An Apple Judgment Today Keeps Infringement at Bay
Even though Apple did not get the $2.5 billion it sought, the $1.05 billion it was awarded is one of the largest judgements of its kind in history. Some commentators lament that this will make smartphones more expensive. Perhaps, but the verdict shows that cloning a successful company, particularly an American company as prestigious as Apple, is not a wise business strategy.
08/28/12 5:00 AM PT
In a heavily anticipated verdict, a jury last week found Samsung guilty of patent infringement and ordered it to pay over US$1 billion to Apple. This victory for Apple in the smartphone wars is a warning to others who may desire to copy the look and feel of the Apple designs.
Samsung's countersuit against Apple for infringement of wireless technologies patents was dismissed.
The jury in the case found that Samsung infringed six of the seven asserted Apple patents, three utility patents and three more narrow design patents. The infringements concerned many of the now popular touchscreen features developed by Apple, e.g., dragging documents, rotating by twisting and zooming in by pinching. Samsung's products, particularly those in the Galaxy line, incorporated these features now standard on iPhones and iPads. To Apple, these and other features capture the Apple experience, and they contended that Samsung wanted to duplicate that experience in an effort to compete with Apple. One of Apple's chief claims was that Samsung's infringing sales undermined sales of Apple's own products, resulting in considerable lost revenue.
Different Cases, Different Verdicts
Even though Apple did not get the $2.5 billion it sought, the $1.05 billion judgment is one of the largest of its kind in history. Some commentators lament that this will make smartphones more expensive. Perhaps, but the verdict shows that cloning a successful company, particularly an American company as prestigious as Apple, is not a wise business strategy. The jury also found that many of the Apple patents were willfully infringed, which under patent statutes allows trebling the actual damages as a punishment mechanism. With Samsung's smartphone profits in the U.S. at about $8 billion, the judgment is but a sting to the megacompany, which will appeal.
Oddly, earlier in the day, a similar patent suit between Apple and Samsung in South Korea resulted in both parties infringing the other. The South Korean court, however, awarded nominal damages to the parties.
In any event, the battle for market share in the global smartphone wars goes on. The recent Apple victory in San Jose, home turf for the company, is but the latest skirmish, with more battles to come. Patents are the tools for these market share battles.
In addition to damages, successful patentees at trial can also be awarded an injunction, e.g., the seizure of infringing inventory and cessation of sales of those products deemed infringing. This possible serious measure is now being vetted by the trial judge, and the hearing on the issue is in a few weeks.
Despite the apparent animosity between the parties, it makes perfect sense to settle the dispute at this time to prevent the possibility of injunction and the chaos that would bring to Samsung, as well as the potential for bad press for Apple. This situation is reminiscent of the BlackBerry litigation years ago, in which the threat of injunction on top of the $612 million award forced a settlement.
Without settlement, the case will be appealed to the Federal Circuit, the appellate court charged with all national patent appeals. Samsung will have to allege some error on behalf of the district court, and that a legal injustice has occurred necessitating reversal. All eyes will be on the Federal Circuit this Christmas for their ruling. Of course, if either party is unhappy with the Federal Circuit decision, then the case can be submitted for Supreme Court review, to be heard about a year and half later.
Unfortunately, the Supreme Court has been chiding the Federal Circuit for some time and has also been chipping away at patent rights. Justice Breyer in particular has demonstrated a hostility to patent laws, particularly tech patents.
Blaming It on the System
More notably, and in an ironic twist, the patent system will suffer abuse because of Apple's win. A billion dollars gets notice. Unfortunately, the patent system, an apparent enabler of the smartphone corporate market share wars, will be tarred and feathered for these crimes. It will not matter that the jury found Apple's patents valid, and six of seven infringed, most willfully, i.e., to the jury, the evidence demonstrated a decision to copy and not design around. Sadly, the tech pundits will point their fingers at the evil patents.
Our patent system is not flawless, but it serves a critical societal function to promote innovation. Here, Apple, a company known for inventiveness, patented their inventions and licensed their technology to others, such as Microsoft. Samsung was also offered a license but decided against it, apparently believing that their designs were different. With their quite sophisticated and valuable technology, the smartphone wars generate huge amounts of money to Apple, Samsung and others.
A billion dollars is a tiny fraction of that over $200 billion dollar-a-year market, and the award given was not unwarranted -- at least on the surface. If there were trial court errors, then the judges and then justices on appeal will address them. Hopefully, the Supreme Court and the court of public opinion will not spoil the whole patent system because of one good Apple.