Apple's smartphone battle plan

Arik Hesseldahl
BusinessWeek

Apple's attempt to block the import of smartphones made by HTC Corp. underscores the growing prominence of the International Trade Commission in settling patent disputes over smartphones, one of the fastest-growing areas in technology.

On Mar. 2, Apple filed a patent-infringement complaint with the ITC in Washington, alleging that HTC (2498:TT) is using Apple technology without permission. A decision in favor of Cupertino (Calif.)-based Apple may bar HTC from importing its devices into the U.S. Apple is embroiled in other scuffles at the ITC, including one with wireless handset maker Nokia.

Device manufacturers view the ITC as a more efficient and aggressive arbiter of patent disputes than overstretched federal courts, which can sometimes take years to bring conflicts to resolution. Turning to a government agency with a background in global trade issues underscores the infiltration by non-U.S. companies into the market for smartphones, shipments of which are expected by Gartner to rise 46% this year. "The ITC is becoming a mainstream second track for patent litigation that allows companies to take a second bite of the apple with their patent cases," says Colleen Chien, an assistant professor of law at Santa Clara University.

In its complaint at the ITC, Apple says Taoyuan (Taiwan)-based HTC infringes 10 patents mainly related to the software that runs smartphones. HTC was the first electronics maker to sell a phone based on the Android operating system, developed by a Google -led group of companies. "We can sit by and watch competitors steal our patented inventions, or we can do something about it," Apple Chief Executive Steve Jobs said in a statement. Apple spokesman Steve Dowling declined to elaborate.

"Expedited proceedings"

Created in 1916 to regulate international trade, the ITC has in recent years emerged as a potent force in patent law, especially in the area of technology products like semiconductors and wireless phones. Companies often file patent lawsuits in U.S. district courts around the same time they file complaints at the ITC. On Mar. 2, Apple also filed a lawsuit alleging infringement of 10 other patents in U.S. District Court in Wilmington, Del. "The ITC is well-known for its expedited proceedings," says Thomas Jarvis, a partner at Finnegan, Henderson, Farabow, Garrett & Dunner, a Washington-based law firm that often represents clients before the ITC.

Jarvis says it takes on average about 7 to 10 months to get a hearing at the ITC, and about two years to get to trial in district courts. ITC spokeswoman Peg O'Laughlin declined to comment on the increase in cases relating to smartphones, saying related questions "are better asked of the parties involved."

The ITC issues so-called "exclusion orders," instructions to U.S. Customs & Border Protection to prevent the import of products that infringe patents. The ITC cannot order an infringing company to pay monetary damages. Chien studied ITC rulings from 1995 to 2007 and found that in cases where it found infringement, it issued exclusion orders 100% of the time.
 

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