Friday, September 23, 2011

HTC subsidiary-to-be S3 Graphics sues Apple over two patents in new ITC complaint and federal lawsuit

Yesterday (Thursday, September 22, 2011), S3 Graphics, a company in the process of being acquired by HTC, filed two new complaints against Apple, further escalating the patent dispute between the "HTC camp" and Apple:

  • an ITC complaint (click here for the official notice) over "Electronic Devices with Graphics Data Processing Systems, Components Thereof, and Associated Software"

  • a federal lawsuit in the District of Delaware, targeting "certain electronic devices and components, [for example], the Apple iPhone, iPad, an[d] iPod Touch mobile devices, Apple Mac desktop and notebook computers, alone or in combination with associated system and application software sold or distributed by Apple"

S3 Graphics asserts the same two patents in either complaint:

  1. U.S. Patent No. 5,945,997 on "block- and band-oriented traversal in three-dimensional triangle rendering" (applied for by S3 in 1997)

  2. U.S. Patent No. 5,581,279 on "VGA controller circuitry" (applied for by Cirrus Logic in November 1993, granted by the USPTO in December 1996 and sold to S3 in 1998; it appears that this patent will expire in late 2013, but an ITC investigation is usually finished within about 18 months, so an import ban could be in effect for roughly eight months if S3 successfully enforced this one)

If the ITC agrees to investigate the new complaint, the "companion lawsuit" filed in Delaware will be stayed until after the ITC trial, provided that Apple asks for it. Companion lawsuits are filed because the ITC cannot order damages -- only federal courts can.

Now let's talk about how those filings fit into the overall dispute between Apple and HTC.

This is S3's second ITC complaint against Apple

The dispute between Apple and the "HTC camp" started in March 2010 with Apple's first ITC complaint against HTC. In May 2010, HTC retaliated with an ITC complaint against Apple (which looked rather weak), and S3 Graphics filed its first ITC complaint against Apple.

Preliminary decisions ("final initial determinations" as well as decisions to review them) have already been taken by the ITC with respect to two of those three complaints:

  • An Administrative Law Judge (ALJ) found Apple to infringe two S3 patents, but only with certain Macintosh computers and not with its iOS devices. The Commission (the six-member decision-making body at the top of the ITC) is reviewing that decision in its entirety, which could make things better or worse for the Macintosh line but it appears rather unlikely that Apple's iOS devices (iPhone, iPad, iPod) would be found to infringe.

    Apple is trying to have S3's case dismissed or at least some discovery conducted with respect to the question of whether S3 Graphics owns the patents-in-suit, given that ATI (AMD) now claims, surprisingly, to be the rightful owner.

  • Another ALJ found HTC's Android devices to infringe two Apple patents. That determination is being reviewed in part, and the final outcome could range from zero to four valid patents that are deemed infringed. I believe HTC will probably be found to infringe at least one valid Apple patent, possibly two, but probably not three or four, and I would also be moderately surprised if HTC got away without any infringement finding at all, even though one of its senior executives claimed so according to the Korea Times.

Concerning HTC's first ITC complaint against Apple, the target date was recently pushed back by a month. Based on the current schedule, a final initial determination is due by October 17, 2011. Those "IDs" sometimes come a week or two ahead of schedule.

Meanwhile, three second complaints have been filed with the ITC by these parties:

Yesterday it became known that VIA Technologies, which is selling its shares in S3 to HTC, also filed an ITC complaint against Apple (over CPU-related patents). It would be too speculative to see an HTC hand in this, but it's an interesting coincidence for sure.

Earlier this week, the Financial Times quoted a European lawyer representing HTC before the High Court of England and Wales as saying that an action brought by HTC against Apple in London in late July would go to trial in late March 2012, most likely before a German lawsuit brought by Apple would be decided. The article refers to actions in Mannheim and Munich. I don't have access to the documents but by far the most likely interpretation of this is that HTC filed declaratory judgment actions against four Apple patents in London, and Apple filed an infringement action in Mannheim. The Munich case won't be another infringement action: German patent cases can be, and frequently (but not always) are, interrupted pending nullity actions (attempts to invalidate the asserted patents) before the Federal Patent Cout in Munich. From a legal point of view, the German court is not at all bound by whatever the London court may decide on the validity of those patents since European patents have to be litigated country by country. In Apple v. Samsung, a German court also chose to disagree with a foreign (in that case, Dutch court on the validity of a design-related right.

So there's a lot going on between those two parties. Apple doesn't comment on these disputes in public other than referring everyone to a March 2010 statement by Steve Jobs (on the occasion of Apple's first complaint against HTC). By contrast, HTC's executives talk a lot about this dispute. I mentioned that Korea Times article about HTC claiming that it will win at the ITC, and two weeks ago, the acting president of HTC America also spoke out in public on this matter.

Apple is getting used to such bravado. They also get to hear similar statements from Samsung, which just sent out a taking-the-gloves-off message. On Monday, there will be a hearing in The Hague, Netherlands, on four Samsung complaints aiming to have the iPhone and iPad banned, using FRAND standards patents (a problematic strategy on which I gave comments to the Wall Street Journal) and is already talking about plans to have the iPhone 5 banned in Korea and/or Europe.

Ultimately, neither Samsung or HTC can fend off Apple's patent assertions just by way of public statements and scattershot litigation. If they want to achieve anything, they will have to score important wins in court. So far, Apple is on the winning track against both of them.

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