My Thoughts on Technology and Jamaica: Apple wins US$1.05 billion in Patent Infringement Case against Samsung - Jurors in a Premium Rush to Limit Innovation in Product Design

Thursday, August 30, 2012

Apple wins US$1.05 billion in Patent Infringement Case against Samsung - Jurors in a Premium Rush to Limit Innovation in Product Design

In the trial of the century, a clash of titans between Cupertino, California based Apple and South Korean tech giant Samsung, Apple has come out on top as announced by CNET News Eric Mack in “Apple wins big in Samsung patent battle: Did you call it?”, published August 24, 2012 4:33 PM PDT by Eric Mack, CNET News.

So big was this Legal ruling that it made the news in the Jamaica Observer and the Jamaica Gleaner in the article “What Apple’s US$1B victory means for consumers”, published Monday, August 27, 2012, The Jamaica Observer and “Epic Patent Trial Over iPhone Technology Wraps Up”, published Wednesday August 22, 2012, The Jamaica Gleaner.

For those of you who love Apple to bits, it’s a follow-on of legal attempts to block the Samsung Galaxy Tablet in the EU and other significant markets in the world as stated in my blog article entitled “Apple blocks Samsung Galaxy Tab in EU - Dancehall Hero's Revenge of the Sith”.

Apple has won the most publicized, if not the biggest Patent Battle of its life against Samsung as it relates to infringement on several of its design patents. The award of nearly US$1.05 billion or $1,051,855,000 exactly as stated in the article Apple wins big: Samsung violated Apple patents, must pay $1.05 billion in damages, court rules (updated)” published AUGUST 24, 2012 BY ANDREW COUTS, Digitaltrends as well as “Disaster for Samsung: Jury awards Apple $1.05 billion in patent case” published Aug 24, 2012 - 4:16PM PT By Jeff John Roberts, Gigaom is for Samsung's violation of certain specific patents owned by Apple.

Apple’s action, much storied in the Media and Technology blogsphere, came to light in the US of A when they tried to block sales of the Samsung Galaxy SIII smartphone and their 10” Samsung Galaxy Tablet as stated in Apple may seek U.S. ban of Samsung Galaxy S III today”, published June 8, 2012 5:04 AM PDT by Lance Whitney, CNET News and Apple wants to keep Samsung's Galaxy S3 out of U.S.” published June 6, 2012 1:28 PM PDT by Josh Lowensohn, CNET News.

Good to note at this point that Samsung is also a supplier of components for the Apple iPhone and Apple iPad. So the case for patent Infringement is plausible, despite the contractual obligation to merely supply components for their products for assembly by Chinese electronics manufacturer Foxconn into Apple products.

For Apple, a lot is at stake for them as stats from February analyst Nielsen indicate that in the First Quarter of 2012, 50% of Americans who own a mobile phone have swung towards smartphones as stated in the article “Smartphones now account for half of all mobile phones”, published March 29, 2012 2:23 PM PDT by Scott Webster, CNET News.

Stats from ComScore reveal the depth of Apple's pickle, with Android phones accounting for 50% of the now super-saturated smartphone market as stated in the articles Android now represents half of U.S. smartphone market”, published April 3, 2012 11:19 AM PDT by Lance Whitney, CNET News and Android still dominates U.S. smartphone market”, published by June 1, 2012 2:06 PM PDT by Steven Musil, CNET News.

25% of smartphone users own a Tablet, most likely the Apple iPad as pointed out by the statistics of ComScore in the article “U.S. tablet usage hits 'critical mass,' ComScore reports” published June 10, 2012 11:37 AM PDT by Steven Musil, CNET News. Apple is still the king of Tablets, a market this case hoped to guard against as argued in my Geezam blog article entitled “Three’s a Charm as Apple iPad 3 Looms Large”.

The Jury came to its decision rather quickly (bet you they’re all Apple fans!). Their 20-page summary judgment breaks down in a very skewed manner for Apple, offering compensation for infringement on its smartphones but no protection for later models of their smartphones and its main showpiece product, the Apple iPad:

Software Design

1.      Patent ‘381 (the “bounce back” action) - The jury ruled in Apple’s favor and found that all of Samsung’s accused products infringed on this patent. All Samsung devices were found for inducement (Samsung made its U.S. counterparts infringe on the patent). Samsung was also found guilty of willful infringing on this patent. 
2.      Patent ‘163 (the “double tap to zoom” action) - The jury ruled in Apple’s favor and found that with the exception of eight mobile devices, Samsung infringed on this patent. Samsung was also found guilty of willful infringing on this patent. 
3.      Patent ‘915 (the “pinch to zoom” and other zoom and scroll function actions): The jury ruled largely in Apple’s favor, saying the only Samsung devices exemptions are the Intercept, Replenish, and the Ace. Concerning this patent, all Samsung devices except the Replenish were found for inducement. Samsung was also found guilty of willful infringing on this patent.

Physical Design 

1.      Patent ‘087 (back of the iPhone) - All Samsung devices with the exception of the Galaxy S,4G and Vibrant. 
2.      Patent ‘677 (front of the iPhone)-  all Samsung devices were found to infringe on this patent except the Ace. Samsung was also found guilty of willful infringement on this patent. 
3.      Patent ‘305 (iOS app icon design) - All Samsung devices were found to infringe on this patent – this has been a much-talked-about point, and the jury came down hard on it, saying, basically, that Samsung should have known better. Samsung was also found guilty of willful infringement on this patent. 
4.      Patent ‘889 (iPad design – specifically, “clean front, edge-to-edge glass, thin bezel, thin outer border, and rounded corners”):  Samsung and its Galaxy Tab devices were determined to not have infringed on Apple’s patent. Strangely, Apple is being given a monetary reward, a judgement by the Jury that is still being reviewed by the Supreme Courts

Trade dress (overall Aesthetic Feel)

Trade dress is basically the physical styling of the product, an aesthetic that is difficult to copyright unless it's unique in some way. Samsung argued that patent D’893 was not protectable, but the jury ruled against this decision.

Apple won trade dress infringement for the iPhone 3G only, with the other models of the Apple iPhone and the Apple iPad not being protectable.

To be even clearer, the jury found the following phones diluted the Apple iPhone 3G's Trade Dress: 

1.      Samsung Fascinate
2.      Galaxy S i9000
3.      Galaxy S 4G
4.      Showcase
5.      Mesmerize
6.      Vibrant

The jury found, however, that the following phones were not found to dilute or infringe upon the trade dress of the Apple iPhone 3G: 

1.      The Captivate
2.      Continuum
3.      Droid Charge
4.      Epic 4G
5.      Prevail, S2 (AT&T)
6.      S2 i9100
7.      S2 (T-Mobile)
8.      Epic 4G Touch
9.      Skyrocket
10.  Infuse 4G

This award, albeit hefty, is a lot less than what Apple had wanted, which was US$2.5 billion.
Interestingly enough too, albeit a hefty sum, is a mere drop in the bucket for Samsung, whose Gross Earnings  for 2011AD was US$145 billion, or 0.72% of their Gross 2011AD profit. Certainly won’t shake Samsung, which also has business interests in other areas other than making phone and Tablets. 

More interesting stats for Samsung:

1.      The South Korean tech giant Samsung earned a whopping £2.75bn in the First Quarter of 2012AD
2.      Samsung sold 44.5 million smartphones, 22% more than the First Quarter of 2011AD.
3.      Samsung has taken the No. 1 spot for phone sales overall from Nokia, a position it has held since 1998 Samsung’s sales figures beat Apple, who sold only 35 million iPhones

Their full spread of business, which includes a significant amount of spending on R&D (Research and Development) includes all ranges of consumer electronics, from Car Stereos to Blenders. They also make hard-drives, both the older Mechanical types and the newer SSD (Solid State Drives) hard-drives for PC’s, Laptops, smartphones and Tablets.

This interest in SSD's is based on the US$1.375 billion deal brokered by Seagate Technology PLC and Samsung Electronics Co. on Tuesday April 19th 2011AD as reported in my Geezam blog article entitled “Seagate – Samsung Swap Hard-Drive Assets – Profitable Cloudy Horizon”. SSD’s are the new business area that they are positioning themselves, especially with the expansion of Cloud Computing and Cloud Storage.

Samsung also has it fingers in Natural Gas and Oil via its business arm Samsung C&T Corporation. This comes to light via the deal inked with the GOJ (Government of Jamaica) to build the floating Regasification Terminal and Pipeline infrastructure for the new LNG Plant in Old Harbour, St. Catherine as noted in my blog article entitled “Samsung C&T Corp of Korea secured for LNG Regasification Plant and Pipelines - Jamaican Contractors to benefit from National Project to Secure Jamaica's Energy Future”.

So albeit a significant victory for Apple, it’s a mere drop in the bucket for Tech Giant Samsung, who also lost their countersuit case against Apple. Both Apple and Samsung are most likely to appeal the ruling; Apple is seeking to up the claim for damages to US$2.5 billion and to have it include the Apple iPad. Samsung is set to appeal the whole ruling altogether, as this translates into royalties being paid over to Apple and slight increases in the cost of their smartphones and Tablets to consumers.

Worse, Apple may use this ruling to pursue further legal action against smartphone and Tablet makers whose products are being sold in markets where Apple's products compete and where it feels those competitor’s products infringed on its design.

So a pyrrhic victory that was a Premium Rush (2012) by the Apple-philic jury as its legal battle only winds up protecting the Apple iPhone 3G and leaves its newer Apple iPhone models and the Apple iPad unprotected and vulnerable to the vagaries of the Free Market.

And albeit Apple is well within its rights to defend its patents after years of having Microsoft and other copy and steal their designs with very little significant legal action, this outcome will go a long way to stifle innovation and foster the idea among tech companies that they can profit from having a treasure trove of patents.


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