November 29, 2011 2:23 pm

HTC told to halt sales of 3G devices in Germany

HTC, the world’s fourth-biggest smartphone maker by shipment volume, has been told to withdraw all of its 3G devices from sale in Germany within days.

The ultimatum, from Germany’s IPCom, leaves the Taiwanese company facing potential fines or sales disruption. HTC has been one of the clear winners in the burgeoning smartphone market, recording six consecutive quarters of record sales.

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The latest round of the legal battle between the companies comes after HTC withdrew an appeal against a patent infringement claim won in Germany in 2009 by IPCom, which licenses patents for a range of mobile phone uses.

After the withdrawal of the appeal, IPCom is demanding that HTC comply with the 2009 judgment and stop sales and distribution of all its 3G devices in Germany. IPCom said it would otherwise ask courts to begin a procedure that would impose a fine on HTC per handset sold.

HTC said it withdrew its appeal because it believes that an earlier German court decision had rendered the disputed patent invalid. It added that IPCom’s injunction covered only one, now discontinued, phone model and that models now on sale in Germany have been engineered to bypass IPCom’s patents.

“Even if IPCom obtains an injunction in Germany, there will be no impact on HTC’s sales in Germany,” HTC said in a statement.

IPCom disputes this, saying the ruling covers all HTC devices using international 3G standards.

“The courts have clearly established that HTC has been infringing our patents and now given us the means to put a stop to it,” Bernhard Frohwitter, IPCom’s managing director. said. “Since HTC has never come up with an offer that adequately reflects the value of these patents, IPCom has been left with no choice – we will use the right awarded by the courts, likely resulting in HTC devices disappearing from shops during the crucial Christmas season.”

The dispute highlights the stakes involved in the many patent litigation cases to have embroiled the smartphone industry in recent months.

IPCom’s action comes just ahead of a final decision, expected in early December, by the US’s International Trade Commission in the case of Apple vs HTC. The iPhone maker won a preliminary ruling in July when the court found HTC had infringed two of Apple’s patents, while last month HTC lost one of the two countersuits it brought against Apple.

Florien Mueller, a Germany-based IP consultant and blogger, wrote on his blog that HTC would now find it very difficult to “to block enforcement during the next couple of years”. Mr Mueller believes that HTC chose not to appeal to avoid the court ruling immediately on two additional IPCom patent claims, which would be even more damaging for HTC if it lost on those claims.

“HTC found itself between a rock and a hard place and decided to take the rock,” Mr Mueller wrote.

The lawsuits come at a difficult time for HTC, which last week slashed its forecast for the fourth quarter of this year by 20 per cent, sending its shares down by one-fifth in two days.

Jasmine Lu, analyst at Morgan Stanley, noted that with the smartphone market now more mature in the US, and with the transition to faster fourth-generation networks not yet happening, “the real tests are yet to begin,” for HTC.

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