Apple Suffers Patent Setbacks

The following commentary comes from an independent investor or market observer as part of TheStreet's guest contributor program, which is separate from the company's news coverage.

NEW YORK (Trefis) -- The legal battle for patents in the smartphone market is lately getting more complicated.

Apple(AAPL) endured a couple of setbacks last week. First, it was forced to remove iPhone 4 and 3GS from its German online store as the models were believed to infringe certain patents of Motorola Mobility(MMI). Then a German court granted Motorola's request to permanently ban Apple's push e-mail services, a key feature of its iCloud offering.

This is indeed a big blow to Apple which is already finding itself mired in litigation issues with Samsung and HTC. Incidentally, Google(GOOG) is in the process of acquiring Motorola Mobility for a valuation of $12.5 billion, underscoring the intense battle between Google and Apple.

Our $550 price estimate for Apple stock is about 20% above the market price.

See our complete analysis of Apple here.

This is not the first time that Apple has lost a patent infringement case. A few months back, the U.S. International Trade Commission ruling that Motorola Mobility did not violate Apple's patents. Apple had asked the commission to block Motorola phones such as the Droid and Droid X, claiming they infringed on its patents.

A few weeks ago, Motorola won the injunction against Apple's devices in Germany based on an essential GPRS patent.

Google and Apple are the top two contenders in the smartphone market and hence there is a lot at stake for these players. Google's Android is still the largest player in the smartphone operating system market, but Apple recently became the number one smartphone vendor in the world in the fourth quarter of 2011 overtaking Samsung.

However, if Apple continues to lose patent battles, it could hurt its competitive position in the long term, while Google would be the biggest beneficiary from Apple's loss. With Motorola scoring a decent number of legal victories over Apple, Google's decision to acquire Motorola for its patent portfolio is increasingly looking like a wise move.

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