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Apple and Google at War. Microsoft Gloats [UPDATE]

Apple (AAPL) is suing HTC for patent infringement, but the real target is Google (GOOG). HTC only makes devices and is no threat to Apple. However, Google's Android operating system is a big threat, and Steve Jobs wants to stop it. Yet, in the process, Apple could find itself badly hurt. So who's happy? Microsoft! MisterSoftee will enjoy the benefits of the legal carnage, without any of the risk.

There's risk aplenty for both Apple and Google. Consider the strategies and dangers. Apple doesn't want Android to compete with the iPhone or, potentially, the iPad, and for good reason. Absent any big change, sales growth of handsets running Android is on track to surpass iPhone unit sales. Every potential lost iPhone sale is a loss of over $650 in net revenue. That quickly adds up with tens of millions of products in play. So Jobs wants Android, Google, and Eric Schmidt out of the way.

Patents are a powerful weapon in a company's arsenal. As Engadget has analyzed, Apple is alleging infringement on a wide variety of patents. They date from 1995 to 2010. Some cover user interface aspects. Some cover hardware issues. And some cover key parts of the operating system. Although all might be involved in a given handset, clearly Apple is looking at Android itself as a target. The legal strategy involves splitting the patents into two groups. The older and possibly more fundamental ones are in the United States International Trade Commission, because it often acts more quickly than federal courts and has the power to block infringing products from entering the country. Newer patents appear in the federal infringement lawsuit, where Apple can test how defensible they are. If Apple gets a favorable judgment, then the company can continue to target larger and larger competitors.

Logically, Google eventually becomes the target because it owns the operating system. That Google doesn't sell Android is of no help in a patent infringement suit. As the applicable statute, 35 USC § 271(a), states:

Except as otherwise provided in this title, whoever without authority makes, uses, offers to sell, or sells any patented invention, within the United States or imports into the United States any patented invention during the term of the patent therefor, infringes the patent.
Should HTC lose on any of the operating system-related patents, then Google is in enormous trouble. Apple could conceivably sue Google. If it won, Apple wouldn't pursue royalties. Google could too easily pay them out of petty cash. No, Apple would look for an injunction against Google letting anyone use Android at all. That could quash Google's mobile future.

But it's hardly smooth sailing for Apple. A good number of its patents may be vulnerable to challenge:

Greg Aharonian, who runs the Internet Patent News Service, a site devoted to intellectual property news, said he believed that at least some of Apple's patents would be found to be invalid. But he said the company's goal might be to buy itself some time in the marketplace.
It also wouldn't be the first time Apple lost a patent. In a private newsletter, Aharonian went into greater detail, explaining how a number of the Apple patents showed inadequate amounts of prior art, making them vulnerable to challenge. Apple might find that the important patents to challenge Google suddenly were no longer valid. Furthermore, Apple has shown that it wants to get into mobile ads. That's an area where Google has significant patent strength and could retaliate. Plus, there is that pesky patent fight with Nokia, and Nokia owns some fundamental patents in cell phones as well. In a worst case, Apple might find itself forbidden to sell the iPhone.

Though all of this, Microsoft gets to sit back and laugh. It's two enemies are battling to scuttle each other's boats, but Micorosoft doesn't have to lift a finger. Or it could use its own enormous patent portfolio to take legal action and play Apple and Google against each other... All the while pushing Windows Phone 7 and trying to take market share.

[UPDATE: Engadget got a statement from a Google spokesperson:

"We are not a party to this lawsuit. However, we stand behind our Android operating system and the partners who have helped us to develop it."
That isn't surprising, though it should be interesting to watch what happens next.]

Image: via RGBstock.com user hisks

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