Bloomberg News

HTC to Make Quarterly Payments to Apple Based on Volume

December 06, 2012

HTC Corp. (2498) will make royalty payments to Apple Inc. (AAPL:US) on a quarterly basis and pledges not to make “cloned” copies of Apple products as part of the settlement of their global patents battle, according to an agreement filed in a U.S. court.

Fees paid by HTC will be based on sales volumes and made 45 days after the end of each quarter, according to a redacted version of the patent license and settlement agreement signed by both sides and filed yesterday. HTC gets access to some of Apple’s patented inventions while agreeing not to copy designs.

That 10-year deal, announced by the two companies Nov. 11, ended patent-infringement lawsuits which spanned the globe and threatened shipments. The agreement was filed after a U.S. District Court ruling in a separate case between Apple and Samsung Electronics Co.

Each side licenses some of their patents to the other company. HTC won’t get any rights to Apple design patents, copyrights, distinctive looks, trademarks or know-how. Some of Apple’s design patents, covering the look of the iPhone and iPad, are at the heart of its dispute with Samsung, the world’s largest maker of smartphones.

Samsung demanded to see more details of the HTC settlement, including which patents were covered. Later today, it is scheduled to ask a federal judge in San Jose, California, to throw out a $1 billion patent-infringement verdict it lost in August. The Korean company also is trying to ward off a court order that would limit the sales of some of its products in the U.S.

‘Bubble Slider’

The agreement gives specific examples of what HTC can and cannot do. It can’t use the “slide to unlock” feature if it looks like one used by Apple. It can, however, use a different method such as a “bubble slider” or animation at another location. Functional methods, such as the pinch-to-zoom feature, “will not be considered a Distinctive Apple User Experience,” according to the contract. Violations of that provision could result in arbitration proceedings.

HTC may choose between two payment options for its royalty- bearing units, according to the 143-page agreement. The royalty amounts and the payment choices were blacked out from the document.

The limits on which patents Apple is willing to license is consistent with the Cupertino, California-based company’s public statements that it objects only to phones or tablet computers that it sees as copycats of the iPhone and iPad.

In its 2011 licensing agreement with Nokia Oyj (NOK1V), Apple said it wasn’t giving the Finnish handset maker access to iPhone- specific patents.

Distinguishing Products

“Apple has a general policy against licensing its inventions, particularly to competitors,” Apple said in a Nov. 27 appeals court filing in which it is trying to revive infringement claims against Google’s Motorola Mobility unit. Apple’s “business model is all about distinguishing its products from the competition’s.”

The case is Apple Inc. v. Samsung Electronics Co. Ltd., 11- cv-01846, U.S. District Court, Northern District of California (San Jose).

To contact the reporters on this story: Tim Culpan in Taipei at tculpan1@bloomberg.net; Susan Decker in Washington at sdecker1@bloomberg.net

To contact the editors responsible for this story: Michael Tighe at mtighe4@bloomberg.net; Bernard Kohn at bkohn2@bloomberg.net


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