Phone Patent Battle lines drawn. Microsoft eyes opportunities.

As I suggested last week, Apple’s lawsuit against HTC over phone patents did not come out of the blue, and is not the last of what may mushroom into a multi-company skirmish, perhaps even including Microsoft.

Oppenheimer analyst Yai Reiner issued a report yesterday that illuminated the issues and industry discussions that have been going on behind closed doors prior to patent suits Apple (AAPL) filed last week against HTC.

“Starting in January, Apple launched a series of C-Level discussions with tier-1 handset makers to underscore its growing displeasure at seeing its iPhone-related IP [intellectual property] infringed. The lawsuit filed against HTC thus appears to be Apple’s way of putting a public, lawyered-up exclamation point on a series of blunt conversations that have been occurring behind closed doors.”

“Our checks also suggest that these warning shots are meaningfully disrupting the development roadmaps for would-be iPhone killers. Rival software and hardware teams are going back to the drawing board to look for work-arounds. Lawyers are redoubling efforts to gauge potential defensive and offensive responses. And strategy teams are working to chart OS strategies that are better hedged.”

In simple terms Apple has been warning rivals for the best part of a year that it was not happy about them stepping ever closer to infringing it’s IP. Warned them appropriately, with the primary aim of disrupting their ongoing design work, and ultimately curbing what it perceives as theft of it’s ideas.

Tim Cook (COO of Apple) also touched on this last January in Apple’s quarterly analyst call : Apple “will not stand for having our IP ripped off, and we’ll use whatever weapons that we have at our disposal”.

As I speculated, and Reiner agrees, HTC is merely a proxy target for Google (GOOG), the company behind Android OS. He also points out that HTC does’t have any shared suppliers that may be affected by a legal battle between the two companies.

Most manufacturers interpreted these grumblings from Apple as related primarily to multi-touch. But that seems not to be the case, and they have misinterpreted the breadth and scope of Apple’s intentions. With the launch of new Android mobiles towards the end of last year and no direct comment from Apple many manufacturers decided to go ahead and push further with multi-touch phones, something they had previously held back on.

“It was likely in order to counter that perception that Apple began reaching out to handset OEMs in January and explaining in no uncertain terms that it was now ready to do battle and not just on multi-touch,” Reiner goes on, “It was ready to press its case along a number of axes that had made the iPhone experience unique, from the interpretation of touch gestures, to object-oriented OS design, to the nuts and bolts of how hardware elements were built and configured.”

In the HTC suit Apple not only lists multi-touch, but also a raft of other iPhone specific features such as power management, networking modules and object-orientated system design.

One down side to innovation is that a lot of phone designers are now treading more carefully, reexamining designs, and consulting with lawyers on those designs so as to avoid possible law suits from Apple. All of this could drag on for some time as the HTC lawsuit could take many years to be decided, and much of that could be delayed by pending investigations into that lawsuit itself by the ITC in the US, and another investigation by that same body into the still ongoing Apple V Nokia phone lawsuit.

Another worrying side effect of this (for Apple) is that Microsoft seems to actually enjoy this kind of battle and see benefits they can reap from the confusion. Consequently, they apparently stand ready with their own batch of patents and their Win7 Mobile designs to “join battle with customers that come under IP attack.” Now that’s a marketing ploy to pitch at OEMs!

If I was forced to choose between Android and Windows Phone 7 right now I think I might go with the company behind the OS which is a heavier hitter, and more experienced litigant of the two. So all this raft of lawsuits may do is end up helping Microsoft.

In other news AAPL shares rose even higher to a new record high of over $223 per share yesterday!

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Stephen NorthcottPhone Patent Battle lines drawn. Microsoft eyes opportunities.

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