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Injunction May Lock HTC Smartphones Out of Germany

The Taiwan firm last week withdrew its appeal of an injunction won in February 2009 by IPCom

Since Friday HTC has had to face the prospect of all of its 3G smartphones, largely Android models, being booted off the German market just as the Christmas shopping season is starting.

The Taiwan firm last week withdrew its appeal of an injunction won in February 2009 by IPCom, a German concern that bought roughly a hundred seminal mobile patents owned by Robert Bosch GmbH more than four years ago.

Dropping the appeal gives the injunction new teeth. IPCom is expected to ask the Mannheim court that handed down the injunction to enforce it unless, of course, HTC comes to terms.

According to the FOSS Patents blog the German Federal Patent Court (BPatG) has declared the single 3G standard-essential patent at issue here invalid - well part of it anyway -but apparently that finding isn't likely to help HTC much at this point. The decision is currently unenforceable since it's been appealed to the German Federal Court of Justice (BGH), where the case is likely to linger for another two years before being decided.

HTC will either have to pony up the FRAND-controlled license fees that it has so far refused to pay IPCom, and Bosch before it, or have its German market uprooted.

IPCom says it's cut license agreements with a "number of global telecoms companies," but not HTC or Nokia. It is also suing Nokia as well as T-Mobile and Vodafone, Germany's two biggest carriers.

HTC's explanation for dropping the appeal that would have gone to trial this week was that it would have been "redundant" given the invalidity finding, but FOSS Patents says it's more likely HTC's real purpose in abandoning the appeal was to avoid a defeat on two other patents from the same family that IPCom added to the appellate case and that HTC is now up the creek without a paddle.

Those other two patents were only granted after the appeal was put in train and the Mannheim court was expected to rule on whether HTC infringed them too this week.

The blog figures if HTC doesn't negotiate a settlement it could be locked out of Germany until the first patent expires in 2020. It says HTC "appears very unlikely to be able to block enforcement during the next couple of years" and that "it's hard to see how anything other than the invalidation of the asserted patent in its entirety would result in a patent devoid of any claim that is essential to the 3G standard."

In the next few weeks IPCom should be able reclaim the 1 million bond it posted in 2009 and ask for damages and legal fees exceeding the 7.5 million bond HTC posted at the same time.

It's unclear whether HTC's anticipated German ills played any role in its cutting its Q4 guidance last week for the second time in less than a month. On Friday the company said its revenues this quarter would be flat year-over-year, any better showing lost to Apple and Samsung competition and weakening customer demand.

The company is believed to have unsold inventory. German resellers and major carriers should be able to sell what they have in stock but FOSS Patents doesn't expect that to last long.

HTC also said it was re-evaluating its proposed $300 million acquisition of S3 Graphics from VIA Technologies since the US International Trade Commission last Monday threw out an S3 Graphics patent complaint against Apple's Macs, iPads and iPhones, saying it has no case. Anyway, AMD claims to own the S3 IP.

S3 is expected to appeal the ITC's decision, but right now HTC's products are at greater risk of getting kicked out of the US, HTC's largest market.

More Stories By Maureen O'Gara

Maureen O'Gara the most read technology reporter for the past 20 years, is the Cloud Computing and Virtualization News Desk editor of SYS-CON Media. She is the publisher of famous "Billygrams" and the editor-in-chief of "Client/Server News" for more than a decade. One of the most respected technology reporters in the business, Maureen can be reached by email at maureen(at)sys-con.com or paperboy(at)g2news.com, and by phone at 516 759-7025. Twitter: @MaureenOGara

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