The crippling U.S. patent court $1.05B USD copyright infringement verdict against the world’s largest smartphone maker, Samsung Electronics Comp., Ltd. (KSC:005930), is far from over.
I. Ban ‘Em All
Apple, Inc. (AAPL) is pushing the San Jose, Calif. U.S. District Court for the Northern District of California to ban all currently on-sale products that were found to infringe in the case plus another couple products not listed in the case, which include Samsung’s flagship Galaxy S III smartphone.
Apple previously tried to ban the Galaxy S III, but failed. I predicted it would now try to lump in such a ban on the wings of its massive victory, and indeed it did. If Apple’s request is granted, Samsung would essentially be banned from selling any smartphone other than its Focus 2 Windows Phone and its non-Android quasi-smartphones.
In Samsung’s home nation of South Korea, shock is in the air. Days before the U.S. verdict a Korean court had ruled that both companies had infringed on each others’ work. That verdict stood in stark contrast to the American jurors, who decided that Samsung stole a plethora of technologies and designs from Apple, and that Apple stole nothing from Samsung.
Questions of bias persist — at least one of the jurors had a family member who held a large quantity of Apple stock, according to past reports — but South Korean analysts fear that there may be a hint of truth in the ruling. They fear that perhaps their culture relies a bit too much on imitation when looking to conquer a new field. But many of the critics also express feelings of pride in the company. Even if Apple does “kick it out” of the U.S. market, what Samsung did — beating Apple in an unregulated market battle — was impressive.
Comments James Song, KDB Daewoo Securities’ Samsung-centric analyst, in an interview with The New York Times, “The ruling makes us reconsider the brand value of Samsung because it depicts Samsung as a copycat. But a copycat or not, what Samsung has done with its smartphones was a brilliant move. Look what has happened to companies like Nokia, Motorola and BlackBerry, which didn’t do as Samsung did. Samsung may lack in innovation, but right now, no one can beat Samsung in playing catch-up.”
Indeed — outside of Samsung, nearly ever phonemaker that isn’t named “Apple” is in bad financial trouble. Google Inc.’s (GOOG) Motorola and Taiwan’s HTC Corp. (TPE:2498) are both posting disappointing earnings and shrinking market share. Research in Motion, Ltd. (TSE:RIM) is creeping ever closer to a breakup liquidation/fire sale. And Nokia Oyj. (HEX:NOK1V) is requiring deep financial support from Microsoft Corp. (MSFT) to stay afloat.
But JoongAng Ilbo, a local newspaper, takes a more cynical bent, commenting in an editorial, “Copying and clever upgrading are no longer viable. Samsung must reinvent itself as a first-mover, despite the huge risks involved in acting as a pioneer, if it hopes to beat the competition.”
II. Can Samsung Stay Ahead of Apple?
South Korean analysts acknowledge that Samsung’s phones are “similar” to Apple’s and that it arrived cautiously to the smartphone market, versus some other early adopters, such as RIM and Nokia, who plunged in headfirst. But they point out that for the similarities, Samsung established a unique look for its products, made them cheaper than Apple’s, and endowed them with arguably superior hardware.
The company’s expertise in display and chip-making gave it a key advantage, when it eventually did elect for a full-on smartphone push.
Anthony Michell, author of “Samsung Electronics and the Struggle for Leadership of the Electronics Industry”, tells The NYT, “Koreans do things quicker than almost anyone. Samsung Electronics and the Struggle for Leadership of the Electronics Industry. This allows them to change models, go from design to production faster than anyone at the present time. Korean companies continually set themselves challenges, like the challenge to overtake Sony in terms of brand value in the past.”
Some say its legacy of rapid adaptation will allow it to survive Apple’s patent assault.
Some say despite the pending bans, Samsung may be able to stay ahead of Apple.
[Image Source: Reuters]
Even with Apple seeking to ban all its U.S. Android smartphone sales, Samsung is racing to modify its operating system to remove features — such as “rubber-band” graphical flourishes that the U.S. Patent and Trademark Office granted Apple exclusive rights to animate in a mobile user interface setting.
If Samsung is able to remove the features, the ban could be reduced from months to days or weeks.
Some analysts are convinced that Apple will actually fall farther behind Samsung in U.S. sales in Q3, despite the damage to its image and potential bans. Comments Kevin Lee, an analyst at Korea Investment and Securities, “The patent ruling and Samsung’s copycat image will have a negative impact on Samsung’s sales of cellphones and other products. But Samsung will further widen the gap with Apple in the third quarter, though not as much as expected before the ruling.”
And, of course, Samsung also has an appeal of Apple’s court win in the U.S. federal court pipeline too — so it potentially could undo or mar Apple’s greatest legal triumph somewhere in the near future.
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