Apple vs. Samsung: What you need to know


by David Price, Macworld UK   Jul 28, 2012 12:15 am

Editor’s Note: The following article is reprinted from Macworld UK. Visit Macworld U.K.’s blog page for the latest Mac news from across the Atlantic.a

It feels like mobile giants Apple and Samsung have been suing each other since the dawn of time, but the really big patent trial between the companies—the US trial debating whether Samsung copied the design patents of the iPhone and iPad—begins in California on Monday.

We’ve summarised each side’s arguments below and have attempted to explain what Apple and Samsung stand to win or lose in this titanic legal battle, how likely each outcome is, and the likely effect on the tablet and smartphone markets—not to mention the technology industry, and its heavy reliance on vigorous patent enforcement, as a whole.

What’s this patent trial all about, then?

Design patents on mobile technology products, basically. Apple reckons Samsung copied its designs for the iPhone and iPad, then got rich off the resulting products. Or richer. It wasn’t a pauper to start with. Some thrilling company secrets could get spilled.

Sounds like a pretty straightforward case. If they’ve got the patents, it’s open and shut.

Ha! Good one. New to patent law, are you?

Variants on this basic argument, and extensions and offshoots of it, have been whirling around the world’s courts for years, with different judges reaching often-contradictory verdicts in different territories.

In the UK, for instance, Apple was ordered to take out expensive adverts admitting that Samsung didn’t copy the iPad, although this was later delayed pending appeal, whereas German courts have banned the EU sale of Samsung Galaxy Tabs, on the basis that they infringe Apple design patents. Riddle me that one, if you can.

Patents tend to be very complicated, often vague and horribly subjective. One thing they’re not is “open and shut.”

Okay, so it’s going to be thrillingly complex. Baffle me with some legal arguments. Let’s start with Apple’s position.

I should first state that the following claims and counterclaims are already simplifed versions of the original claims made by Apple and Samsung. The presiding judge in the case, Lucy Koh, has restricted each side to no more than 25 hours to present its case and to show no more than 125 exhibits.

Apple reckons Samsung took rather heavy-handed (or light-fingered) “inspiration” from the design of the iPhone and iPad, and then made billions of dollars selling derivative products (and cost Apple hundreds of millions in lost sales).

Apple’s brief for the trial has some great snippets about innovation. The Wall Street Journal has more of these, but here are some highlights:

“Samsung cannot change the central fact that its products are strikingly similar to Apple’s patented designs. Nor can it change the novelty and extraordinary success of Apple’s designs. Samsung will instead attempt to confuse the issues with a hodgepodge of defenses based on incorrect legal standards. Samsung’s defenses will fail.”

“Samsung’s documents show that the similarity of Samsung’s products is no accident or, as Samsung would have it, a ‘natural evolution’. Rather, it results from Samsung’s deliberate plan to free-ride on the iPhone’s and iPad’s extraordinary success by copying their iconic designs and intuitive user interface.”

Presumably Samsung sees things differently.

Yes. Samsung contends that it got there first with a lot of the basic technologies used in today’s smartphones, that it has relevant patents of its own—although intriguingly, Apple argued in Australian court this week that Samsung was claiming patents on components it didn’t know about—and that Apple has a history of commercialising other companies’ innovations rather than coming up with its own. Here are some excerpts from the Samsung brief:

“Apple, which sold its first iPhone nearly twenty years after Samsung started developing mobile phone technology, could not have sold a single iPhone without the benefit of Samsung’s patented technology.”

“Apple seeks to exclude Samsung from the market, based on its complaints that Samsung has used the very same public domain design concepts that Apple borrowed from other competitors, including Sony, to develop the iPhone. Apple’s own internal documents show this.”

“Apple has admitted in internal documents that its strength is not in developing new technologies first, but in successfully commercializing them… Also contrary to Apple’s accusations, Samsung does not need or want to copy; rather, it strives to best the competition by developing multiple, unique products. Samsung internal documents from 2006, well before the iPhone was announced, show rectangular phones with rounded corners, large displays, flat front faces, and graphic interfaces with icons with grid layouts.”

I’m torn. What evidence has Apple got to support its claims?

Apple has put forward a document (which has been published by AppleInsider) that illustrates Samsung smartphones before and after the iPhone launch in 2007. Of course the company has selected the most visually helpful models, but there’s an undeniable “non-iPhoney”/“iPhoney” contrast between the before and after pictures.

Samsung smartphones before and after
Samsung smartphones before and after

More specifically, Apple has listed the patents it reckons Samsung has infringed, and a per-unit royalty fee it believes would be appropriate. Quoting from the excellent FOSS Patents site:

“These are the per-unit royalties that Apple calculated for its different intellectual property rights-in-suit:

$2.02 for the ‘overscroll bounce’ (or ‘rubber-banding’) 318 patent

$3.10 for the ‘scrolling API’ 915 patent

$2.02 for the ‘tap to zoom and navigate’ 163 patent

$24 for use of any of Apple’s design patents or trade dress rights

Apple bases these demands on studies according to which the features and techniques covered by those patents drive demand. For example, a conjoint survey conducted by one of Apple’s experts “shows that Samsung’s customers are willing to pay between $90 and $100 above the base price of a $199 smartphone and a $499 tablet, respectively, to obtain the patented features covered by Apple’s utility patents.”

$2 doesn’t sound unreasonable. What would the total cost be if Samsung lost (and the judge went with Apple’s numbers)?

A cool $2.525 billion. Sorry but it’s impossible to write $2.525 billion without putting “cool” in front of it.

Ouch. Does Samsung have any patents of its own to wield? You said both sides had recorded victories.

Samsung’s got a few, yes. Its counterclaims have listed some examples of what we call SEPs, or standard-essential patents, which could relate to antitrust issues. In the same FOSS article linked above, you can read Apple’s slightly amusing pronouncements on that subject: “To The Extent That Samsung Is Entitled To Any Remedy, its FRAND Damages Cannot Exceed $0.0049 Per Unit for Each Infringed Patent.”

You’ll notice that half a cent per unit per SEP is rather lower than the figures Apple gives for its own patents, but there are complications. As FOSS puts it, “Samsung’s SEPs cover a part of the functionality of the baseband chip. And such baseband chips sell in the $10-per-unit range. That’s a completely different value proposition than the entire market value of an iPhone or iPad, but that’s the way it is.”

I see. But if you forget money for a second…

I’ll try.

…what other market effects should we expect if Apple wins big?

Nobody’s sure, I’m afraid. But it will establish a pretty strong precedent for future patent enforcement in the biggest single technology market: the US. Other makers of non-iOS smartphones, not to mention anyone who’s got a tablet that looks like—but isn’t—an iPad, can expect their lawsuits with Apple to get that much tougher.

To return to the money issue, it might be worth pointing out that Samsung had revenues of almost $250bn in 2011, so even Apple’s dream compensation figure wouldn’t bankrupt the company overnight. It would probably hurt, though.

Could the mobile market as a whole benefit from an Apple victory?

Longer-term, it’s conceivable—if a little unlikely—that a win in a context as significant as this could nudge the entire market in a new direction. Up until now, let’s face it, even if they aren’t truly copying the iPad, rival tablet makers are at the very least using it as a rough template. A thumping Apple win could encourage more innovation.

The iPad created a brand-new market—it would be nice if another company came along and produced something with the potential to take sales off the iPad without emulating it. As Tim Cook put it recently, “It is important for Apple not to be the developer for the world. We just want other people to invent their own stuff.”

One last question. Who’s going to win?

The precedents are all over the place, so it’s impossible to call this one way or the other. Let’s just hope that obscure patent law is the real winner!





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