The weekend has passed, but the shock is still setting in after a potentially precedent setting jury verdict at the U.S. District Court for the Northern District of California, which left Samsung Electronics Comp., Ltd. (KSC:005930) on the hook for approximately $1.05B USD and facing at least temporary bans on most of its product lineup.
I. “Appleflation”? Cupertino Company’s Win Stirs Controversy
Apple, Inc. (AAPL) was quick to gloat about the victory, whose foundation certainly had some controversial aspects — such as Apple’s ability to re-patent inventions (pinch to zoom) in the context of capacitive multi-touch, Apple’s ability to (essentially) patent the animation of natural phenomena (the rubber-band animation is a textbook visualization of nature’s transient response e.g. see spring), and Apple’s ability to “patent a shape” (Apple’s attorneys argued that its design patents offered an exclusive right to make rectangular smartphones with rounded edges).
Thus in the aftermath of the trial, much of the controversy has focused not on whether the jury made the right decision, but whether the U.S. Patent and Trademark Office was crippling the free market with its lacking scrutiny.
Tech mogul Mark Cuban (also a prominent venture capitalist featured on the show Shark Tank) blasted Apple’s decision in a series of Twitter posts, as noted by Neowin. He implies that he is going to boycott Apple’s products as a result of the lawsuit, and accuses Apple of conspiring to raise prices for electronics customers a term he calls “Appleflation”:
[Image Source: Twitter/Neowin]
[Image Source: Twitter]
Google, Inc. (GOOG) makers of the Android operating system also chimed in, writing that the claims in the case “don’t relate to the core Android operating system”, explaining:
The court of appeals will review both infringement and the validity of the patent claims. Most of these don’t relate to the core Android operating system, and several are being re-examined by the US Patent Office. The mobile industry is moving fast and all players — including newcomers — are building upon ideas that have been around for decades. We work with our partners to give consumers innovative and affordable products, and we don’t want anything to limit that.
While that may sound like Google is throwing Samsung to the wolves, Google is aiming to offer Samsung and other Android OEMs powerful long-term protection, by filing a major new suit against Apple, which seeks to ban almost Apple’s entire product lineup.
II. What’s Next? Bans, Appeals, Appear Likely
Reuters reports that after the ruling South Korea’s markets had a wild day of trading, with 1.27 million shares of Samsung stock changing hands, and the company facing its worst single-day value loss in nearly four years. Overall, Samsung shed $12B USD of its $160B USD valuation. Apple, meanwhile added approximately $12B USD to its market cap this morning, reaching $634B USD, and creeping ever closer to Microsoft Corp.’s (MSFT) record 1998 valuation, which adjusted for inflation totals around $850B USD.
The verdict cost Samsung $12B USD in value. [Image Source: SeongJoon Cho/Bloomberg]
In a statement to Dow Jones NewsWires, Samsung complained that the ruling would limit consumer choice, writing:
We will move immediately to file post-verdict motions to overturn this decision in this court and if we are not successful, we will appeal this decision to the Court of Appeals
It is unfortunate that patent law can be manipulated to give one company a monopoly over rectangles with rounded corners or technology that is being improved every day by Samsung and other companies.
In other words, Samsung will first try to sway Judge Lucy Koh to reduce the infringement and damages in the trial verdict stage. The jury’s ruling is only guidance for the judge’s verdict/sentencing in this kind of civil case, although it usually closely resembles the final ruling.
If it cannot sway Judge Koh, it will begrudgingly move up the food chain with its appeal, while it continues to challenge the validity of Apple’s broad patents in complaints to the USPTO.
A memo to employees from Samsung’s management highlights how the U.S. ruling was much more punitive than rulings in other countries, who largely rejected Apple’s design claims (Germany is the only other region to embrace Apple’s design claims). Samsung writes:
We initially proposed to negotiate with Apple instead of going to court, as they had been one of our most important customers. However, Apple pressed on with a lawsuit, and we have had little choice but to counter-sue, so that we can protect our company.
The NDCA verdict starkly contrasts decisions made by courts in a number of other countries, such as the United Kingdom, the Netherlands, Germany, and Korea, which have previously ruled that we did not copy Apple’s designs. These courts also recognized our arguments concerning our standards patents.
The Korea Times quotes a senior Samsung Electronics executive as saying; “It’s absolutely the worst scenario for us.”
A South Korean patent lawyer involved in the case asserted, “Judge Lucy Koh will make the final ruling in the next few weeks. Samsung will try best to persuade Koh that we didn’t willfully infringe on Apple’s design patents. Samsung, however, is ready to bring the issue to the Supreme Court as the verdict was based on protectionism.”
But a Samsung executive appeared more aware of the likely grim reality, remarking, “As far as I know, it’s very rare for the presiding judge to make a decision going against the verdict by jurors.”
Thus Samsung’s next move is to move the matter to an appeals court, and (likely) to work on emergency software patches to remove features like tap/pinch to zoom and new body designs, to escape product bans.
Unless the Samsung Galaxy S III escapes an ITC ban, Samsung’s entire lineup may be temporarily forbidden from sale on the U.S. market.
Apple’s next move will be to push for speedy product bans. It will also likely seek to pressure the U.S. International Trade Commission to ban the Galaxy S III, not involved in the case, pointing that it has similar features as Samsung’s infringing lineup (e.g. pinch to zoom). If Apple can ban the Galaxy S III, it may be able to achieve the unthinkable — secure a complete ban on the products of America’s current top smartphone seller.
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