Apple Inc. (AAPL) may face a difficult task invalidating two HTC Corp. (2498) patents for data transmission in wireless devices, a U.S. trade judge said at a trial that could lead to import bans on the newest iPad and next version of the iPhone.
"Clear and convincing means something to me," U.S. International Trade Commission Judge Thomas Pender said today, referring to the legal standard in determining that a patent shouldn't have been issued. "I have to be pretty darn certain a U.S. patent is invalid."
HTC accuses Apple of infringing two patents it owns for ways to reliably transmit a greater amount of data. Taoyuan, Taiwan-based HTC said the patented methods are critical to the 4G technology known as LTE, or long-term evolution, that allow faster downloads.
A victory could let HTC seek an import ban of the latest iPad and even the newest iPhone, if it uses LTE when it's unveiled as early as next week. That could give the Taiwanese handset maker leverage to force a settlement with Apple, which has made its own patent-infringement claims against HTC.
The global smartphone market grew 62 percent last year to $219.1 billion, according to Bloomberg Industries, and consumers are demanding ever-faster downloads of movies, music and websites on what has become more a handheld computer than a simple phone. Carriers such as AT&T Inc. are converting to faster LTE technology, and network-equipment maker Cisco Systems Inc. (CSCO) projects that worldwide mobile data traffic will soar 18- fold by 2016.
HTC, which started as a contract manufacturer, has fought to increase its market share after losing customers to Apple and Samsung Electronics Co. Adding LTE capabilities to go up against Samsung's 4G phones is one way the company hopes to differentiate itself from other phones that run on Android, the most popular platform for mobile phones and the chief rival to Apple's iPhone.
The newest iPad, which went on sale in the U.S. in March, is the first from Apple that runs on LTE wireless networks. Apple is expected to introduce its newest iPhone on Sept. 12, and HTC can argue that it should be subject to an import ban because it was in production during the pre-trial investigative portion of the patent case.
When Pender asked whether Apple would be announcing its newest iPhone next week, Apple lawyer Michael McKeon of Fish & Richardson in Washington said he wasn't told of the company's plans. "It will be thinner and the screen bigger?" the judge asked. McKeon would only say, "That's what the blogs are saying."
Apple and HTC have been embroiled in patent battles over features in smartphones since March 2010, when Cupertino, California-based Apple filed its first infringement claim at the trade agency. The case at trial today, and an earlier case HTC lost at the commission, "were filed in retaliation against Apple," McKeon said.
Apple contends phones by HTC and other competitors that run on Google Inc. (GOOG)'s Android operating system copy features that make the iPhone unique. The March 2010 complaint against HTC has spread to a global war involving Apple and Android-handset manufacturers that is being contested in courts on four continents.
HTC lawyer Tom Jarvis of Finnegan Henderson said the company was the first to sell Android and 4G devices and one of the first with touch screens.
"HTC is an innovator," Jarvis told the judge. "It's no Johnny-come-lately."
In this case, though, HTC acquired the patents at issue in April 2011, around the same time it began selling its first LTE phone, the Thunderbolt. The patents are part of a portfolio HTC bought for $75 million from ADC Telecommunications Inc.
"I don't care if they bought these patents to sue you or not," Pender told McKeon. "They are a property right."
In a court filing, HTC said it bought the patents, which ADC said were being infringed by Apple, "to protect itself and its customers from these aggressive tactics and to preserve its ability to compete in the United States."
Today's testimony, much of which wasn't open to the public, focused on whether HTC is using the technology, a requirement to win the case under trade law.
"LTE products were particularly important to our strategy in 2011," when the complaint was filed, said Martin Fichter, HTC America's vice president of product and operations. "We're a pioneer in that field."
HTC has altered its allegations in the case, McKeon said. It initially claimed the patents covered Wi-Fi technology and now says they cover 4G, he said. McKeon argued that the patents, which relate to work that began in the 1990s, don't cover mobile technology at all.
The case on trial today, filed in August 2011, initially included five patents that HTC obtained from Mountain View, California-based Google. Pender threw out that part of the case, saying HTC didn't have adequate ownership control under the terms of its agreement with Google. The commission in July upheld that decision.
Pender said today he probably won't side with Apple's argument that HTC didn't have proper ownership rights of the two former ADC patents.
The case is In the Matter of Certain Electronic Devices with Communication Capabilities, 337-808, U.S. International Trade Commission (Washington).