Apple Inc. (AAPL) is fighting a multifront 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 with
Motorola, 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 2.25% of net sales per device from
Apple for its patents, which are considered essential for creating
wireless devices.
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 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.
Apple shares recently traded down 0.7% at $529.73.
-By Ian Sherr, Dow Jones Newswires; 415-439-6455;
ian.sherr@dowjones.com
Marcus and Millichap (NYSE:MMI)
Historical Stock Chart
From Jul 2024 to Aug 2024
Marcus and Millichap (NYSE:MMI)
Historical Stock Chart
From Aug 2023 to Aug 2024