Apple 2.0

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Top Android phone maker faces possible U.S. import ban next week

December 5, 2011: 7:41 AM ET

Shares of HTC are down sharply in advance of a ruling on a key Apple patent suit

HTC Incredible S

HTC shipped more than 5.7 million smartphones to the U.S. last quarter, according to Canalys, beating out Samsung and Apple to become the country's leading smartphone vendor.

So there's a lot at stake for the giant Taiwanese phone maker -- and indeed for the manufacturers of all Google (GOOG) Android phones -- in the ruling due next week from a six-member panel at the International Trade Commission in Washington.

[UPDATE: After this item was posted Monday morning, the ITC postponed a decision that was due Tuesday eight days to Dec. 14. See here. The item has been recast to reflect the new schedule.]

In July, an ITC administrative law judge determined that HTC's phones had infringed -- "stolen" in Steve Jobs' words -- two Apple (AAPL) patents. HTC appealed the decision, and the outcome of that appeal is now scheduled to be announced next Wednesday. (See Apple vs. Google: Inside an Android patent violation.)

There have been a lot of headlines lately about Apple vs. Android patent rulings, some in Apple's favor, some against.

But this could be the big one.

The two patents at issue (see below) appear to be at Android's core. If HTC has infringed them, according to FOSS Patents' Florian Mueller, so have the makers of all Android phones.

"Google's Android mobile operating system is in serious trouble," Mueller wrote after last summer's ruling. "It's hard to see how any Android device could not infringe [the patents], or how companies could work around them."

In the worst case scenario for HTC, the trade commission could ban the import of its Android phones at the height of the holiday selling season, and its 25% U.S. smartphone market share could shrink to 0.0%.

HTC shares fell to their lowest level in 17 months in the Asian markets Monday on that fear.

The ITC can impose import bans but it can't award monetary damages. If Apple wins this case, it could offer to license the technology to HTC or, more likely, sue HTC for damages in federal court.

Below: Mueller's summary of the two patents at issue. See here for the infringement claim charts that show exactly how HTC is alleged to have violated them.

  • 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")
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About This Author
Philip Elmer-Dewitt
Philip Elmer-DeWitt
Editor, Apple 2.0, Fortune

Philip Elmer-DeWitt has been following Apple since 1982, first for Time Magazine, and now on the Web for Fortune.com.

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