Analyst: Apple’s IP battle over iPhone’s multi-touch capabilities is ill-advised: Firm reviews Apple’s patent filings for wireless technology

Apple Inc.’s threat to sue competitors over multi-touch capabilities that violate its patents, a warning made during the company’s earnings call last month, may not be wise or even have a solid foundation, according to a leading telecom analyst.
“Initiating multi-touch infringement litigation may prove lengthy, costly and fruitless for Apple, in our view,” wrote analyst Pablo Perez-Fernandez at Global Crown Capital L.L.C. “Building on the company’s legacy as one of the greatest innovators in the technology industry may be a smarter business model than taking on the rest of the industry in a battle that may be impossible to win.”
Patent infringement lawsuits typically cost money and time and can distract a company’s management from the task at hand: continuing to innovate and out-compete against their rivals.
“Apple does not need to do this,” Perez-Fernandez added in an interview. “It is inevitably infringing itself.”
Apple’s perspective
That clearly is not Apple’s current view. On Apple’s Jan. 21 earnings call, COO Tim Cook said:
“We like competition, it makes us all better. We are ready to suit up and go against anyone. However, we will not stand for having our IP ripped off and we will use whatever weapons we have at our disposal.”
Asked whether that was a veiled reference to Palm Inc. and its new Pre, a product guided by several ex-Apple employees that received plaudits and caveats at the Consumer Electronics Show in early January, Cook declined to name names.
Risks and work-arounds
According to Global Crown Capital’s investor note, however:
“Palm is most at risk of legal action by Apple since the Pre uses a very similar multi-touch interface, including but not limited to the famous ‘pinching’ gesture,” Perez-Fernandez wrote. “HTC, Garmin and even RIM are also at risk because they have or will soon introduce capacitive, multi-touchscreen (devices), and some of Apple’s patents detail apparatus with transparent capacitive touch sensors. HTC and Garmin are both expected to introduce multi-touch, Android handsets later this year.”
As in other cases of challenges to a company’s technology, Palm might well develop a “work-around” that more clearly avoids an Apple challenge to the Pre’s multi-touch technology, the analyst said. In fact, Perez-Fernandez pointed out, Apple has trademarked the term “multi-touch” and could even challenge Palm, pre-emptively, on the use of that term in marketing materials for the Pre.
Strengths and weaknesses
Should Apple file a trademark violation suit prior to the Pre’s launch, it might signal that Apple truly intends to be aggressive in the matter. But a patent infringement case can only proceed once the Pre hits the market – widespread expectations call for a May launch – and Apple has analyzed the device’s software for possible infringement.
In an 8-page report, Perez-Fernandez reviewed Apple’s IP holdings in multi-touch, capacitive touchscreen technology and concluded that some patents issued to Apple by the U.S. Patent Office may not hold up upon review.
“Our review of granted and filed patents shows that Apple has a formidable arsenal of capacitive, multi-touch patents that constitute a nearly impenetrable barrier to entry for companies hoping to commercialize capacitive, multi-touch devices,” Perez-Fernandez wrote.
However, the analyst wrote, Apple’s key patents may be “invalidated based on prior art considerations if subjected to a review by the USPTO.” (“Prior art” refers to publicly known information, in other patents or in published research papers, before a particular invention is made public.)
“Our findings suggest the University of Delaware may be the legal owner of the key multi-touch technologies, as the essential discoveries embedded in Apple’s products were the result of academics from the university now employed by Apple.”
“We believe Apple almost certainly has IP claims against competing products currently on their way to the market,” the analyst wrote. “Unfortunately, our findings suggest that (Apple) is almost certainly violating the IP of other companies and research labs.
Universities involved, early on
Perez-Fernandez went on to examine the work of two University of Delaware researchers – Wayne Westerman and John Elias – who received patents on key aspects of multi-touch capacitive touchscreen technology while they were employed by the university, which rightly owns those patents, the analyst wrote. Numerous other researchers, universities and companies are cited as having performed decades of work on the technology prior to patent filings by Apple.
Why then has Apple been granted patents that ignore these examples of “prior art”?
“The U.S. patent system is a royal mess, in our view,” wrote Perez-Fernandez. “Patents that should never be issued are regularly granted. The USPTO seems to have neither the manpower nor the resources to research and verify all prior art pertinent to each and every patent application. Hence, the office relies heavily on the disclosures of the applicant and incomplete information …”
But the economics of attracting top talent to government agencies is an issue as well, Perez-Fernandez said in an interview.
“You must have deep technical background and a huge base of knowledge to review patent requests,” the analyst said. Obviously the brightest minds do not go to work at the USPTO.”
But, the analyst added, there are low-cost, wiki-like technologies that would allow the industry to provide information on ‘prior art’ on their own patents or others’ disputed patents.
Finally, the analyst pointed out that institutions such as the University of Delaware may well hold the rights to patents claimed by Apple, but won’t pursue their claims until the multi-touch market takes off – as it appears to be doing right now.
“I would not be surprised, as the market grows, to see the universities involved in the basic research decide to sue, as they weigh the costs and benefits of litigation costs,” the analyst concluded.
Article updated Feb. 6 to include additional information and analysis.