Another crack appears in the Android IP dam

By Florian Mueller’s count, there are 49 ongoing Android-related infringement lawsuits. The first crack in the dam was found in Google’s Daubert motion to exclude the Oracle expert's damages report, where Google’s own words could indicate intentional infringement. Now an ALJ from the US International Trade Commission (ITC) ruled that HTC infringed two Apple patents (U.S. Patent Nos. 5,946,647  and 6,343,263) in their Android smartphones. HTC has stated they will appeal the ruling to the full six-member panel of the ITC. (The Wall Street Journal reports one basis for the appeal will be a single ITC attorney’s research that uncovered no infringement.)

If the appeal does not go HTC’s way, here are some scenarios that valuators should consider:

  1. It is difficult to see how a final judgment against HTC allows Motorola to escape the suit they are fighting for infringing the same two patents.
  2. Apple has asked for an injunction against importation of the offending goods, and they could continue down that (FTC-monitored) road to cripple the competition. (There is also the matter of damages.)
  3. HTC (and others) suggest they have alternatives to the patents in suit. Even if true, those “workarounds” will probably look and feel quite different to the consumer, and there is no guarantee of acceptance.
  4. Apple could license the technology to Android manufacturers.
  5. HTC might have some cross-license bargaining power as a result of their recent purchase of S3 Graphics (Apple has been judged to have infringed S3 patents).
  6. Investors know the importance of this ruling:  HTC shares slid 6.5%, and HTC has announced a stock buy-back program as support. Motorola and others will face stock price pressure, and Apple shareholders will be the beneficiaries.