Fear Factor: 3 Reasons Apple Is Suing HTC


The Apple lawsuit centers on alleged user interface patent violations that are at the heart of how the new HTC smartphones operate.

HTC manufactures new Google Android based smartphones including Google's own Nexus One, which threatens to put significant price pressure on Apple's crown jewels, the Apple iPhone.

In the lawsuit, filed concurrently in both the United States District Court in Delaware and with the U.S. International Trade Commission , Apple alleges 20 patent violations. Specifically, Apple alleges that HTC phones running Google's Android operating system violate patents that pertain to the smartphone's touch screen interface.

"We can sit by and watch competitors steal our patented inventions, or we can do something about it. We've decided to do something about it," said Apple CEO Steve Jobs in a prepared statement. "We think competition is healthy, but competitors should create their own original technology, not steal ours."

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Here are three reasons Apple has filed suit against HTC.

1. Apple Fears HTC And Google Android Will Take A Big Bite Out of Apple's iPhone Profits

This suit has nothing to do with patent violations and everything to do with Apple's fear that the vaunted HTC-Google combo is going to eat into the huge profits that Apple's iPhone is dropping to Apple's bottom line.

Apple and its team of high-priced lawyers are going to fight like the devil to stop anyone that stands half a shot at eating into Apple's hefty iPhone profit margins. HTC teaming with Google and Android to change the economics of the smartphone market in one fell swoop is Apple's worst nightmare come true.

Apple and Jobs are looking purely and simply at HTC's manufacturing might and Google's financial muscle and putting it on a spreadsheet and matching it against the Apple iPhone numbers. It's not a pretty picture. Google and HTC are likely to drive down Apple's iPhone margins significantly in a year. That kind of profit plunge is worth every penny that Apple's high-priced lawyers are being paid to tie HTC and Google up in a legal strait jacket.

2. Apple Fears HTC-Google Manufacturing And Technology Innovation

Jobs is smart. But so are HTC and Google. Remember the key to the smartphone market is the right combination of low-priced manufacturing and high technology innovation. That is just what HTC and Google Android bring to the smartphone game.

HTC has the manufacturing might to move aggressively and nimbly to drive down manufacturing costs on the smartphone device. Remember HTC is manufacturing smartphones for multiple companies.

Apple designs the iPhone but the components that make up the iPhone are manufactured by, according to some estimates, more than 24 companies. HTC's entry into the game allows it to leapfrog Apple with a lot of manufacturing innovations.

As for software innovation, Apple can crow all it wants about its smartphone user interface. But let's not forget that all of the groundbreaking user interface work was done by Xerox Palo Alto Research Center (PARC). Apple is great at taking technology and combining it into a nice package. The fact is Google has much more software engineering talent that can deliver big breakthroughs than Apple.

3. Apple Fears HTC Google Will Redefine The Smartphone Search Experience

The smartphone is all about getting instant answers/advice/guidance from the internet when you are on the road for business or pleasure. Need to get the latest information on a client you are visiting just before you enter the lobby? Search your smartphone. Need to find a restaurant in a pinch for a client meeting? Use your smartphone search.

HTC and Google Android have the opportunity to take the smartphone into another realm. Apple has done a great job with the App Store. But HTC and Google have the ability to bring a new Web 2.0 smartphone experience to businesses and consumers.

Apple and Apple CEO Steve Jobs are scared stiff that HTC Google have Apple's number. Remember, Google CEO Eric Schmidt spent three years on the Apple board of directors sitting side by side with Jobs.

Jobs knows what Schmidt knows about the economics and technology behind the Apple iPhone. And he has some insight into the creative talent that powers Google and the manufacturing muscle that is at the heart of HTC. Apple's lawsuit is all about fear, fear of HTC and fear of Google.