Apple, HTC Settlement: 10 Implications for the Mobile Market

 
 
By Don Reisinger  |  Posted 2012-11-12
 
 
 

Apple, HTC Settlement: 10 Implications for the Mobile Market


Apple and HTC announced that they had inked a joint licensing agreement that will see the companies put an end to their patent wars and financially compensate each other for any technologies they use over the next 10 years.

Neither Apple nor HTC announced the financial terms of the deal, but one analyst, Shaw Wu from Sterne Agee, says that Apple will likely come out ahead in the agreement by earning $280 million in licensing next year alone.

Despite the obvious benefit to both parties—Apple wins some more cash and HTC gets out of costly lawsuits—the agreement could play a role in the way the mobile market behaves in the next year. Samsung might be more willing to accept a deal with Apple. Motorola might find a way out of its many lawsuits. Android and iOS might even find a way to play nice together. Simply put, the Apple-HTC deal opens a world of possibilities for every company across the mobile space.

Here is how Apple’s HTC settlement could impact the mobile market:

1. Will more settlements arise?

There seems to be a good chance that the Apple-HTC deal could lead to more settlements in the mobile market. In fact, Sterne Agee analyst Shaw Wu said that the Apple-HTC deal could become the “blueprint” for similar agreements between Apple, Samsung and Motorola.

2. HTC can do what it wants

HTC will have more freedom of action in the mobile space. Previously, the company was criticized for delivering products that were rather boring and run-of-the-mill. Now, by licensing Apple’s patents, HTC has more flexibility in what features and technologies it can build into its mobile devices and include them in its products. Look for HTC to vastly improve its devices.

3. HTC’s business issues will continue

The Apple deal is not the panacea that some HTC investors might be hoping for. HTC is still in deep trouble. The company is a decidedly second-tier smartphone maker and largely ignored by customers around the world. According to Wu, HTC could sell 28 million to 30 million smartphones next year. During the third quarter, Apple sold 26.9 million iPhones worldwide. That’s a vast difference that HTC won’t be able to make up any time soon.

4. A first step toward more innovation?

Patent lawsuits stifle innovation. No matter what Apple says, the lawsuits force device manufacturers to build products not based on what makes the best product at the right price, but how to design a product that reduces the chances of a patent lawsuit. That hurts consumers as much as the producers. This settlement could encourage other mobile device makers to pursue settlements that will bring an end to innovation-killing lawsuits.

Apple, HTC Settlement: 10 Implications for the Mobile Market


5. Apple is getting in on Android

With the HTC deal, Apple has found a way to generate revenue from the sale of each and every Android-based device the vendor sells. If Apple strikes similar deals with Samsung and Motorola, it means that Apple will garner even more revenue from Android sales. That’s an interesting development to watch out for in 2013.

6. Google issues will surface

If Apple starts taking advantage of Android sales, expect Google to come out fighting. If there’s anything Google doesn’t want, it’s Apple’s hands in the Android cookie jar. By inking this deal with HTC and possibly signing agreements with other vendors, Apple will be able to do just that. Google, hating the very idea of it, might just launch its own lawsuits against Apple. After all, with help from Motorola’s patents, it might just have a chance at winning a few.

7. Samsung has a way out

If Samsung does, in fact, decide to enter into a licensing deal with Apple, the company would finally have a way to dodge the crossfire of patent lawsuits it is exchanging with Apple. Over the summer, for example, Apple won a landmark case in which a jury awarded Apple more than $1 billion in damages for Samsung’s alleged infringement. Apple has won in other courts around the world, while Samsung has won cases in other nation’s courts. HTC’s deal might just pave the way for Samsung to enter into a similar agreement with Apple and find a way out of this mess.

8. Regulators march in

Patent cross-licensing across the mobile market raises the concerns of one producer or group of producers gaining too strong a competitive advantage. That's when government regulators start looking into the antitrust and anti-competitive implications of these deals. After all, with licensing agreements in place, it could mean that companies have gotten too cozy in their pricing or marketing plans,  or conversely, one firm offers ridiculous terms to another to not compete too hard in the market. Regulators could take a closer look at all such deals.

9. A nicer, more understanding Apple?

Does the HTC deal indicate that Apple is becoming a bit nicer than it was years ago? When Steve Jobs was running things, he made clear that he wanted to wipe Android off the map. Now, under Cook, Apple seems more willing to negotiate and make deals. Maybe the HTC settlement is a sign of nicer things to come from Apple.

10. Death to competitors

Is it possible that Apple is trying to destroy all non-Android competitors with its patent-licensing deals? With lawsuits, Apple is trying to take down Android and force vendors to remove their products from store shelves, leaving iOS to take on Windows Phone and BlackBerry OS. But by licensing patents to Android vendors, and getting patent licenses from those same companies, Apple is effectively allowing Android to stay on store shelves. And if history has shown us anything, it’s that Android and iOS are increasing their mobile market share at a rapid rate. So, could this perhaps be a ploy on Apple’s part to diminish the importance of competing operating systems? It’s certainly possible.

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