Apple Offered Licensing Deals To Some Patent Foes -Sources

SAN FRANCISCO (Dow Jones) -- Apple Inc. (AAPL) is fighting a multi-front patent war against competing makers of mobile devices, demanding injunctions that would block sales of their products. But the company has also indicated a willingness to cut deals with competitors, according to people familiar with the matter.

The consumer-electronics company has put forth proposals to Motorola Mobility Holdings Inc. (MMI) and Samsung Electronics Co. (005930.SE, SSNHY) to settle some pending litigation in exchange for royalty payments to license its patents, among other terms, these people said.

This is not a new tactic; Apple had some discussions with companies such as Samsung before initiating litigation, according to statements made to a court in at least one suit.

Apple isn't attempting to offer patent licenses to all its competitors or create a royalty business, one person familiar with the matter said.

However, some people familiar with the situation see more reason for Apple to consider legal settlements, following a mix of legal victories and setbacks against smartphone makers that use Google Inc.'s (GOOG) Android mobile operating system. Apple has targeted these hardware makers rather than sue Google directly, and they have responded with their own patent suits against Apple.

One factor is that Android has proliferated so widely that shutting the software out of the market using injunctions is no longer practical, one of the people said. Licensing is an alternative that could add cost to Android development and make it less appealing for manufacturers.

Apple, of Cupertino, Calif., has asked for between $5 and $15 per handset for some of its patents in one negotiation, or roughly 1% to 2.5% of net sales per device, another person familiar with the matter said. Motorola, for its part, has been criticized for asking for 2.5% of net sales per device for its wireless patents from Apple.

None of the people could confirm if settlement talks are currently taking place, but say this is part of an ongoing process.

Any offer to license patents would seem to oppose statements from co-founder Steve Jobs, who died in October.

In his authorized biography, Jobs said he would "spend every penny" of Apple's money to fight against competitors that he said had copied the company's technology for smartphones and tablets. He had particularly harsh words for Google, which is buying Motorola Mobility for $12.5 billion.

Apple, moreover, has more cash than its competitors and little need to seek revenue from them. The company would seem to have more incentive to hold out for court orders that could block sales of competitors' products, or force them to modify their designs to remove features found to infringe Apple patents.

In some cases, Apple said it has tried to head off litigation. The company told an Australian court last year that Jobs had begun discussions with Samsung in the summer of 2010, in part because of the close relationship between the companies. But those talks broke down when Samsung released its first Android-based tablet, the Galaxy Tab, in the fall of 2010.

Apple has been considered by its legal adversaries to be stubborn and unwilling to reach agreements. Two people involved with litigation with Motorola said Apple had been asked by a German court to resubmit numerous proposals for a licensing deal for Motorola's patents. These people added that it took roughly 10 submissions before one was deemed appropriate by the court.

There is a lot at risk, however. Apple, for example, relies on Samsung to manufacture parts for its mobile devices, such as microprocesssors and memory chips.

Other considerations include the fact that winning an injunction against individual products may not end Apple's legal efforts, since competitors have many different devices waiting in the wings to be sold, the people familiar with the matter said. By contrast, so much of Apple's sales are generated by current iPhone and iPad tablet models that any injunction won by competitors could have a more devastating impact on the company, they added.

In addition, there are questions about the extent of the legal leverage Apple can gain with its current strategy. The company has chosen to mainly sue rivals under relatively narrow patents that cover specific features of its products, such as software that can detect useful information, like a phone number in an email, and make a call when a device is tapped. Many such features could be removed or modified to allow shipments of a handset to continue in the event of a court order.

By comparison, some of Apple's rivals are wielding broader patents that may have been deemed essential for creating wireless communication devices. Apple had been an outspoken critic of the practice, saying opponents shouldn't use such patents to seek injunctions.

However, these patents often lead to successful claims for royalty payments from defendants. So one possible goal for Apple in any negotiations is to use its own patents as bargaining chips to reduce any potential royalties it might face as a result of such "essential" patents. Another common motivation is to show judges presiding over patent litigation that a company is not being unreasonable, and will negotiate in good faith to settle suits.

Apple's position has been bolstered by wins in some crucial cases, such as an ITC decision that said some Android-based phones made by HTC (HTCXF, 2498.TW) had infringed on the data-tapping patent. Recently, a German court said Apple had won an injunction against all Motorola devices that infringed a patent on how they manage photos.

However, some rulings have not gone in Apple's favor. Last month, Apple temporarily suspended sales of some iPhones and iPads in Germany because Motorola had enforced an injunction it was given by a local court over a standards-essential wireless technology patent. Apple also recently lost a bid for an injunction against Motorola in a German court over a patent widely known as "slide to unlock," which describes software for gaining access to the phone by dragging an image across the screen.

Motorola also recently enforced an injunction that stopped Apple from delivering messages from its Mobile Me and iCloud email services using near-instant transmission technologies, known by the term "push." Apple said it has implemented a stop-gap measure for German customers so that they automatically receive their email by another method.

-By Ian Sherr, Dow Jones Newswires; 415-439-6455; ian.sherr@dowjones.com

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