A tough lesson in patent strategy for HTC that others can learn from 04 Oct 13
Last week the International Trade Commission (ITC) ruled that certain devices imported into the US by HTC infringed two Nokia-owned patents. The case involved some of HTC’s older products, so it was initially uncertain whether the ruling would apply to the company’s newer offerings. However, it appears that the latest HTC One smartphone, yet to be launched in the US, does in fact utilise the patents in question. Now, the company is scrambling to forestall an import ban.
HTC has three choices: it can enter into a licensing agreement with Nokia; it can persuade the ITC to reverse its finding; or it can develop a work-around. The Nokia-patented technology relates to a radio chip used to boost mobile signal in HTC’s handsets. Reports indicate that HTC is now considering a swift radio chip redesign in order to avoid the import ban. But whichever option it eventually chooses to pursue, it has said after last week’s ruling that it would “keep its alternative plans ready to ensure no business disruption”.
Any disruption to HTC’s business that did occur would not come at a more inopportune time. In the past year the company has seen the exit of senior executives, the arrest of several employees for alleged leaking of trade secrets, and now it has posted its first quarterly loss since its initial public offering in 2002. Overall, the company has lost more than 90% of its market value since 2011.
The travails of the Taiwanese Android smartphone maker is a cautionary tale for other Asian tech companies. Having become entangled in s series of patent disputes, HTC has tried to bolster its IP portfolio, while also concluding deals with first Microsoft, then Intellectual Ventures and, more recently (and historically), with Apple; but it has not seemed to make much difference. The company’s tumultuous journey emphasises the importance of strategically building an IP portfolio in anticipation of problems to come, rather than leaving it until after the moment when the proverbial has hit the fan. Judging by reported transactions involving Asian technology companies over recent years and the rumours of a few big ticket ones that have not been made public – several involving entities based in mainland China – as well as increased international patent filings, it does seem that others are learning the lesson well.
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