones last quarter. "If you eliminate generics it affects the market"
"Apple is known for its creativity. If Apple cannot protect the creativity side of [the market] it also isn't good for consumers," Field said. When molded together, it could be argued that the patents are the essence of the Apple machine, he explained.
Grimmelmann saw it another way. "Overall, the move strikes me as a sign of weakness on Apple's part; it fears the competition. Then again, Apple is an irrationally litigious company. For every reasonable lawsuit (Psystar), it brings an ill-advised one (Apple v. Does)," he concluded.
Apple v. Does is a lawsuit that Apple filed in 2004 against unnamed defendants that it accused of leaking information to news sites including AppleInsider and PowerPage.
My take is that Apple is waging a proxy war against Google while firing buckshot at so-called "generics" (I am hesitant to use that term). It might risk alienating customers, but, as Fields told me, there cannot be a backlash unless you can understand whether the suit has merit. I eagerly await more details about the case as it unfolds.