Apple-Samsung Trials Seen Solving Copycat Spat Ceos Couldn’t

Apple Inc. (AAPL) and Samsung Electronics Co. (005930), the world’s top two smartphone makers, are heading to trials that may resolve global patent disputes their chief executive officers couldn’t settle on their own.

Overlapping trials are beginning this week at the U.S. International Trade Commission in Washington, where each company accuses the other of infringing patents for features and hardware. They will be followed up in July by a jury trial involving other patent claims in federal court in San Jose, California.

Meetings over the past two years, most recently ones involving Apple Chief Executive Officer Tim Cook and Samsung CEO Choi Gee Sung, have failed to resolve a standoff that spans 10 countries on four continents. Each side is looking in court for some break, such as an order blocking the rival’s products from the U.S., that would give them an advantage in settlement talks.

“This about brinkmanship and bargaining position,” said Rodney Sweetland, a patent lawyer with Duane Morris in Washington who specializes in ITC cases. “They both have too much to lose and too much to gain to not make a settlement.”

Samsung is Apple’s biggest adversary in the iPhone maker’s challenge to the growth of devices that run on Google Inc.’s Android operating system. Together, Samsung and Apple made more than 49 percent of all smartphones sold worldwide in the first quarter, with Samsung edging out Apple in that period for the title of world’s biggest manufacturer of the devices, research analyst Gartner Inc. said May 16.

First Trial

The first ITC trial, scheduled for today through June 6, involves Apple’s patent-infringement claim against Samsung. Apple accuses its Suwon, South Korea-based rival of copying six patents including ones covering inventions related to touch- screen devices, headset detection and the look and shape of the iPhone.

Apple is seeking to block imports of Samsung’s Galaxy Tab tablet computer and phones including the Nexus, Captivate, Indulge, Infuse and Sidekick.

Starting June 4 before a different ITC judge, Samsung will air its claims against Cupertino, California-based Apple. Samsung contends Apple is infringing five patents including one that allows users to view documents in a touch-sensitive screen and two covering industry standards for ways to boost high-speed data transmission. It targets the iPad, iPod touch and different versions of the iPhone including the most recent iPhone 4S.

Continuing Escalation

“It looks like neither company can find common ground, even though Tim Cook said he’s not really interested in litigation,” said Will Stofega, an analyst at IDC in Framingham, Massachusetts.

In an April 24 conference call with analysts, Cook said he would prefer to reach a settlement, as long as it doesn’t put Apple at a disadvantage.

“We just want people to invent their own stuff,” Cook said. “And so if we could get some kind of arrangement where we could be assured that’s the case and a fair settlement on the stuff that’s occurred, I would highly prefer to settle versus battle.”

Kristin Huguet, a spokeswoman for Apple, reiterated the company’s statement on the case that Samsung is engaged in “blatant copying.” Adam Yates, a spokesman for Samsung, said the company had no comment before the trials begin.

Samsung, which makes more than a dozen smartphone models, shipped 42.2 million smartphones in the first quarter, while Apple sold 35.1 million iPhones, IDC reported May 1. Overall, smartphone shipments worldwide surged 43 percent.

Smartphone Profits

The growth is adding to the bottom line for both companies. Samsung, Asia’s biggest consumer-electronics maker, said first- quarter profit jumped 81 percent to 5.05 trillion won ($4.5 billion) after earnings at the mobile business almost tripled. Chinese demand for the iPhone helped Apple boost its fiscal second-quarter profit 94 percent to $11.6 billion.

Even as they battle in courts around the world, Apple remains Samsung’s biggest client. Apple accounted for 7.64 percent of Samsung’s revenue, buying chips and displays, according to data compiled by Bloomberg.

Apple has been able to force Samsung to delay the release or alter its Galaxy products in some countries, including Australia and the Netherlands. There’s more at stake in the U.S., because the trade agency — which will issue final decisions in both cases in January and February — has the authority to stop products at the U.S. border.

In the meantime, Apple is pursuing an order to block sales of the Galaxy Tab 10.1 while the San Jose case is pending.

Battles like those between the smartphone makers aren’t unusual — similar contests occurred when the sewing machine and the telegraph were new, U.S. Patent and Trademark Office Director David Kappos told a House Judiciary subcommittee on May 21. He was asked whether the Apple and Samsung fight will stifle innovation.

“I do not believe that it’s a sign that there’s anything at all wrong with the innovation environment in the U.S.” Kappos said. “It’s a byproduct of a very healthy overall innovation environment. These things happen; they sort themselves out over time. What’s going on here is just a natural ebb and flow of technology development.”

Leave a comment