Rumor: Apple spent $100 million in its first case against HTC — and got almost nothing

As I reported in this week’s Newsweek, Apple’s “thermonuclear war” on Android smartphone makers has been fizzling out lately. Most of Apple’s legal claims have been tossed out, and the two minor victories Apple has scored were so trivial that opponents could work around the claim by making minor changes to their products.

But a person close to the situation tells me there’s a rumor going around among the lawyers that Apple spent $100 million just on its first set of claims against HTC.

Who knows if it’s true, but if so, Apple didn’t get a lot for its money.

Apple brought the case against HTC with the International Trade Commission in February, 2010. Apple wanted the ITC to block HTC from importing products into the United States.

Apple’s case against HTC started out with 84 claims based on 10 patents. But by the time the case got to a judge only four patents were involved.

The final ruling was that one patent was totally invalid because of prior art, and should never have been issued to Apple. On two other patents, the ruling was that HTC was not infringing on the patents, and, worse yet, that Apple itself was not using those patents in its own product, which means Apple had no right to seek an injunction based on them. (ITC injunctions are intended to protect “domestic industry,” and to get one you need to show that you are “practicing” the patent that you claim someone else is infringing.)

On the last patent the ITC found that HTC was infringing and that Apple was practicing the patent.

That got reported as a victory for Apple. But in reality the infringement involved a relatively tiny software feature, one that lets you press on a phone number in an email or Web page and bring up a menu from which you can choose to call the number, send a text message, and so on.

HTC can resolve the infringement simply be removing that feature from phones it sells in the United States, or by finding a different way to implement that feature that sidesteps the patent.

So Apple started out with 10 patents — presumably its best ones — and ended up with a tiny victory on just one. Was that worth $100 million?

Apple certainly can afford the legal fees, and shows no sign of letting up.

Apple has a second complaint against HTC pending at the ITC, involving other patents, with a ruling expected by March 2013. Both of these cases, the one that’s been ruled on and the one that is pending, have also been filed with district courts in the U.S., though those cases have been stayed pending the outcome of the ITC cases.

HTC has two claims pending against Apple with the ITC as well, the first one due for a decision next month and the second in April 2013. And then there are other claims, all over the world, against HTC, Samsung and Motorola.

But all of those guys are now suing Apple as well. Apple already got its ass kicked by Nokia and had to pay royalties for infringing on Nokia patents.

Eventually everyone is going to settle. (Steve Jobs may have wanted to drive Android out of existence, but that’s probably not going to happen.) The question is what kind of terms will everyone get in these settlements. The court fights are really just a way of jockeying for position and trying to gain leverage for the great settlement that is yet to come.

In that sense, whatever Apple is spending on legal fees is probably money well spent.

146 Responses to “Rumor: Apple spent $100 million in its first case against HTC — and got almost nothing”

  1. Ewan

    Hymn, a very one sided article.

    That said, *IF* Apple spent that much money on the suit, I wonder how much money HTC spent? I think that’s the bigger point.

    Apple leads the way and differentiates. What Apple is saying, and has said, is that if you steal our ideas will will sue the hell out of you. I guarantee newer versions of Andriod will pay attention to functionality which might get Apples ire up, and will try to avoid it.

    …and that’s what Apple bought with he money.

  2. boethius

    You may recall Apple “sued the hell” out of Microsoft as well, for infringing on the GUI, and also got effectively nothing for the protracted battle. It certainly didn’t prevent Microsoft from continuing on with Windows and it’s highly questionable that this will deter Android handset makers significantly. Apple absolutely did “lead the way” and arguably continues to after it ported NeXTStep to the Mac but continuing Jobs’ legacy of “suing the hell” out of its competitors ultimately seems petty and a smack against their own innovative products, as though they’re not capable of standing on their own in the marketplace – which very clearly they are, regardless of their competition.

  3. Frank George

    This idea bout Apple innovating is bogus, especially in mobile.

    Prior to Apple turning up there have been very, very few legal cases between mobile players. Everyone played nice and new the rules to pay cross-party licenses etc. Nokia was one of those with a lions share, but as the previous settlement indicates, Apple thought that whatever they conceive, it must be the first time.

    Apple and SJ have a history of getting the teams to work in bubbles. This has the advantage of allowing the design process not to be influenced by what came before. The problem comes from the false belief of being an originator.

    Apple’s hippy, we’re small, Microsoft is Orwellian nightmare contrasts massively with its huge number of patent filings ever since the iphone was released.

    Yes some are original and ingenious, but a huge number are petty and about grabbing IP real estate. About muddying the waters and complicating industry wide innovation.

    I stress, prior to Apple, the mobile industry operated much more on honour and haring of IP.

    The reality is that Apple is slowly undermining it’s standing with it’s oldest followers. Who know it from a different time and more sincere ethos.

    The whole Fanbouys and girls nonsense distorts the legacy.

    Think differently. Think for yourself. be a leader…all of these slogans appear variously in Apple campaigns.

    But what do they do. They curate apps, videos and music. Decide on music and video file formats, even compression. They reject cartoons or political humour. They create a closed eco-system in itunes where user information is mined fro Apple’s express purpose and not even shared with content providers to the platform.

    Facebook is just as bad with it’s closed eco-system, except worse,selling its user’s lives/habits/utterances to advertisers.

    The Apple distortion field lives on

  4. Proto

    Dan, I think the real story is in the last paragraph of your article. For years, there was a patent detante in which tech companies rushed to file claims on anything they could possibly imagine (really, bitmapped text on a display?) and then cross-licensed their portfolios with each other. This had the effect that was desired at the time: existing large tech companies were protected by the blanket cross-licensing agreements, but upstarts could be sued out of existence at any moment by the patent cartels.

    For a number of reasons, including Apple’s return to a level of litigiousness they showed in the 70s and 80s, that detente has fallen apart. Eventually, we will reach a different point of stability. While we may not get anywhere near the retroactive banishment of software patents that many engineers would like to see, there should be a great deal of consolidation. Apple is sending a strong signal that they are sitting on a mountain of cash and are willing to litigate every dispute. How many other companies are in a similar position? It seems very possible that the eventual grand unified settlement will be advantageous to Apple, in which case the cost of the current litigation would seem like a very sensible investment.

    Is this crappy, anti-competitive behavior on Apple’s part? It sure seems like it, but the future of a multi-billion dollar industry is resting on an unstable patent system. Companies faced with that kind of risk will do anything they can to come out on top.

  5. Darwin

    You are just making this up. Either deliberately or because its what you would like to believe. I have been involved in mobile devices since before Palm and Windows CE. there have been a slew of lawsuits the entire time.
    All of your other comments are inane and incorrect as well.

  6. Old fan

    Jeez, Dan. Take a look at yourself. What the hell are you made of? What the hell have you turned into?
    You’re the unrecognizable shadow of the Dan Lyons of yesteryears. You’re the unrecognizable shadow of a journalist, I’d say. I’m so sorry for you, it must be hard to be out of the league of those whose work still matters a little. Keep on kicking and shouting, baby boy, if it makes you feel better.
    Condolences, Dan.

  7. r00fus

    What is visible is the tip of the iceberg.

    For example, how much does Apple stand to gain by delaying holiday 2011 sales of a given manufacturer? How much do they gain by creating potential precedent? Given what we know about Intel and Microsoft’s payola network (kept Dell afloat for several quarters in the past decade), we see how seemingly large investments that have no visible gain can yield considerable profit (or continuation of existing profit centers).

    Again, not all that is of value may be publicly visible.

    Of course, I think software patents are bullshit and should be tossed out along with business process patents, but given the current judicial atmosphere, Apple’s $100M investment may be considered wise and recouped with a single month of (boosted) sales.

  8. blah

    The kid in that photo is now paralyzed. Figures Dan Lyons would find an injury like that funny.

  9. yet another steve

    fake steve is a more credible source than real dan. sorry but that’s the bed you’ve made.

  10. joe

    $100 Million to make HTC spend 1 week putting out a hotfix to their phones. Amazing.

    Keep the flames coming, iFanboys, its fun to watch you guys squirm

  11. Jake

    $100 million is a fantasy number… did you even consider how Apple could spend that much? Let’s say Apple hires lawyers at $500/hour. That’s $1 million/year. They would need to 50 high-priced lawyers working full time for 2 years to generate $100 million. Not gonna happen. I think $10 million is on the high end of what it cost. And it’s just as well sourced as your fantasy number.

  12. Joe

    Firstly, you seem to forget in how many nations and in front of how many courts Apple started to claim. Every single court demands its legitimate fees (which are regularly calculated from the amount in dispute).

    Secondly, you seem to forget that in many countries the claimant will have to reimburse the defendant at least part of his legal costs, if the court finds, that the claim is without merit.

    Thirdly, being in the legal profession, I don’t find these numbers unrealistic. Not saying that its adequate, but realistic.

  13. Meester Bleester

    Rumor: Fake Steve hates Real Steve, and takes it out on Apple. What deep dark secret happened in your past, FSJ? Did Apple stop inviting you to press events? Did you build a huge web portal using iWeb, only to have no one come and iWeb be discontinuesd?

    What, FSJ, what? Tell us. You’ll feel better about yourself.

  14. Bill

    If Apple spent $100M then HTC probably spent something similar. Even if Apple loses they have already subjected Android makers to a tax. Apple makes a profit of about $200 per phone. And sells maybe 30M a quarter. HTC sells many fewer, at lower prices, and for much less profit, and can ill afford $100M.

    Of course Apple would prefer to win, but they can make Android expensive to use, and bit by bit get Android device makers to drop features or make design changes. And if they win against HTC on the click to call or email or set an appointment feature then it is much easier and cheaper for them to assert that against other Android licensees. And I do think that feature is an advantage and HTC phones will ultimately be less satisfying for not having it. Apple are in it for the long game. They want to have the best consumer satisfaction, the most repeat customers, and gradually eat away market share. Just as they are doing with the Mac, which has grown faster than Windows for 5 years.

  15. theycallmefishmeal

    Apple can, and does, sue everyone and anyone hoping to intimidate adversaries into going away. Once upon a time, about 30 years ago, it worked. Not so much anymore. As the article states, Apple wasn’t using some of the patents that they were suing over. The reality is that those patents were procured (purchased or stolen, you be the judge) so the competition could not use them. Now, even if you own the rights to a particular idea, widget or whatever. If you are not using said patent for gain and profit, you cannot not claim for infringement and loss of revenue, which is what Apple attempted to do. As for the expenditures, Apple isn’t the only company on the planet with deep pockets. Get real! Litigation is a way of life in the corporate world and those expenses are the cost of doing business. Or to make it very plane, pre-tax Dollars, Yuan, Shekels or whatever currency you prefer. Apple is not now nor has it ever been an innovator. They are very adept at using existing products and/or tools, repackaging and rebranding them with amazing marketing and product user functionality. Innovators? not so much. Marketing gurus? You better believe it!

  16. The1Llama

    So if Apple has to spend less than a PENNY of it’s $$$ BILLIONS in the bank to deliver a knock-out blow to Android competitors who have COPIED the look and feel of your iPhone & iPad, you think that’s a bad investment? The other companies have had to spend just as much money to defend themselves and they have a much SMALLER piggy bank!

    Steve Jobs would be a MORON not to go after them! It also sends a message to all the other companies that Apple will go THERMONUCLEAR WAR (legally speaking of course!) against them if they try to blatantly copy their designs. Samsung and HTC were making phones for years before Apple created the iPhone and suddenly ALL smartphone look and feel like iPhones? NOBODY was making a Tablet computer for $500 that did what an iPad does and suddenly everyone is trying to design an Android iPad Killer” that looks and feels like an iPad???

    On the near horizon, Google’s growing legal battle with Oracle over the stolen “Java Code” in Android could cost them a lot more $$$ than any legal problem with Apple over the iPhone and cause Amazon and other Android Phone & Tablet makers to switch to something else (Windows Mobile OS?) to avoid the high royalty fees or penalties. 

    Google’s last earnings took a big hit because of the growing competition for online Ad $$$ with Facebook and BING, while Apple has $80 + BILLION in the Bank and ZERO DEPT! Amazon is doing very well on the balance sheet too and makes a nice eBook reader, but iPad’s are only going to get FASTER, CHEAPER & more POWERFUL making it impossible for Amazon to beat them in Speed or Power.

    Finally, even if Apple spends even more money it might not matter if they don’t deliver a knockout blow, because the time for ANY Android Tablet device to stop the iOS / iPad juggernaut is quickly closing! Just like the time when all the non-Apple mp3 devices (Zune, etc…) were suppose to end the iPod Music Player dominance for the past 10 years! 

    Google is looking more like the high flying 80′s & 90′s tech companies (HP, DELL, and Microsoft), where their best days are OVER, or will be soon! I’m sure Larry & Sergi will look back in 10 years and wish they had just stuck with SEARCH & Saving the World than piss off Apple, Oracle, and thumb their nose at Microsoft with Chrome!

    Hopefully they end up better off than Jerry Yang of Yahoo!


  17. Jack

    I never get why everyone thinks that the iPhone design was original. There were mobile phones with full screen touchscreens well before the iPhone. I had the Sony Ericsson P900 which came out in 2003 which had the option of a flip on the front for buttons or it could just be touchscreen. I was playing monkey island on the P900 4 years before the iPhone was even released.

    I understand that Apple wants to protect its investment but all these cases were brought because they copied apples design. But the design wasnt revolutionary as claimed. Whether they took inspiration from existing phones or were just living in a bubble, you can’t sue them for taking the next step in design from previous generations of phones.

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