On Saturday evening, HTC and Apple issued a joint press release indicating the two companies had settled their ongoing legal slapfight. Under a confidential 10-year licensing arrangement, they have agreed to what essentially amounts to a rigid patent ceasefire. Even future patents are covered under the deal (there obviously will be exceptions to any deal, but that's the gist).
Immediately, most people assumed HTC was getting hosed. Then, HTC rep Jeff Gordon issued a slightly cryptic but factually vital statement, saying HTC "does not expect this license agreement to have any adverse material impact on the financials of the company."
Now, whether that means the cost of the license and the savings of not keeping 300 attorneys on retainer will cancel out, or if the settlement basically cost HTC nothing, is not clear. HTC had been asserting its own patents against Apple, as well (unsuccessfully, I might add), so it's at least possible that HTC's own IP arsenal gave it a stronger negotiating position. Or, perhaps more likely, $6-8 per handset doesn't constitute a "material impact" in light of an immediate end to all existing litigation.
Either way, HTC getting off the hook fiscally scot-free seems very unlikely, as neither Motorola nor Samsung have managed to work out their own deals, and both of those firms have far stronger patent portfolios than their comparatively small, young Taiwanese rival.
It's also hard to forget that we're also talking about the company that has quite deliberately removed the native Android app picker functionality from all of its US phones as the result of an ITC lawsuit brought by Apple, which powers features like address / phone number action prompts when those particular types of data are detected in text. There's no doubt that Apple's software patents can be potent weapons. Even Samsung - who has been anything but complacent fighting Cupertino's allegations - has taken the precautionary measure of removing universal search functionality from Galaxy S III phones in the US to avoid a sales ban.
After this deal, though, it seems very likely we'll see features, the app picker in particular, return to HTC phones in the US fairly soon. At least I hope so. I, for one, will be watching the next few software updates HTC issues to its US handsets with great interest.
But as consumers, how does all of this actually affect us? Does it? I'd argue that the reality of the situation is, even if HTC ended up basically "giving in" to Apple through a licensing arrangement, it's probably a positive in the long run for a number of reasons.
Software Changes Quickly, Grudges Don't
Here's the number one reason I think this settlement is better for everyone in the end, and why it's not worth getting steamed over: software changes quickly. Long-standing feuds, though, can rage on for decades, even as new products emerge, existing ones evolve, or old ones die.
Think about where Android was three years ago - the original DROID. Think about how different Android looks now, how many more things it does, how software features we hadn't even thought were possible to cram into a phone are now stuff we just take for granted. Android is an ever-changing, ever-evolving platform that has proven more popular and versatile than even Google likely could have imagined.
This settlement doesn't stop HTC from using Android, and it doesn't stop Google from making it better. It means that for the next ten years, HTC can develop whatever sort of phones with whatever sort of features it so desires, with no fear of patent litigation from either Apple or Microsoft (which HTC previously settled with, though I'm not sure of the duration of that license), requirements of those deals withstanding.
HTC doesn't have to look over its shoulder anymore, doesn't have to worry about product bans (something that seriously hurt its EVO 4G LTE and One X launches in the US), and can focus on making great phones.
Royalties Are Better Than Ruin
Let me ask you this: what do you, as a consumer, care about the small portion of HTC's profits Apple may or may not be getting? Unless you're an HTC shareholder, you really don't have any kind of personally vested interest in this deal. It's two companies resolving a dispute, and they've done so on what are apparently mutually agreeable terms. That, frankly, is all it comes down to - two companies deciding to engage in a business deal.
I've heard far too many people make the case that HTC shouldn't have "given up" and let Apple "win," or that HTC is simply kowtowing to Apple because it doesn't have the financial might of Samsung or Motorola.
Can someone remind me when we decided Apple and Android manufacturers squabbling over patents was a good thing? I must have missed that meeting.
The reality is that we live in a world where powerful corporations in the tech industry have become accustomed to licensing their technology to competitors as a way of protecting the value of that technology. Apple and Microsoft, in particular, have adapted this model to the software world. Is that OK? Is it alright that our patent system allows us to protect something like a 'rubber-banding effect' as being a new and useful invention, through what is basically a loophole in the wording of the law? That's really a question for another day. And soon, the US Federal Circuit court will be answering that question - whether or not simply describing a software invention as an abstract idea (as Apple is infamous for) and tying it to a computer is legally sufficient to obtain a patent.
But in the here and now, that battle doesn't really matter for the HTC's of the world. Certainly, HTC would be for greater restrictions on the scope of patentability for software, but relying on such a ruling as opposed to settling today is just bad business. Continuing to engage in these legal entanglements instead of settling could only hurt HTC's customers, and potentially lead to even more compromises in its products. The customs seizure of two of its phones at their respective launches is evidence enough of that.
A Sea Change At Apple Is A Real Possibility
Lawsuits are expensive. A partner at a large law firm like the ones representing Samsung, Apple, and Motorola can charge well above $1000 an hour for their time - and lawyers are among the shrewdest of billers. That being in addition to the likely dozens of low-level associates working a case, digging through banker boxes and hard drives 14 hours a day leading up to trial, who can each easily cost a client $500 an hour. Expert witnesses, such as those needed for calculating damages in a federal court? Think upwards of $1500 an hour. Then there are the filing costs, the incidentals, and the on-the-clock time of your own company's employees making depositions to the attorneys you're paying. All of this time, money, and effort, as Samsung found out, can easily end up being for naught.
And I agree with some of those out there on the fiscal implications of waging such a ware for a company like HTC, whose coffers are being depleted with each passing quarter. But even Apple can't justify these costs into perpetuity - people notice. It doesn't matter how many hundreds of billions you have in the bank, Apple didn't get where it is by throwing away money, that's not something you simply start doing. Maybe if you're Steve Jobs it is, but I doubt even Steve would have held up on his thermonuclear promise forever. The board would have, eventually, mutinied.
On Saturday, though, Tim Cook did something Apple has repeatedly said it wouldn't: he compromised. And make no mistake, this was a compromise from Apple's previous position. That position being, essentially, "Stop infringing or we'll sue you into oblivion and get as many of your products banned as humanly possible." Royalties weren't on the tablet. Apple did allegedly offer its most bitter rival, Samsung, a settlement, but it was basically a mockery of one - $30 for every phone, and $40 for every tablet. This settlement took design patent licensing into consideration, however, so it was mostly a symbolic offer anyway. Apple knew full well Samsung wouldn't take it.
Increasingly, though, Apple has become the target of public opinion. Jokes about patenting rectangles, circles, "innovation," and tasteless anti-Apple slurs - however annoying I may find them - are clear indicators that Cupertino is no longer the plucky underdog fighting a Windows world that geeks and many counterculture types came to love. Apple's patent campaign and "reality distortion field" have become publicly visible - and potentially deeply damaging - flaws in the company's fashionable, harmonious image. Apple has suddenly found itself among many rivals, rivals Steve Jobs made it his personal goal to obliterate as copycats of his company's most successful product ever.
And I am sure Steve Jobs believed in his heart of hearts that suing his "copycat" rivals into submission would help Apple retain its image - to prevent its products from becoming lost in a sea of lookalike competitors. The fact is, though, I don't think anyone can argue that this entire ordeal has done anything to help Apple's image. Apple may have had some success in painting Samsung as a copycat, but not without dragging its own reputation through the mud. More people than ever look at Apple and see a company that has become petty, greedy, and self-obsessed. That isn't good for sales - especially when for the first time ever, one of your rivals' smartphones outsells you for an entire quarter in your home market.
The Road Ahead
More than anything, Apple's deal with HTC makes me optimistic about the future. It seems entirely likely Apple will end up offering similar deals to Samsung and Motorola, and those companies would be foolish not to accept them. Does it mean Apple will profit off the sales of its rivals' products? Sure. And if you disagree with that on principle, I guess it's your right to do so.
But me? I'm tired of the patent wars. I'm tired of hearing about Samsung filing X, HTC injunction Y, and Motorola dismissal Z. I don't see it as a rivalry in which to take a side, or as some pivotal conflict of good versus evil. I see a handful of multi-billion dollar corporations having a pissing match over who invented what and when, and the one that started it all is finally showing signs of relenting. There is far too much drama made over what amounts to a legal war for the contents of our wallets these days, and the sooner it ends, the better. As of Saturday, we're one step closer to peace, and I refuse to see that as anything but good for innovation, consumers, and the industry at large.