Will Apple Suit Hurt HTC in the Long Term?

Analysts express mixed views on whether or not Apple's patent-infringement suit against HTC is simply legal saber rattling by the iPhone giant to scare off the competition or a serious threat that could have long-term effects on HTC as it works to infiltrate the U.S. market.

Apple's lawsuit against competitor HTC may not hurt the smartphone maker in the short term, but could have long-term consequences, straining its relationships with partners in the U.S. market, The New York Times reported March 3.
The Times quoted analyst Jeff Pu, with Fubon Securities in Taipei, as saying, "From a long-term perspective, many carriers in the U.S. may take a more conservative stance in adopting HTC's new products ... or ask for price cuts to compensate for the risk."
HTC makes the Nexus One phone for Google and the myTouch phones for T-Mobile, but in the fourth quarter of 2009, 95 percent of HTC's revenue came from phones branded under its own name, the Times reported. At the 2010 Mobile World Congress event, HTC introduced the HTC HD2, the HTC Legend and the HTC Desire. Other phones already selling under its brand include the Droid Eris.
The Apple suit alleges that HTC infringes on 20 of its patents related to the iPhone's user interface, underlying architecture and hardware. "We think competition is healthy, but competitors should create their own original technology, not steal ours," Apple CEO Steve Jobs said in a March 2 statement on the Apple site.
Analyst Roger Kay, with Endpoint Technologies, said Apple has really innovated around the multitouch interface and probably has a good case.
"Though it's hard to say, because if you go back to the inception of the Apple graphic interface, it was effectively lifted from Xerox Park," a research lab associated with the Xerox company, Kay told eWEEK. "There's old video where Jobs admits, pretty proudly, to lifting ideas he saw there."
Regardless, Kay says, HTC will likely want to settle the matter quickly and move on.
"HTC has had quite a lot of momentum, and now it has no momentum," he said. "It would be hard for HTC to do business in the U.S. with this hanging over its head."
Gary Chia, head of Greater China research with Yuanta Securities in Taipei, told the Times that the suit partly highlights such momentum. "This is what happens in Silicon Valley," Chia told the Times. "When you're big enough to become a threat, I'll slap a suit on you sometimes just to slow you down."
Charles King, principal analyst with Pund-IT, offered a similar idea, telling eWEEK that a subtext of the suit may be that "Apple is trying to cast a shadow on the degree to which some of its competitors-by which I mean Google-[work with] third parties to build the products they bring to market."
The iPhone is facing increasing competition, and the suit may be Apple drawing a line in the sand, King said, "saying it's not going to allow anyone to kick sand in its face"-or profit off its intellectual property.
Apple and Nokia have also been trading legal documents over the last few months, each accusing the other of patent infringement.
Nonetheless, King said, "I think it's a little early in the process to handicap what sort of effect it could have on HTC. These suits become such a dime-a-dozen event that I'm not sure anyone pays too much attention to two companies having their respective law firms wrangling in the background."