Yesterday, Apple and HTC announced their settlement agreement regarding patent litigation. The agreement settled all current lawsuits regarding patent infringement between the two companies, but more importantly it created a license agreement for the next 10 years. According to the official statement:
TAIPEI, Taiwan and CUPERTINO, Californiaâ€”November 10, 2012â€”HTC and Apple® have reached a global settlement that includes the dismissal of all current lawsuits and a ten-year license agreement. The license extends to current and future patents held by both parties. The terms of the settlement are confidential.
How important was it that the companies will now have access to all patents held by each other respectively, and what does that forecast for the future of the mobile market? Some analysts are now questioning whether granting Apple access to HTC patents might be part of an "end game" scenario for the destruction of the Android platform. Others think that Apple is simply easing up on their gung-ho lawsuit frenzy. Neither scenario would seem very likely, but the scenario is worth discussion.
HTC is in troubled water, there's no denying that at this point. Their sales are down, they hold relatively few U.S. patents compared to any of their major competitors, and they came into the negotiations with Apple in a very weak position. Ansel Halliburton, a lawyer for ComputerLaw Group in Palo Alto, recently published an editorial via TechCrunch regarding what this move heralds for the future. According to Mr. Halliburton, HTC is undoubtedly adding a new royalty payment to their structure as part of the agreement. This comes on top of royalty agreements already in place with Microsoft. This style of legal attack is called "royalty stacking" and it can have a profound effect on the bottom line.
Not only does Mr. Halliburton believe that the royalty stacking will effectively push HTC out of the Android market, he also states that it will set a new "floor for any future deal between Apple and Samsung." His puts his final question in bold, as if nailing the coffin shut:
The big question is whether Samsung â€” or anyone else â€” will be able to still sell Android phones at a profit after paying Apple's and Microsoft's royalties.
Interestingly ommited from Mr. Halliburtons article is the fact that Apple isn't exactly on a roll with litigation lately, despite some major wins such as the HTC patent case. Samsung recently had great success against Apple in the UK, and other courts are now considering whether Apple is abusing the legal system in its barrage of patent disputes.
The Android, or really the "alternative to iOS," market in all it's forms is a powerful creature, not easily destroyed by price increases. Many consumers have and will continue to choose the open Android system over the closed iOS system almost regardless of price. Although Android fans would hate to be lumped into the same category as Apple Fanboys, the fact remains that there is extreme brand loyalty on both sides of the aisle. Will both companies benefit from this patent sharing agreement? Absolutely. Will Apple take a weakened HTC and run it into the ground with this new access? Probably not, but that doesn't mean that HTC isn't in trouble, as stated before, and the industry will be looking for something special to roll of their line soon.
Let's not forget, Android captured 75-percent of the smartphone last quarter, and Android growth numbers are on the rise. Let's try looking at the whole picture before we start calling for the imminent death of one of the largest operating systems in the world.