Samsung vs. Apple patent dispute: Subject to 1 tri

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Samsung vs. Apple patent dispute: Subject to 1 tri

디지털데일리 발행일 2013-11-28 10:28:04

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By Yun Sang-ho crow@ddaily.co.kr

Digital Daily

Samsung Electronics will have to pay Apple about 0 million (990 billion won) as the California District Court returned its damages verdict against the company in the patent dispute involving technology used in iPhones and iPads on Nov. 21. The court decision virtually confirmed the earlier rulings on the case (Case 11-1846), which took side with Apple. Although a motion for JMOL (judgment as a matter of law) is pending, it would be difficult to reverse the result. In August, the U.S. International Trade Commission (ITC) ordered a ban on the import and sale of some Samsung smartphones and tablets for their infringement on Apple patents.

The patent dispute between Samsung and Apple, which started in 2011, seems to bring one-sided victory to Apple but Samsung has earned much more than that.

Patent infringement involves punitive damage reimbursement. As the process of patent dispute litigation takes time for settlement, in order to prevent recurrence, the defendant is subject to the reimbursement of compensation which amount s to more than the profits gained from infringement. The defendant usually attempts negotiations with the plaintiff before a final decision to avoid the situation. For this reason, most patent infringement lawsuits are settled with a cross-licensing agreement.

But Samsung and Apple did not follow the rule. They have gone all the way. There have been no negotiations between the two sides although Samsung has to pay Apple a huge amount of compensation, which amounts to as much as 1 trillion won. However, the profits that Samsung has gained from the infringement on Apple’s patents were too big for the company to initiate negotiations. Samsung’s refusal for a compromise has made Apple demand more compensation.

The Samsung products that have become the target in the lawsuit and by ITC were the mobile devices preceding the Galaxy S3 model. Although Samsung has not made public detailed information on them, it is presumed that they include a majority of Samsung’s Android smartphones and tablets released in 2010 and 2011.

Ban on these devices would not much affect Samsung’s present business. But without the devices, Samsung as what it is now may not have been possible. Far from being the world’s top mobile phone manufacturer, the company may have had to give up mobile phone business like Nokia, which was the world’s top mobile phone manufacturer at the time. Blackberry and HTC, which were in the top 3 mobile phone maker list along with Apple during the early days of the smartphone market, may have still prevailed.

To make suppositions about the past would be meaningless but these suppositions indicate how much the ‘Galaxy S’ and ‘Galaxy S2’ phones have influenced on the present status of Samsung. Launched in May, 2010, and April, 2011, respectively, Galaxy S and Galaxy S2 models are still sold in the market worldwide. Galaxy S phones recorded a sale of 10 million in seven months since its release and Galaxy S2 phones, in five months. According to Samsung, it sold more than 25 million Galaxy S phones and 40 million Galaxy S2 handsets until January this year.

According to Strategic Analytics (SA), a global market research company, Samsung sold a total of 17.4 million smartphones from 2007 to the first quarter of 2010, a period preceding the release of Galaxy S. During the first quart of 2010, Samsung’s global market share ranked fifth with 4.8 percent, following Nokia, Research in Motion (present BlackBerry), Apple and HTC. SA said Samsung sold 88.4 million smartphones in the world during the third quarter of this year, accounting for a 35.2 percent market share.

Samsung’s revenue and profit grew more dramatically. During the second quarter of 2010 when Galaxy S was released, Samsung’s revenue in the telecommunications sector remained at 8.78 trillion won and its profit, at 630 billion won. Its revenue and profit in the IT and mobile communication (IM) sector grew to 24.04 trillion won and 4.19 trillion won in 2012, respectively, when Galaxy S3 phones were launched. During the third quarter of this year, Samsung’s revenue and profit in the IM division amounted to 36.57 trillion won and 6.07 trillion won, respectively.

While Samsung was on a fast track with its Galaxy S and Galaxy S2, mobile phone businesses of Nokia and Motorola saw changes of ownership, and LG, BlackBerry, and HTC struggled with poor performance. Through the lawsuit with Apple, Samsung Electronics also raised its brand value, which is an intangible asset.

Over the period, the global mobile phone market has been reorganized to a winner-take-all structure. Samsung also performed well in the semiconductor and display area by focusing on self-supply of parts for phones. In particular, its System LSI application processor (APs) and active-matrix organic light-emitting diodes (AMOLED) displays have reached a world level.

Officials who headed the mobile phone business of Samsung in 2010 have also strengthened their positions in the company. Choi Ji-sung, who was CEO of Samsung in 2010, was promoted to a vice chairman and now heads Samsung’s Future Strategy Office. Shin Jong-kyun, who was in charge of the mobile phone business in 2010, is now a Co-CEO of the company. The telecommunications sector accounted for about 23.2 percent of the total revenue of Samsung during the second quarter of 2010 and 12.6 percent in profit. But the figures grew to 61.9 percent and 65.9 percent, respectively, during the third quarter of this year.

Would the latest ruling by the U.S. court be able to lead negotiations between Samsung and Apple? The possibility seems very low at the moment unless Apple drastically lowers its demand. For Samsung, it is more advantageous to pay a certain amount to Apple in compensation after it further expands its market share and maximizes profits. There is no reason for Samsung to compromise with Apple at the risk of possible loss. Apple also has no reason to accept the condition.

After all, the victims of Samsung’s infringement on Apple’s patents seem to be the other competitors in the market, rather than Apple.