Macs infringe S3 patents, could face U.S. import ban

But trade agency clears iPhone, iPad of patent charges in Apple-Android battle-by-proxy

A trade agency judge has ruled that some Macs infringe patents held by S3 Graphics and could be barred from the U.S., according to a decision made public Wednesday.

But U.S. International Trade Commission (ITC) Judge James Gildea also ruled that the iPhone, iPad and iPod Touch do not infringe the S3 patents.

If the full six-member commission upholds Gildea's decision, the ITC could block imports of Macs that are not equipped with graphics processors made by Nvidia.

Nvidia-equipped Macs are immune to the patent challenge, Gildea said.

"An implied license and the doctrine of patent exhaustion apply to those Mac OS X Devices incorporating the Nvidia GPU that are protected by the Nvidia License (MacBook, MacBook Air, and Mac Mini)," ruled Gildea.

"Patent exhaustion" means that because S3 had previously granted a license to Nvidia, it cannot claim infringement against Apple, Nvidia's customer.

Macs that rely on other companies' graphics processors, such as those sold by Intel and AMD, may be at risk to an importation ban. Most models of Apple's notebook and desktop lines now include graphics chipsets produced by Intel and AMD, including the MacBook Air, MacBook Pro, iMac, and Mac Mini.

While Gildea ruled that two of the four patents S3 originally cited are not infringed by Mac systems, none are violated by Apple's iOS line-up of iPhone, iPad and iPod Touch.

The ITC case between S3 and Apple is important, most analysts have agreed, because Taiwanese smartphone maker HTC announced three weeks ago that it would pay $300 million to acquire S3. The deal, however, is subject to regulatory approval and has not been finalized.

HTC and Apple are locked in a patent battle of their own: A different ITC judge ruled earlier this month that the former's Android phones violate a pair of Apple patents.

"HTC's best chance to force Apple into at least a partial cross-license would probably be S3 Graphics' assertions against Apple," said independent patent analyst Florian Mueller on his FOSS Patents blog Wednesday. "HTC's potential leverage against Apple depends very much on whether S3 Graphics would be in a position to obtain an import ban against product lines representing a significant part of Apple's revenue base."

Others have noted that Apple may never have to pull its Macs from U.S. distribution.

On the same day that Gildea ruled that Macs infringe two S3 patents, the U.S. Patent & Trademark Office (USPTO) found that those same claims were not patentable.

The ITC was not able to take that into account when Gildea ruled, said Matt Macari, a patent attorney with the law firm Skaar Ulbrich Macari of Minnetonka, Minn.

In his Litigating Apple blog, Macari said Apple would undoubtedly bring the USPTO decision to the ITC and ask that it bounce the Mac infringement ruling.

That would put HTC in a bind, Macari argued. "As S3 goes, so goes HTC -- at least when it comes to using the S3 acquisition as leverage against Apple," he wrote. "Such a turn in events would effectively put HTC back where it was before it purchased S3, forcing HTC to face Apple's initial ITC win head on."

Apple has other options, including returning to Nvidia graphics chips for its Macs.

Apple abandoned Nvidia in favor of AMD for its iMac line in mid-2010, and early this year dropped Nvidia's graphics processors from its notebooks, which now universally rely on Intel chipsets.

"It would make a whole lot of sense for Apple to do this in the event the ITC orders an import ban, even if it resulted in a limited reduction of the gross margins of its Macintosh product line," said Mueller. "There's a lot more for Apple to gain by fending off Android than by settling with HTC only to maximize its flexibility in the Macintosh business."

In the quarter that ended June 30, two-thirds of Apple's revenue came from its iPhone and iPad business, while Mac sales accounted for only 18% of the firm's revenues.

Gregg Keizer covers Microsoft, security issues, Apple, Web browsers and general technology breaking news for Computerworld. Follow Gregg on Twitter at @gkeizer, on Google+ or subscribe to Gregg's RSS feed . His e-mail address is gkeizer@computerworld.com.

See more articles by Gregg Keizer.

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