Apple Sues HTC to Scare Competitors
Apple is suing rival phone maker HTC - whose popular phones are helping drive the upswing in Android sales
- in order to scare off other potential competitors, according to a financial analyst with ties to the mobile phone industry. Yair Reiner of Oppenheimer Research said in a report to his clients that his "industry checks" led him to the conclusion that the legal action is "meaningfully disrupting" manufacturers' plans for new phones.
According to Fortune magazine's Apple 2.0 blog
, Reiner traces the hardball Apple strategy back to a conference call early last year, where Apple number-two Tim Cook issued a blunt warning to any company thinking of making an iPhone killer. He said Apple "will not stand for having our IP ripped off and we'll use whatever weapons we have at our disposal," concluding - in a combination of corporate formality and mafioso-style threat - that "I don't know that I can be more clear than that."
Reiner said that the warning had the desired effect on companies thinking of coming out with touchscreen phones: LG, Samsung, and Nokia all backed off. When Palm came out with its Pre, Apple pretty much turned the other way, since Palm sells so few phones compared to Apple. When the Motorola Droid and HTC Eris Android-based phones shipped at the end of the year, though, the strategy shifted. Reiner says Apple figured that if it didn't respond to the challenge, other competitors would consider it a "green light." So Apple pounced on HTC, which - unlike Motorola - works with different suppliers than Apple does, and which manufactures the Nexus One phone for the Cupertino company's hated rival: Google.
Reiner says the strategy is working. Up until now, he wrote, companies have been mainly focused on avoiding making their mobiles too "iPhone-like" in terms of the user interface. Now, he says, they are looking at any technology that might come under a patent challenge. "We believe a lot of software and hardware is being sent back to engineering departments for work-arounds," Reiner told his clients.
Apple sued HTC last week in both the US International Trade Commission and the US. District Court in Delaware
, charging that HTC had infringed more than 20 patents on iPhone technology. The suit asks for HTC to be banned from importing and selling phones into the US, and demands triple damages and maximum interest.