HTC Buys a Patent Power Play

High Tech Computer Corp. (HTC) (Taiwan: 2498) cleaned up in the second quarter, announcing Wednesday it doubled its quarterly income over last year and that it's acquiring a company that will help it compete against Apple Inc. (Nasdaq: AAPL) -- in technology and in the courts.

The handset maker has paid VIA Technologies Inc. $300 million in exchange for all of its shares of S3 Graphics, a company that powers graphics visualization technologies in mobile devices and game consoles. Along with its imaging savvy, HTC will get 235 patents, and more pending applications.

S3, like several mobile companies, has found itself entangled in lawsuits with Apple over intellectual property rights. Apple filed a complaint against S3 with the U.S. International Trade Commission (USITC) last year for patent infringement. A judge ruled last week that Apple had infringed on two of the graphics company's patents related to image compression.

HTC and Apple have also butted heads in the courts. Apple sued the Taiwanese company in March of 2010 for infringing on 20 Apple patents. (See Apple Sues HTC.)

The deal, expected to close before the end of the year, will give HTC S3's entire portfolio of patents, which will help it protect itself against more lawsuits -- from Apple and from other smartphone vendors in what has become a highly litigious industry. (See Samsung Tries to Block Apple Sales in the US, Apple Sues Samsung for iCopying, Apple Escalates Samsung Lawsuit, Apple Hits Back at Nokia and Apple Sues Moto .)

In an unrelated announcement Wednesday, HTC said its unaudited second-quarter earnings results include net income of NT$17.5 billion (US$608 million), more than double what it brought in during the year-ago period. Unaudited revenues for the quarter were NT$124 billion (US$$4.3 billion), a 104 percent increase. Analysts expect the growth to continue into the third quarter owing to HTC's focus on Android smartphones and, soon, Windows Phone 7 devices.

— Sarah Reedy, Senior Reporter, Light Reading Mobile

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