Earlier this week we reported on HTC’s $300 million acquisition of S3 Graphics and admitted absolute defeat when it came to conjuring up a theory as to what the smartphone maker was going to do with S3’s expertise in the PC graphics space. Turns out that the acquisition was purely over patents. Winston Yung, Chief Financial Officer at HTC, says that he expects the company to recoup their investment over the next 2 to 3 years by using S3’s patents both defensively, which we’ll assume means negotiating lower royalty rates by signing cross licensing agreements, and aggressively, lawyer code for suing your patent infringing ass. This has upset Wall Street, with Citigroup wondering if such a deal was necessary, and Bloomberg pointing out that HTC Chairwoman Cher Wang partly owns S3 Graphics and looks to make some money off this deal.
Considering the recent events surrounding Microsoft’s successful attempts at getting companies manufacturing Android devices to enter into a licensing agreement with them, and their claim that Samsung owes them up to $15 per Android smartphone they ship, we’re quite saddened that the mobile industry is turning into a legal nuclear arms race. Nortel’s recent patent auction is another fine example of this, with Google offering a starting bid of $900 million, but eventually losing to a consortium made up of Apple, Ericsson, Microsoft, RIM, Sony and EMC bidding $4.5 billion. All that money for intellectual property, not any actual talent or innovation. Still, we hope that at some point in the future everyone will figure out how to best achieve progress without having to pay the salaries of an army of lawyers and not an army of engineers.
What do you think, should HTC have spent that $300 on something else or kept it to themselves for safe keeping? That kind of money can buy you a lot of components.