HP Takes Swing at Acer Over Patents

PC industry leader Hewlett-Packard (HP) filed a patent infringement lawsuit Tuesday against up-and-coming rival Acer.

HP alleges that its Taiwan-based competitor has violated five patents that HP acquired between 1997 and 2003.

The patents, 6,501,721; 6,438,697; 6,609,211; 5,892,933; and 5,596,759, deal with technologies for read/write optical drives, notebook’s power management, clock frequency switching, digital bus arrangement.

Filed in the U.S. District Court for the Eastern District of Texas, HP’s suit alleges that Acer and its U.S. subsidiary are knowingly selling computers with technology that infringes its patents, according to court documents. HP has requested a jury trial and seeks an injunction against Acer to prevent sales of computers containing the disputed technologies as well as compensation from Acer to recover “damages sustained as a result of Acer’s wrongful acts.”

In addition, the company has requested that treble damages be awarded for Acer’s intentional violation of the patents as well as payment of all attorney fees.

“HP today filed suit against Acer, seeking to stop the company from selling certain products in the United States because of its infringement of five HP patents related to PC technology,” the company said Tuesday. “This action was necessary because HP believes Acer has been selling computer products that use HP’s patented technologies without permission.”

In response, Acer said it “respects the intellectual properties of third parties and is currently conducting a full investigation” into the allegations.

Major PC Players

A Gartner report released last January crowned HP as the No. 1 worldwide PC vendor during the fourth quarter of 2006, the second quarter in a row. During that period, HP’s worldwide PC shipments increased nearly 24 percent, giving it a total market share just over 17 percent. Of the 239 million PCs shipped worldwide, 40.6 million were HP computers.

HP’s worldwide dominance does not translate to the U.S., where Dell maintained its No. 1 status. Dell’s hold on the top spot, however, is tenuous, according to the Gartner report, as its PC shipments declined 17.3 percent, while HP’s shipments increased 16 percent.

In terms of market share, Dell is at 29.1 percent while HP comes in at 25.3 percent for the fourth quarter. The two companies tied as the leaders in worldwide PC shipments

“Dell’s market share was its lowest in four years,” said Mikako Kitagawa, principal analyst for the Gartner Dataquest Client Computing Markets Group. “It lost market share across all segments in the U.S., particularly the home market. The fourth quarter’s consumer bias favors HP; however, Dell’s accelerated shipment decline in the fourth quarter is surprising.”

As HP and Dell battle it out for the top, Acer is in fourth place and is angling to knock Lenovo out and become the third-largest global PC vendor.

Fighting for First

The struggle for dominance is fierce in what the Gartner report calls a “market impacted by stiff competition from the consumer electronics industry.” The level of competition in the PC market has left some analysts wondering if HP’s lawsuit is a strategy to stymie Acer’s momentum.

However, gaining market share alone is not a reason for a competitor to sue, according to David Daoud, an IDC analyst. HP’s contention that its patents have been infringed means that an alleged intellectual property case is at stake.

“However, there is no doubt that Acer’s aggressive stance in the U.S. market is cause of concern among its competitors, and it is their job to do whatever it takes legally to protect their markets,” Kitagawa told the E-Commerce Times.

Although HP has been innovative and released products that meet consumers’ demands, Daoud said, the problem is that Acer is seeking to further expand in the U.S.

“And rumors of [Acer’s] interest in Gateway, if such an acquisition happens, could add more competitive pressure in an already tough U.S. market,” he continued. “So, HP certainly remains one of the key leaders in the U.S., but competition from Acer could create some problems going forward.”

No Rash Decision

Acer’s growth made HP take a little more notice, but that is not the only motivation behind the lawsuit, according to Steve Kleynhans, an analyst at Gartner.

“A lot of the players who have been around in the PC industry for a long time — like HP and Compaq — do own some fairly fundamental patents on a bunch of different pieces of how PCs operate,” he told the E-Commerce Times.

“There is a lot of cross licensing that goes on between the major players to stave off these kinds of lawsuits. HP does have a fairly significant patent portfolio and, as a larger company, doesn’t tend to make a lot of rash moves,” he noted.

“I don’t think [competition] is the only motivation behind the lawsuit, but it probably moves them up the list as HP looks around at who is using some of its intellectual property,” he continued. “It certainly put a spotlight on Acer, but I’m not sure it is the primary reason HP went after them first.”