Google's Android mobile operating system is in serious trouble:
Bloomberg reports that an ITC judge determined that HTC infringes two of ten Apple patents asserted in investigation no. 337-TA-710.
The type of decision that was taken: an initial determination by an administrative law judge
Today's decision is a so-called "initial determination" by an administrative law judge (ALJ). Those determinations are reviewed by the six-member Commission, the highest decision-making body at the ITC.
In case you don't know, the US International Trade Commission is increasingly popular as a patent enforcement agency -- especially but not exclusively in connection with smartphones -- because it can order import bans against products infringing intellectual property rights.
The target date for the final Commission decision on this investigation is December 6, 2011. Today's initial determination was scheduled for August 5, 2011, and came a few weeks early. That happens all the time, and it's possible that the target date for the final decision will now also be moved up accordingly.
Fortunes can change in ITC cases at different stages. About three months ago, the ITC staff (which participates in the proceedings only as a third party) had issued a recommendation against Apple's infringement allegations. At the time, six of the ten patents Apple originally asserted in its first ITC complaint against HTC were in play, and the ITC staff felt that there wasn't any valid one among them that HTC infringed. But the ALJ apparently arrived at a different conclusion concerning two of the patents. And those two appear to be extremely important.
Patents appear to be at the core of Android and infringed by all Android devices
AllThingsD just stated which two patents HTC is found to infringe, and based on that information, I believe today's determination is even more important than it would have been at any rate. These are the two patents:
U.S. Patent No. 5,946,647 on a "system and method for performing an action on a structure in computer-generated data" (in its complaint, Apple provides examples such as the recognition of "phone numbers, post-office addresses and dates" and the ability to perform "related actions with that data"; one example is that "the system may receive data that includes a phone number, highlight it for a user, and then, in response to a user's interaction with the highlighted text, offer the user the choice of making a phone call to the number")
U.S. Patent No. 6,343,263 on a "real-time signal processing system for serially transmitted data" (while this sounds like a pure hardware patent, there are various references in it to logical connections, drivers, programs; in its complaint, Apple said that this patent "relates generally to providing programming abstraction layers for real-time processing applications")
[Update] I have meanwhile published infringement claim charts, i.e., tables that show HOW Android infringes those two patents. Those tables leave no doubt that fundamental elements of Android's technology and architecture are at stake. It's hard to see how any Android device could not infringe them, or how companies could work around them. [/Update]
Those patents are apparently infringed by code that is at the core of Android. It's telling that those two patents are also at issue between Apple and Motorola (and the '263 patent was also used by Apple against Nokia). A while after Apple started suing HTC, Motorola filed a declaratory judgment action against a dozen Apple patents including those two. Apple then counterclaimed by asking the court to determine that those patents are valid and infringed by Motorola. So the relevance of this goes way beyond HTC!
This could (in a worst-case scenario) result in an import ban against all Android-based HTC products in the U.S. market.
Apple unlikely to grant a license -- but might make damages claims
Theoretically, Apple could grant HTC a license, which is how Microsoft resolves Android IP issues. More than a year ago, HTC signed an Android-related patent license deal with Microsoft. But I doubt that Apple will offer HTC a license unless HTC owns or effectively controls any patents that Apple needs, in which case the two companies would cross-license. A company named S3 Graphics recently obtained an ALJ determination against Apple and HTC is in the process of acquiring that company, but I'm not sure Apple absolutely depends on a license to those patents.
The ITC can impose import bans but it cannot award damages. If Apple prevails with respect to those patents, it's very likely that Apple will also want HTC to pay damages for past infringement, and if HTC refused to do so, Apple could still sue HTC in a federal court for that purpose.
16 more Apple patents still in play against HTC
In order to up the pressure, Apple recently filed a second ITC complaint against HTC.
Besides Apple's two ITC complaints against HTC, there are also three federal lawsuits (all of them in Delaware). Besides the patents at issue in the ITC investigation to which today's determination relates, Apple has 16 other patents in action against HTC: eight in the first Delaware suit, four in the second suit, and another four in the third suit. The second ITC complaint relates to five patents, one of which is asserted by Apple in its first federal lawsuit and the other four in the third federal lawsuit. So there's still a lot of intellectual property in action against HTC.
The first -- but hardly the last -- ITC determination against Android
Today's decision is the first judicial determination to find Android in infringement of third-party intellectual property rights. But there's more going on. For example, Microsoft is on the winning track against Motorola. Motorola appears to be very afraid and now tries to persuade the ITC to push back the target date for the final decision by three months from March 5, 2012 to June 5, 2012.
Android is also under fire in dozens of federal lawsuits. By my count, there are 49 Android-related infringement suits (federal and ITC). A very prominent one is Oracle's lawsuit against Google, and the judge presiding over that case has raised very serious questions about the possibility of Google's intentional infringement of Java-related intellectual property.
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