Apple Will Share Patent Love With HTC

Apple (NASDAQ:AAPL) and HTC have reached a global settlement that will dismiss all ongoing court litigation between the two and start a ten-year license agreement covering patents held by either company. As part of the deal, HTC will pay licensing fees to Apple, though the exact amount is not yet clear.

HTC shares in Taipei received a boost on Monday on the news, surging by their daily 7 percent limit to 241.50 New Taiwan dollars, according to Dow Jones Newswires.

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With Apple taking its patent battles against its various Google (NASDAQ:GOOG) Android rivals seriously, the Taiwanese company has struggled to compete. Earlier this year, it had to delay the launch of two of its smartphones in the United States after the U.S. International Trade Commission found the devices infringed on Apple’s patents. In a separate case, the same agency ruled that Apple did not violate HTC’s patents.

HTC’s market share has also steadily declined with the launch of new devices from Samsung and others. According to IDC, the Taiwanese company fell to fifth place in the global smartphone arena in the third quarter with a 4 percent share, down from 10.3 percent a year earlier.

The company expressed hope that the licensing agreement, which covers all present and future patents held by both Apple and HTC over the ten-year period, will help it get back in the game. “HTC is pleased to have resolved its dispute with Apple, so HTC can focus on innovation instead of litigation,” chief executive Peter Chou said in a statement. However, analysts say profit margins of the Taiwanese company may be squeezed by the deal. “Nokia (NYSE:NOK) settled with Apple in 2011 by winning royalties from Apple, but it did not change the landscape at all for smartphone competition,” Barclays analyst Dale Gai told Dow Jones.

Analysts focusing on Apple are seeing the settlement as a “philosophical shift” for the company. According to Nomura’s Aaron Jeng, Apple’s late co-founder Steve Jobs “had felt strongly about destroying his copycats, but Tim Cook’s thinking is slightly different. He appears to be less interested in spending so many resources on lawsuits.”

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