Apple-HTC Deal to Auto-Terminate When Any Party is Bought Out

HTC Corporation’s Headquarters in Taoyuan City, Taiwan | Wikipedia

A redacted public version of Apple and HTC’s licensing deal was discovered last Wednesday, showing a bit of information regarding both companies’ ten-year agreement. Based on the heavily redacted document, the deal includes a “change of control” clause, which automatically terminates the agreement if one of the parties is bought out.

Apple and HTC’s “Change of Control” Clause

Discovered by Florian Mueller of FOSS Patents, the “change of control” stipulation holds that patent licensing deals from companies involved in the agreement will be terminated unless stated otherwise. Although change of control clause is typical in such situations, they are not always automatic.

When HTC signed the deal, it brought its subsidiaries—S3 Graphics and VIA Technologies—with it. Both companies were also asserting claims against Apple. According to the document, the US dismissals of the existing deal are without prejudice. This means that both parties can reassert their claims in case the arrangement goes sour, or one of the companies is purchased.

Because of Apple’s dominant market position, it is less likely that they will be bought out anytime soon. Thus, the clause clearly skews toward protection against HTC or one of its subsidiary’s possible takeovers. Furthermore, this stipulation would be a disadvantage to the new owner since the deal theoretically enables Apple to reassert claims.

“Covered” Patents

Aside from the Change of Control, the document also revealed that certain patents are deemed “covered”. Thus, when properties were licensed to third parties, they would remain encumbered in case the agreement will be terminated.

However, the redacted document does not clarify what patents are covered, as well as what “covered” means with regards to patent rights. On the other hand, Mueller believes that the definition is very inclusive.

The 30-page document has indeed enlightened people about the closely guarded licensing deal between Apple and HTC. In relation to this, there were speculations that more information will be revealed if Samsung’s motion to compel Apple to show the unredacted version of the deal is granted.

It is believed that this move is part of the landmark Apple vs. Samsung case’s post-trial proceedings, with the South Korean tech giant trying to sway the court’s decision to ban certain devices. The company can do this by citing specifics in the Apple-HTC deal.

On the other hand, one Samsung exec pointed out that they don’t have an intention to negotiate with the Cupertino-based company “at all”.

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