As if Taiwan-based smartphone manufacturer HTC doesn’t have enough problems already. The US International Trade Commission issued a preliminary decision finding the Taiwanese company guilty of violating two patents held by Nokia. Apparently, according to the decision, HTC used Nokia technology to build HTC branded Smartphones. This is yet another example why Google and Microsoft paid billions of dollars to buy out hardware Smartphone companies. As we have reported earlier, Google bought out Motorola and Microsoft bought out Nokia’s hardware business. For the most part, these companies didn’t buy for market share or key market segments. Instead, they bought these hardware companies for their patent portfolios.
On the hardware side of the mobile phone business, you have to have a lot of patents to protect yourself from precisely the issue HTC is facing. Nokia is no slouch when it comes to patenting technology. It has a lot of patents under its belt that’s why Microsoft bought it out for billions of dollars. Now it looks like HTC has run afoul of Nokia’s patent portfolio. Still, this is a preliminary decision and HTC can always appeal. As we have reported with Apple and Samsung’s litigation, the court system can be a very powerful tool in dealing with the competition. Of course, this strategy has its limitations as well. It still remains to be seen how HTC will get out of this mess. As mentioned earlier, HTC is not exactly doing well currently. Its market share is shrinking and its fate is a dramatic example of why Smartphone makers need to have a compelling competitive advantage in terms of software design, software uniqueness of hardware proficiency in the increasingly competitive Smartphone hardware market.
Make no mistake about it, the price is crashing to earth and most consumers are really getting wary of paying a premium for something that they can buy for cheaper from a known name manufacturer. HTC definitely needs to get its act together soon or it might need to just compete for the bottom of the market instead of a premium segment ala Samsung.