Thursday, May 17, 2012

Delaware-based federal court orders Apple and HTC to talk settlement on August 28

Today the United States District for the District of Delaware ordered the lawyers as well unspecified decision makers of Apple and HTC to meet in Delaware on August 28, 2012, to discuss a possible settlement. The talks will be moderated by Magistrate Judge Sherry R. Fallon.

This orders comes a day after two HTC product launch dates had to be postponed because of issues resulting from an ITC import ban Apple won last year over a "data tapping" patent, and a few days before the CEOs of Apple and Samsung will meet for the same kind of purpose in San Francisco (on Monday and Tuesday).

In other high-profile cases such as Oracle v. Google and Apple v. Samsung, courts have formally or informally required the parties to make their CEOs available for such discussions. It remains to be seen whom Apple and HTC will send to that mediation effort. The court order says that the chosen decision--makers "must have full authority to act on behalf of the parties, including the authority to negotiate a resolution of the matter and to respond to developments during the mediation process". "Full authority" is defined as meaning that those corporate representatives "should be able to make independent decisions and have a knowledge or understanding of the dispute and/or the business objectives/operations of their company to generate and consider solutions and/or to be able to address the negotiation dynamics in mediation". The order clarifies that "[full authority] is not just settlement authority, that is, to make an offer or to accept an amount".

The court "expects the parties' full and good faith cooperation with the mediation process" and "encourages all participants to keep an open mind in order to reassess their previous positions and to find creative means for resolving the dispute". But I doubt that this effort is going to yield a result, and a decision made by this particular court has made a successful settlement effort even less likely than otherwise. Less than five months ago, the very same district court stayed almost all of the Apple-HTC lawsuits pending in that district. Such a sweeping order to stay maybe within the court's discretion, and Apple should have chosen a different venue from the outset, but it was highly unusual. It's a simple truth that fast-approaching trial dates are the best lubricant for settlement talks, while Delaware-style postponements of the resolution of pending cases have the opposite effect.

HTC was the first Android device maker Apple sued (back in March 2010), but from a strategic point of view, Apple's disputes with Samsung and Motorola are certainly much more important than the one with HTC. I said before that if Apple had to pick three Android companies to sue today, HTC might not be among them (a company like Amazon might be a higher-priority target). Nevertheless, even the conflict between Apple and HTC has reached a fairly significant level of escalation that also involves two HTC affiliates, S3 Graphics and VIA Technologies, as well as Google, which gave nine patents to HTC last summer to use against Apple (Apple just asked the ITC to dismiss HTC's assertion of five of those patents for lack of standing).

In recent months, Apple has brought ten more U.S. patents into position against HTC (six in the Southern District of Florida, where Motorola Mobility has to defend itself in the same lawsuit unless HTC wins a transfer, and four new patents, three of which weren't previously asserted against anyone, in the District of Delaware).

Last year, the dispute also escalated geographically, with Apple filing lawsuits with two German courts (in Munich as well as in Mannheim), and HTC launching a defensive action in the UK.

I don't expect any major developments between now and the date set for this mediation effort that will put the necessary pressure on HTC to settle. HTC doesn't have to fear any major legal breakthrough for Apple (not counting preliminary rulings) for at least the remainder of this year, and it now has bigger problems than this litigation.

If the Delaware court really wanted to make a contribution to a near-term settlement, it should un-stay all those lawsuits except for those claims that are still pending at the ITC. Even if the court did that, the matter wouldn't be ripe for settlement by the summer, but then a mediation effort might succeed in early 2013.

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