THX Blasts Apple With Lawsuit
The company that famously said "The Audience Is Listening" is now litigating. THX, named after founder George Lucas' first movie, is suing Apple for patent violations. It's now Apple's turn to decide how to respond, but the case does put a spotlight on what makes Apple such a ripe target for patent lawsuits, and what's really at stake for those who want to take on Tim Cook's company in court.
03/20/13 5:00 AM PT
THX filed a lawsuit against Apple last week, claiming that the company's consumer electronics are infringing on one of its sound patents.
The sound technology company, founded by George Lucas, alleges that some models of the iPhone, iPad and iMac devices violate a THX patent regarding a "narrow profile speaker." The patent protects a design that enhances the sound quality of speakers in thin consumer devices.
It is difficult to ascertain how strong THX's case is from the limited information that has been released, said Roman Tsibulevskiy, patent attorney at Goldstein Law Offices.
"Right now from the pictures released, there are allegations based on similarity, and the design does look similar," he told MacNewsWorld. "But Apple will go through these patent claims and go through each point to determine if this is really a valid claim. Just a similar picture isn't going to determine infringement."
THX is seeking monetary damages or royalties for the use of its patents, but it's likely that Apple will strike back before settling anything, said Tsibulevskiy.
"Apple has a lot of sound patents too, and patents on so many other technologies," he noted. "It could be that someone at Apple is working right now to be able to turn around and sue them for something else, or go after someone that is making hardware that uses a THX patent. At the very least, Apple is probably going to argue that it didn't infringe or that the patent isn't valid."
Going for Patent Gold
It's still unclear what the outcome of the lawsuit will be, Tsibulevskiy said. Whatever happens, it's not surprising that THX is targeting Apple. Recently, with high-profile patent battles like the one between Apple and Samsung, it has become clear that while global legal wars might be costly and time-consuming, they can also take down competitors and increase revenues in the multi-billion dollar electronics industry.
For instance, Bloomberg reported this week that Samsung is also developing a smartwatch -- one that could rival the rumored Apple watch that is supposed to be the company's next groundbreaking device. The news is notable not just because of the ongoing competition between the two, but because it could be yet another front for the two companies to continue their courtroom rivalry. The THX lawsuit is another example of what's at stake with patents anytime Apple is even rumored to be launching a new device.
"There is probably a business reason that this patent was filed," Tsibulevskiy pointed out. "It could be that this is something that would apply to a smartwatch if it came out, and this acts as a reminder that any device that Apple comes out with will be targeted as infringing."
The pressure is on to make as much cash from patents as possible, especially for a company like THX, which focuses more on developing technology than producing the hardware that runs those systems. If a company is looking to monetize, it's probably going to target a company with an infamous pile of cash, he said.
"For a non-practicing entity, there is a lot of pressure by investors and boards to monetize patents," Tsibulevskiy said. "Apple obviously has a lot of money, and there is a lot of money to be earned by paying royalties."
Still Questionable to Wall Street
The news regarding Samsung's alleged smart watch, and the launch of the new Galaxy S4 smartphone last week, were factors affecting Apple's volatile stock this past week.
With competition on the rise from Samsung, Apple seems eager to convince its customer base that it is the smartphone king. This weekend, the company unveiled a new landing page for the iPhone on its site, claiming "There's iPhone. And then there's everything else." The page goes on to highlight some of the most-loved features of the phone, including its Retina Display, camera, battery life and customer satisfaction ratings.
It's not surprising that Apple is attempting to lump the competition together and tout its phone just after Samsung released its Galaxy update, said Shaw Wu, analyst at Sterne Agee. The firm, along with many of its financial analyst peers, recently cut its price target for Apple.
iPhone demand has been weaker than expected lately, Wu admitted, but Apple is missing out by not launching a phone that can better rival the 5-inch Samsung Galaxy S4 in size.
"Apple is leaving money on the table by not participating in larger touchscreen form factors dominated by Android vendors," he told MacNewsWorld. "In our supplier checks, we are seeing evidence of a larger form factor iPhone being worked out, but given its early stage, we don't believe we will see it ship until 2014."
If the electronic giant can transport the already-loved iPhone into a larger size, consumer demand and the company's stock price might climb again, said Wu.
"Apple needs to reclaim high-end leadership, as that is what its brand is about," he said.
Apple did not respond to our request to comment for this story.