Apple's $1 billion verdict against Samsung: What's next for consumers?

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Apple's $1 billion verdict against Samsung: What's next for consumers?

Battle between two tech giants is not over: Apple plans to call for Seoul-based Samsung to take its most popular cellphones and computer tablets off the market and is asking the judge to triple damages to $3 billion. Samsung vows to fight on to overturn the verdict.

By Paul Elias, The Associated Press / August 25, 2012

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A Samsung customer waits at its service center in Kuala Lumpur on Saturday. Apple Inc scored a sweeping legal victory over Samsung on Friday, as a US jury found the Korean company had copied critical features of the hugely popular iPhone and iPad and awarded the U.S. company $1.05 billion in damages.

Bazuki Muhammad/Reuters

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Apple Inc.'s $1 billion legal victory could mean fewer smartphone options for consumers to choose from, analysts said.

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A federal jury's verdict Friday that Samsung Electronic Co. stole Apple's technology to make and market smartphones using Google's Android software sends a warning to other companies manufacturing similar devices, the biggest marketplace threat to Apple.

"Some of these device makers might end up saying, 'We love Android, but we really don't want to fight with Apple anymore,'" said Christopher Marlett, CEO of MDB Capital Group, an investment bank specializing in intellectual property. "I think it may ultimately come down to Google having to indemnify these guys, if it wants them to continue using Android."

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That's if the verdict stands. Samsung, the Seoul-based global leader among smartphone makers, vowed to fight. Its lawyers told the judge it intended to ask her to toss out the verdict.

"This decision should not be allowed to stand because it would discourage innovation and limit the rights of consumers to make choices for themselves," Samsung lead lawyer John Quinn said. He argued that the judge or an appeals court should overturn the verdict.

Apple lawyers plan to formally demand Samsung pull its most popular cellphones and computer tablets from the U.S. market. They also can ask the judge to triple the damages from $1.05 billion to $3 billion.

U.S. District Judge Lucy Koh will decide those issues, along with Samsung's demand she overturn the jury's verdict, in several weeks. Quinn said Samsung would appeal if the judge refuses to toss out the decision.

Apple Inc. filed its patent infringement lawsuit in April 2011 and engaged the country's highest-paid patent lawyers to demand $2.5 billion from its top smartphone competitor. Samsung Electronics Co. fired back with its own lawsuit seeking $399 million.

The jury on Friday rejected all Samsung's claims against Apple, but also decided against some of Apple's claims involving the two dozen Samsung devices at issue.

It found that several Samsung products illegally used such Apple creations as the "bounce-back" feature when a user scrolls to an end image, and the ability to zoom text with a tap of a finger.

The US case was the latest skirmish in a global legal battle between the two tech giants. Its outcome is likely to have ripple effects in the smartphone market. Other device makers relying on Android, the mobile operating system that Google Inc. has given for free to Samsung and other phone makers, may be more reluctant to use the software and risk getting dragged into court.

During closing arguments, Apple attorney Harold McElhinny claimed Samsung had a "crisis of design" after the 2007 launch of the iPhone, and executives were determined to cash in illegally on the success of the revolutionary device.

Samsung's lawyers countered that it was legally giving consumers what they want: smartphones with big screens. They said Samsung didn't violate Apple's patents and alleged innovations claimed by Apple were created by other companies.

Samsung said after the verdict that it was "unfortunate that patent law can be manipulated to give one company a monopoly over rectangles with rounded corners."

"This is by no means the final word in this case," Quinn said in a statement. "Patent law should not be twisted so as to give one company a monopoly over the shape of smartphones."

The jurors' determination that Samsung took Apple's ideas probably matters more to the companies than the monetary damages, Marlett said.

"I don't know if $1 billion is hugely significant to Apple or Samsung," Marlett said. "But there is a social cost here. As a company, you don't want to be known as someone who steals from someone else. I am sure Samsung wants to be known as an innovator, especially since a lot of Asian companies have become known for copying the designs of innovators."

Apple and Samsung combined account for more than half of global smartphone sales. Samsung has sold 22.7 million smartphones and tablets that Apple claimed uses its technology. McElhinny said those devices accounted for $8.16 billion in sales since June 2010.

Samsung's Galaxy line of phones run on Android, and ISI Group analysts viewed the verdict as a blow to Android as much as Samsung.

If Android lose any ground in the mobile computing market, that would hurt Google, too. That's because Google relies on Android to drive mobile traffic to its search engine and services to sell more advertising.

Google entered the smartphone market while its then-CEO Eric Schmidt was on Apple's board, infuriating Apple co-founder Steve Jobs, who considered Android to be a blatant rip-off of the iPhone's innovations.

After shoving Schmidt off Apple's board, Jobs vowed that Apple would resort to "thermonuclear war" to destroy Android and its allies.

The Apple-Samsung trial came after each side filed a blizzard of legal motions and refused advisories by the judge to settle the dispute out of court. Legal experts and Wall Street analysts had viewed Samsung as the trial's underdog. Apple's headquarters is just 10 miles from the San Jose courthouse, and jurors were picked from the heart of Silicon Valley, where Jobs is a revered technological pioneer.

A verdict came after less than three days of deliberations, surprising observers who expected longer deliberations because of the case's complexity.

While the issues were complex, patent expert Alexander I. Poltorak has said the case would likely boil down to whether jurors believed Samsung's products look and feel like Apple's iPhone and iPad.

Samsung's lawyers argued that many of Apple's claims of innovation were either obvious concepts or ideas stolen from Sony Corp. and others. Experts called that line of argument a high-risk strategy because of Apple's reputation as an innovator.

Apple's lawyers argued there is almost no difference between Samsung products and those of Apple, and presented internal Samsung documents they said showed it copied Apple designs. Samsung lawyers insisted that several other companies and inventors had developed much of the Apple technology at issue.

Apple and Samsung have filed similar lawsuits in South Korea, Germany, Japan, Italy, the Netherlands, Britain, France and Australia.

"This is not the final word in this case or in battles being waged in courts and tribunals around the world, some of which have already rejected many of Apple's claims," Samsung said in its statement.

Samsung won a home court ruling earlier Friday in the global patent battle against Apple. Judges in Seoul said Samsung didn't copy the look and feel of the iPhone and ruled that Apple infringed on Samsung's wireless technology.

But like the jury in California, South Korean judges said Samsung violated Apple's technology behind the "bounce-back" feature. Both sides were ordered to pay limited damages.

The Seoul ruling was a rare victory for Samsung in its arguments that Apple has infringed on its wireless technology patents. Samsung's claims previously were shot down by courts in Europe, where judges ruled that Samsung patents must be licensed under fair terms to competitors.

The U.S. case is one of some 50 lawsuits among myriad telecommunications companies jockeying for position in the burgeoning $219 billion market for computer tablets and smartphones.

Associated Press writers Michael Liedtke in San Francisco and Sam Kim in Seoul contributed to this report.

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http://www.csmonitor.com/USA/2012/0825/Apple-s-1-billion-verdict-against-Samsung-What-s-next-for-consumers

Friday, August 24, 2012

Apple-Samsung ruling suggests South Korea is a FRAND rogue state

A couple of court decisions announced in Seoul, South Korea, this morning indicate that South Korea has decided to become a rogue state in connection with standard-essential patents, essentially telling foreign companies that in order to sell their technology products to the country's 50-million population, they must bow to extortion by Samsung and LG.

This is highly problematic and will have diplomatic repercussions. The victims of such abuse will be companies from the United States, Europe and Japan, and increasingly also Chinese companies. I don't know what Apple is going to do, but it would make sense to talk to both U.S. presidential candidates at the earliest opportunity.

As the media report (1, 2, 3), Apple was found to infringe two Samsung wireless patents (which have previously been identified as standard-essential ones), and Samsung was found to infringe one Apple patent. Both companies were ordered minor amounts of damages (chump change) and sales bans on older products, in Apple's case the iPhone 4 and the iPad 2. What appears at first sight to be a mixed ruling and will be subject to a de novo (from scratch) review by an appeals court is actually a declaration of a trade war. It would mean that foreign companies would either have to bow to Samsung's and LG's demands and, among other things, give up their own non-standard-essential intellectual property or stop selling in Korea. If I were Apple, I would defend myself vigorously and, if necessary, write off the Korean market until this issue is resolved through bilateral U.S.-Korea talks or at the level of the World Trade Organization. Also, Apple's products are very popular among a large part of the Korean population, though I guess the influence of "fanbois" is going to be very limited compared to the clout of the Samsung and LG conglomerates.

Even the 2:1 score in Samsung's favor is noticeably inconsistent with the track record these companies have against each other in litigation in countries in which neither one is headquartered. In such neutral countries, Samsung has won zero -- ZERO -- injunctions so far. It has failed miserably in Germany (three times already), in France, in Italy, and in the Netherlands. Now, all of a sudden, it wins two injunctions in a country in which about 20% of the GDP depends on the Samsung group (compared to that percentage, Apple means nothing to the U.S. economy). The only thing Samsung was able to win against Apple in a neutral country at all was an award of what will ultimately be very minor damages in the Netherlands.

While Samsung is now also formally subjected to an injunction, that one is not over a standard-essential patent. Samsung can modify the affected products and future products and simply work around that patent. But Apple cannot work around the 3G/UMTS standard.

Formally, only the iPhone 4 and iPad 2 are affected, but in practical terms, Apple now knows that (unless the appeals court reverses this ruling) Samsung may be able to quickly seek injunctions against newer Apple products over standard-essential patents.

Samsung and LG both have a history of aggressive enforcement of SEPs. LG has a history of very aggressive demands, and this week it just filed a lawsuit over DVD-related patents against ToshibaSamsung in Delaware. LG wants both: high royalties and a back-license to non-standard-essential patents. But if it can "only" get high royalties, it's fine with that. Samsung is not even interested in high royalties from Apple. All that it's interested in is a basis on which Apple will tolerate Samsung's and Google's infringement of its non-standard-essential patents, either on a royalty-free basis or on a basis on which net payments to Apple would be minuscule and on which Apple would not be able to impose restrictions, such as excluding certain patents from the scope of a deal.

What has to be said in all fairness to Korea is that the United States itself will have a credibility problem on standard-essential patents in the event that the ITC later today orders an import ban against Apple over a Motorola SEP (and if such ban is neither vetoed by the White House nor stayed by the Federal Circuit).

The stakes in this are getting higher and higher, but if Apple gives up its intellectual property only because of temporary issues such as the one it faces in Korea, the cost will be far higher than if it defends its rights. If the price to pay for access to the Korean market is unfettered commoditization, Apple should pull out of the market at some point, and return only after the issues have been resolved.

If you'd like to be updated on the smartphone patent disputes and other intellectual property matters I cover, please subscribe to my RSS feed (in the right-hand column) and/or follow me on Twitter @FOSSpatents and Google+.

http://www.fosspatents.com/2012/08/apple-samsung-ruling-suggests-south.html

Victorious Apple: The Wireless Hegemon’s Victory

by Binoy Kampmark / August 25th, 2012

The Apple monster has received a boost with its victory on Friday over Samsung Electronics Co. in the first major patent trial over smartphone technology, ensconcing it in the wireless industry as never before.  The mobile industry, take heed.  Competition, always a moot point in the industry, has been further trashed by legal fiat.  As Anton Troinovski in the Wall Street Journal (August 24) put it in a headline, “Apple’s Victory Sends Fear Through Android Ecosystem.”

The Yonhap News Agency (August 25) was just as graphic about the jury’s award of $1.05 billion in total damages against Samsung.  “Samsung, South Korea’s electronic giant, suffered a crushing defeat Friday in a courtroom war against Apple, casting dark clouds over its booming sales of smartphones and tablet computers in the U.S. market.”

The battle between Samsung and Apple over “utility” patents on the iPhone and iPad covering, amongst other things, the way smartphone screens reshape or the way they are double tapped, has been taking place now for over a year, with some 30 lawsuits in the U.S., South Korea and seven other states. The Californian verdict has effectively dealt a blow to the Android system, which was the alternative to the iPhone behemoth.

The heat and hostility of the confrontation can be gauged by the verdict of the Seoul Central District Court, which concluded that both companies had violated each other’s patents.  If competition, in the strict sense of the word, is to flourish in the wireless system (bizarrely termed an ecosystem by computer aficionados), violations and fitful treading on the turf of competitors is surely inevitable.  That, however, is something that the legal world of patents has stifled.

What is striking about Apple’s corporate strategy is how it has wooed the carrier market, lodging the iPhone brand across the market.  Apple’s strangling tentacles have taken hold of AT&T Inc., Verizon Wireless and Sprint Nextel Corp.  The company’s strategy has been to seek sizable payments from the carriers to subsidize purchase of iPhones.  Such a strategy can only remind one of the ancient and medieval technique of forcing neighbouring states to pay tribute to the region’s most powerful empire.  The precursor to profit is the good old bribe.  On discovering such a tribute system – that Sprint, for instance, had arranged the purchase of $15.5 billion worth of iPhone stock – stocks have plummeted.

The iPhone has become the unnecessary necessity.  The possibility of buying a phone that is merely a device to call on has vanished, or at the most, been vanquished to corners of the wireless imperium.  As a despondent Mike Elgan put it in Wi-Fi Planet (September 28, 2009), the iPhone was a contagion, more effective than the swine flu. The need for others to catch up with spreading this contagion has become pressing.

Once you catch this particularly virulent bug, you become susceptible to a personality disorder that compels you to filter all experiences in life through the prism of whether or not there’s an app for it.  It creates a bias in favour of information and media available through apps – and another bias against content not delivered through the iPhone.

With each passing day, the “app” world is creeping into every minute facet of living.  There are those that are free and inherently worthless and those that just might do, as one iPhone app does, help law students pass their bar exams at the cost of $1000.  “Part of the reason for BarMax’s success,” writes Jason Del Rey in Inc. Magazine (June 22, 2010), “is the fact that bar preparation classes cost three times as much.”

The triumph of Apple was not merely to make goods pretty, but to make them seemingly indispensable to human vanity.  Love is something of a disease, romanticism a disorder, and the Apple romantics have conquered in a remorseless fashion through their bereft jargon of the “app.”  To have an iPhone, is to be alive, to be a circulating blood cell in the wireless organism of Apple might.   The screen has been vested with living properties, and each time, as if it were drawing force from its human subject, the iPhone deprives as much as it gives.  That Samsung dared do the same thing could not be allowed to pass.  The smartphone wars, despite this court decision, are set to continue.

Binoy Kampmark was a Commonwealth Scholar at Selwyn College, Cambridge. He lectures at RMIT University, Melbourne and can be reached at: bkampmark@gmail.com. Read other articles by Binoy.

This article was posted on Saturday, August 25th, 2012 at 8:01am and is filed under Arts and Entertainment.

http://dissidentvoice.org/2012/08/victorious-apple-the-wireless-hegemons-victory/