Elan Sues Apple Over Patent Infringment, Seeks Injunction To Bar MacBook Sales

Originally Posted by New York Times

TAIPEI — Taiwanese firm Elan Microelectronics has sued Apple Computer alleging infringement of two of its touch-screen patents, a company spokesman said Wednesday.
The suit was filed late Tuesday afternoon in U.S. District Court in San Francisco, said spokesman Dennis Liu, speaking by phone from the chip design firm’s headquarters in Hsinchu, Taiwan.
“We couldn't find a common viewpoint with Apple, so we decided we had to take action,” he said, adding that the companies had been in licensing talks for about two years.
The lawsuit alleges that Apple products including its MacBook computer, iPhone and iPod Touch use technology that infringes on two of Elan’s “multi-touch” patents, the company said in a statement.
It was not immediately clear what damages or remedial action Elan was seeking in the suit. In January, Apple reported stronger than expected fourth-quarter earnings of $1.61 billion, in part due to robust iPhone, MacBook and iPod sales. The company said it sold 4.4 million iPhones that quarter, nearly double the amount sold in the year-ago quarter.
Hong Kong-based Apple spokeswoman Jill Tan said in an email that the company would not comment on the Elan suit.
“Multi-touch” technology allows users to zoom in and out, flip images around, and perform other tasks using two or more fingers pressed to the screen.
Such screens are becoming increasingly popular in a wide array of electronic devices and appliances. The market consulting firm iSuppli last year forecast that the worldwide market for all touch screen modules would nearly double by 2013, from $3.4 billion in 2008 to $6.4 billion.
Elan said it won a preliminary court injunction against U.S.-based rival Synaptics in a dispute over one of the patents mentioned in the Apple lawsuit, after a then-subsidiary unit filed suit in 2006. Synaptics counter-sued.
Both actions were dismissed last year after the two companies reached a cross-licensing agreement, according to a statement on Elan’s website.
That result likely emboldened the firm to take legal action against Apple, said Jessica Chang, a Taipei-based analyst who covers Elan for Credit Suisse.
“From their previous victory in the case with Synaptics, I think they [Elan] should be quite confident,” she said. “Elan believes they have a unique edge with this patent, and they want to send a signal to the market” and set an example for others.
Ms. Chang said that in addition to trying to secure a licensing agreement and royalties from Apple, Elan may seek future cooperation with the California company and try to raise its market profile with this case.
Touchpads helped drive up Elan’s profits last year, she noted, providing some 20 percent of its revenue in the fourth quarter of 2008. Much of that came from touchpads that Elan provides for Asustek’s popular EEE PC netbooks, Ms. Chang said.
Like Taiwan’s other chip firms, though, Elan has been struggling in the downturn. Its revenue plunged starting in December, said Chang, dipping to 170 million new Taiwan dollars ($5 million) in January (a 44 percent year-on-year drop), and 199 million New Taiwan dollars in February (a 22 percent year-on-year drop), before climbing back to 336 million new Taiwan dollars in March.
Mr. Liu, the Elan spokesman, said that the firm believes this case is “comparable” to the Synaptics case and that the company hopes to have the dispute resolved in a “shorter time.” He declined to reveal details of the agreement with Synaptics, citing confidentiality agreements.