Apple’s patent pact with HTC auto-terminates if either party is bought

By , Nov 24, 2012

Apple’s worldwide patent settlement with HTC is set to automatically expire should either firm get acquired by a third-party, patent blogger Florian Müeller discovered combing through court documents. Even more so, a so-called “change of control” clause is mostly beneficial to Apple given its $110+ billion cash pile making Silicon Valley’s most powerful company literally unlikely to be snapped up any time soon.

But if HTC gets bought, Apple’s prized iPhone patents licensed to the Taiwanese handset maker remain encumbered. What’s more, in case of such an outcome Apple is theoretically free to reassert its claims. The settlement also involves HTC subsidiaries S3 Graphics and VIA technologies, both of which were asserting patents against Apple in the past…

Müeller discovered earlier this week that VIA has entered into a separate but simultaneous settlement agreement with Apple. As for the Change of Control clause, it stipulates that “this Agreement shall automatically terminate unless otherwise agreed in writing by the Parties, effective immediately prior to such Change of Control”.

The patent expert explains that dismissals without prejudice theoretically keeps the door open to future reassertions:

Unsurprisingly, the agreement protects both parties in the event any of the Covered Patents are assigned or licensed exclusively to a third party. In that case, the patents must remain encumbered.

It’s also interesting that S3, VIA and HTC all share the same owner, the Formosa Plastics Group.

Formosa who?

The Formosa Plastics Group is a Taiwanese conglomerate whose diverse interests include biotechnology, petrochemical processing and production of electronics components. It also files as one of the world’s ten biggest petrochemical producers.

The group was founded by Wang Yung-ching, one of Taiwan’s most influential entrepreneurs, along with his brother Wang Yung-tsai. The conglomerate is controlled by CEO Wenchi Chen and chaired by Lee Chih-tsuen.

In another WTF moment, VIA and HTC share family ties. According to well-connected John Oram of Bright Side of News:

The wife of VIA Technologies’ CEO is Ms. Cher Wang, Chairperson and Co-Founder of HTC. In 1997, at the age of 39, Wang launched HTC along with associates HT Cho and Peter Chou. Wang is the daughter of Y.C. Wang, who co-founded the conglomerate Formosa Plastics Group.

Formosa Plastics Group and the Wang Family are one of most successful family enterprises in Asia. Cher Wang is known as a highly successful business woman ranked in 20th spot on Forbes list of the 2011 World’s Most Powerful Women.

It was originally reported that the Apple-HTC settlement entails HTC paying Apple between six and eight dollars per each Android handset sold, thus putting total value of the ten-year deal at about $3 billion, assuming current level of HTC sales.

HTC CEO Peter Chou laughed off the figure, calling it “outrageous” and saying the estimate is “baseless and very, very wrong”.

Though both parties pledged to keep the specifics private, Samsung asked a U.S. judge to force Apple to turn over a copy of the HTC agreement. Apple agreed to show lawyers a version with 33 words redacted, but the judge forced the Cupertino firm to reveal the agreement in its entirety.

The Galaxy maker has no intent to cut an HTC-like deal with Apple and is seeking to preempt any injunctions against its products with the same patents Apple licensed to HTC because this would imply, in Samsung’s own words, “Apple’s willingness to forego exclusivity in exchange for money”.

And the plot thickens.

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  • J M

    FOSS Patent says It is only 33 words redacted, not only 33 words left unredacted

    • http://www.idownloadblog.com/author/dujkan Christian Zibreg

      You’re right, I’ve fixed this. Thanks for the heads-up!