Acer lawsuit puts suppliers in a bind

An Acer lawsuit that seeks to force its PC suppliers to stand by its side in a legal battle with Hewlett-Packard puts the companies in a bind because they provide PCs to both companies.

Last week, an Acer subsidiary filed suit against three of its suppliers to force them to abide by their contractual agreements that indemnify Acer in patent suits.

The three companies, Quanta Computer, Hon Hai Precision Industry Co., and Wistron, are all from Taiwan and count Acer and HP as customers. What's more, HP orders around $15 billion worth of IT goods from Taiwan each year, and Quanta is normally a major recipient of laptop PC orders from the company. Wistron was spun-off from Acer several years ago, and Acer remains one of its largest shareholders.

The three suppliers could face fines or worse if they refuse to honor their contracts and help Acer in the case. However, they face the risk of losing future orders from HP if they cooperate. There are plenty of other contract manufacturers around for HP to choose from.

Quanta, the world's largest contract laptop PC maker, said legal proceedings with Acer have already started, and it plans to seek an amicable solution to the problem that is in the best interest of both customers.

Hon Hai, the world's largest contract electronics maker, said it has not yet received papers from the court, and declined further comment, according to a statement filed with the Taiwan Stock Exchange on Saturday.

Wistron declined to comment specifically on the Acer lawsuit, but said it will comply with court orders and hopes to resolve the dispute outside of the courts.

HP filed two lawsuits against Acer this year alleging the infringement of 10 HP patents related to PCs. HP is seeking to block Acer PC imports to the U.S. and is asking for compensation from Acer, payment of legal fees, and treble damages for alleged intentional violation of the patents.

Acer has said it is looking into HP's claims, and that it believes it is indemnified by the contracts with its PC suppliers. Many laptop and desktop PC suppliers do the design and manufacturing work for customers. Acer says that since its suppliers worked on the design of the PCs in question, they should share the burden of the HP lawsuit. The supplier agreements specifically indemnify the company from lawsuits such as the two brought about by HP, Acer says.

The HP lawsuits come as Acer continues to gain market share in the global PC business, and some analysts have called the disputes a response to the inroads Acer has made in the U.S. PC market.