Smartphones are the latest patent battleground

Smartphones are the latest patent battleground

Olga Kharif  |   May 18, 2010
Bloomberg Businessweek
The patent wars are raging in the mobile device market, and they could result in rising costs for handset makers and higher gadget prices for wireless carriers and consumers. So far this year, Apple and HTC—two of the most innovative smartphone makers—have become embroiled in more patent-related litigation than in all of 2007, and they are on track to beat their own 2008 and 2009 records, according to Bloomberg data.
On May 7, Nokia lodged a patent infringement suit against Apple in Madison, Wis., that said Apple's iPhone and iPad violate five Nokia patents. In just seven months, the companies have exchanged five suits and countersuits. The tussle began in October 2009 when Nokia accused Apple of infringing on 10 patents and demanded royalties.
In March, Apple  sued Taiwan-based HTC, alleging it infringes on 20 Apple patents relating to touch and menu controls. The latest legal volley came May 12 when HTC responded to the Apple litigation with a complaint at the U.S. International Trade Commission, asking the agency to halt imports and sales of iPhones and iPads in the U.S. "We are taking this action against Apple to protect our intellectual property, our industry partners, and most importantly our customers that use HTC phones," Jason Mackenzie, a vice-president at HTC, said in a statement.
Microsoft is also pursuing patent payments from companies that make phones based on Android software. On Apr. 27, Microsoft said HTC will license its software for the phones. The terms haven't been disclosed. Patents also played a role in the recent $1.2 billion deal for Palm. Hewlett-Packard has said that patents associated with Palm's WebOS operating system for smartphones is one reason it wants to acquire Palm. "This landscape looks like France in 1914," says Eben Moglen, a professor at Columbia Law School. "This is the onset of a period of instability."

Revenue pie

Patent holders want a larger slice of smartphone revenues, which grew 27 percent to $61 billion in 2009 and are on track to grow another 30 percent this year, according to Boston-based consultant Strategy Analytics. And the companies that want a slice come from not only the phone but also the PC and software industries, whose inventions and functions smartphones increasingly absorb.

Each industry has its own unique functionality to protect: Apple holds many patents related to computing, applications, and touch technologies, which have been a hit in the iPhone. Nokia holds rights to many of a telephone's communications capabilities, while Microsoft owns a wealth of patents related to mobile device software. As companies seek to keep their technological acumen away from rivals—or to collect patent royalties from those rivals—the lawsuits are piling up. "Whenever industries merge, there may be patent litigation," says Gustav Brismark, vice-president for patents strategy and portfolio management at Swedish telecom gearmaker Ericsson, which holds many wireless connectivity patents.

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