Apple won't settle cheaply in Android patent suits, says analyst

Apple will likely hold out for a major settlement in its patent suits against Android vendors, says Deutsche Bank's Chris Whitmore.

As Apple and Android have been battling in the marketplace, they've also been duking it out in the courts.
Apple has been embroiled in a slew of lawsuits against such vendors as Samsung, HTC, and Motorola. Though aimed at each company, the suits are an overarching attempt to target Android for alleged patent infringements over multitouch and other technologies, noted Whitmore in an investor's note out yesterday.

Apple's legal strategy has also been designed to stifle the growth of Android, says the analyst.

Android smartphone vendors shipped 240 million devices last year, estimates Deutsche Bank. Another 390 million are forecast to ship this year, followed by 465 million in 2013.

Apple shipped 84 million iPhones last year, with 112 million expected this year and 130 million in 2013, according to the investment firm. As a result, shipments of Android phones are around four times higher than those of the iPhone.

By holding out for a big settlement, Apple could hurt Android in three key ways, according to Whitmore.
"First, it could convince additional handset manufacturers contemplating use of the Android OS to look elsewhere for OS support" the analyst said. "In addition, it could slow developer investment in the Android platform. And finally, it makes Android more costly for vendors to support (litigation expense, etc)."

Whitmore painted four possible outcomes to Apple's legal salvo against Android:

1. The cases are settled with a per-unit license fee paid to Apple.
2. Apple handicaps Android's feature set and/or distribution channels and grabs 25 percent of the platform's future market share.
3. The case ends up neutral with no winner.
4. Apple loses and files a counterclaim.

Apparently discounting scenarios 3 and 4, Whitmore believes the first outcome would reward Apple with a fee of $10 for each Android device sold, adding around $35 per share to its stock price. The second outcome would be even more favorable with 25 percent of the Android market adding up to a value of around $260 per share.

"As a result, we suspect Apple is unlikely to settle cheaply," said Whitmore. "Although Apple has not expressed a desire to settle, most believe a settlement could occur resulting in [a] $10-per-unit software licensing fee. Beyond the monetary benefit to Apple, a settlement would make Android-based handsets incrementally more expensive and less competitive due to the higher OS cost and would likely support incremental iOS share gains vs. Android."

But with the potential value that Apple stands to gain, the company is unlikely to settle the suits anytime soon, says Whitmore, who expects the legal war to continue well into 2013, adding up to a "long, drawn out process."

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Kodak not dead yet: Fires patent suits at Apple, HTC

Kodak, steps away from potentially filing for bankruptcy protection, isn't going to fade quietly.

The company said today that it filed lawsuits against smartphone makers HTC and Apple over camera technology, just the latest attempt to get tech companies to pay a licensing fee. The new lawsuits assert that Apple infringed on four Kodak patents and that HTC infringed on five. They were initially reported on by Florian Mueller, who runs the patent blog Foss Patents.

Kodak, meanwhile, is trying to find an acquirer. The company holds a war chest of 1,100 digital-imaging patents--crucial to cameras, phones, and other devices--that it is looking to sell. The patents could be useful for companies looking to buy some legal protection.

The four patents Kodak alleges that Apple violated respectively relate to a method of transferring an image from a camera to a service provider, the ability to transmit an image from an electronic camera, the ability to e-mail images, and the ability to selectively send images over a cellular or Wi-Fi network. Kodak asserted a fifth patent against HTC for a technology that relates to capturing a still image while previewing motion images. It had already sued Apple and Research In Motion over that patent.

The suits name nearly all of the iOS products, as well as a large number of HTC's Android devices.

"We've had numerous discussions with both companies in an attempt to resolve this issue, and we have not been able to reach a satisfactory agreement," said Laura G. Quatela, president and operating chief of Kodak. She added that the company is only seeking fair compensation for its patents.

"It would be premature to comment until we have had a chance to review the complaint," an HTC representative said.

An Apple representative declined to comment.

While Kodak is seeking money, ultimately, this is part of a marketing campaign for its patent portfolio. Kodak is trying to demonstrate the value of its patents, Foss Patents' Mueller said. He added that he expects Apple and HTC--entangled in their own lawsuits against each other--to work together to fight off Kodak's claims.

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