Apple and Samsung Bury the Hatchet, Finally!

July 12, 2018

 

 

 

What once seemed to be a series of relentless bickering, smartphone giants Apple and Samsung finally reached a settlement on June 29, 2018. Although terms for the agreement have not been disclosed, it is quite apparent that both the parties had had enough mutual drama, in and out of the courtroom.

 

When Apple filed its first lawsuit against Samsung back in 2011, the news set off alarms because Samsung at the time was a major component in Apple’s supply chain, which manufactured everything from DRAM and SSDs for MacBook Pros to the A4 and A5 processors in the iPhone, iPod touch, Apple TV, and iPad. In its complaint, Apple said “Instead of pursuing independent product development, Samsung has chosen to slavishly copy Apple’s innovative technology, distinctive user interfaces, and elegant and distinctive product and packaging design, in violation of Apple’s valuable intellectual property rights” – bringing shade over Samsung as a leading innovator in electronics worldwide. Through its tough stance, Apple made one thing clear - protecting intellectual property is no laughing matter.

 

Of course, there was a lot of speculation in the public as to which side was more genuine, and hence a lot of biased comments were made according to different loyalties and agendas. Apple fanatics held Samsung to be a fraud megacorp, whereas others were of the opinion that the moment Apple detects potency of competition, it runs towards the courthouse, hinting towards Apple’s previous lawsuits against prominent companies including Motorola, HTC and Microsoft.

 

In fact, four days before the first iPhone launch 11 years ago, Apple filed a suite of 4 design patents covering the basic shape of the iPhone. That was followed by a massive design patent covering 193 screen shots of various iPhone graphical user interfaces later that year. That was Apple’s way of telling the world that not only were its products unique, but that it will do anything to protect them.

 

It didn’t take Apple long to dominate the smartphone market – replacing Research in Motion (Blackberry) on the throne. Android remained a sloppy contender with the likes of HTC, Samsung, Motorola and LG each vying for the prize. But a lot changed for Android in the 2008-2011 timeframe. Samsung more than overcame the software limits of Android by their (superior) hardware specs and filled marketplaces with a whole spectrum of smartphones (as opposed to Apple’s insistence on basically a single iPhone).

 

It wasn’t surprising therefore, when Apple fired the first shot – accusing Samsung of infringing atleast 3 of its utility patents and 4 design patents. Steve Jobs was a man on a mission, and his mission was to bring Samsung down. He made no secret of his hostility towards Android, considering it to be nothing short of embezzlement.

 

Samsung attempted to strike back and reclaim respect by countersuing Apple in June 2011, asserting that the company too had infringed on Samsung patents around wireless communications and camera phones. Apple came back even tougher – and filed a second case, this time accusing Samsung of infringing an additional 8 utility patents. It was clear that neither side was going to back away from the fight.

 

When the first case finally came to trial in August 2012, it took the jury less than 3 days to establish that the Korean electronics maker did infact infringe on the design patents covering the iPhone and iPad and owed a whopping USD 1.05 billion. Unfortunately for Samsung, the jury also found that Samsung was entitled to zero damages.

 

The monetary figures aside, both companies mentioned time and again that the trial was about more than just money. Apple went in for the kill – and tried to bar Samsung from selling some of its flagship products in US. Apple’s argument did not carry, however, and the preliminary injunction order was vacated soon after.

 

Adding to the confusion, in December 2012 Judge Koh also concluded that the jury made an error in its damages assessment of $400 million and ordered a retrial. When the retrial concluded in 2013, Apple got awarded USD 290 million, but it was unsuccessful in obtaining a permanent injunction over Samsung’s infringing products.

 

The second case went to trial in 2014 - the motive and energy remained the same even if the patents did not. Unlike the first trial, Google’s presence in the courtroom was quite consequential as Samsung noted that 4 of the 5 accused functionalities were licensed from Google as part of the Android OS. The jury found that Samsung infringed upon two Apple patents but though Apple had requested for USD 2 billion in damages, they awarded Apple (only) USD 128 million. In addition, Apple was found guilty of infringing one of Samsung’s patents but while Samsung had expected to receive damages worth USD 6 million, it was awarded a mere USD 158,400.

 

But it was still the first case – that continued to capture the techno-legal industry’s attention – in no small measured due to the repercussions it would potentially have for how companies view, value and enforce design patents. The case ultimately went up to the Supreme Court – where Samsung argued that Apple is not entitled to total profits from the entire phone (as was the age-old standard for design patents), but only the profit from the components that infringe. After all, products and technology in general have evolved at a faster pace than the law. An electronic device could consist of a 1000 inventions put together – and it would be improper to apply the 100% apportionment standard to such complex products. Samsung argument carried. The Supreme Court tossed the USD 400 million decision and sent the case back to the lower courts to decide.

 

Samsung’s victory at the Supreme Court was short-lived as well – as the jury in the lower court gave Apple a $539 million verdict in May 2018, which finally broke the camel’s back. Samsung could theoretically still challenge the verdict in the Federal Circuit – but decided to settle with Apple, presumably driven by at least the following factors:

  1. Legal costs: Challenging the latest verdict (again) at the Federal Circuit and Supreme Court would have cost many millions over and above the tens of millions already spent over the last 10 years.
     

  2. Market Dominance: While Apple may still be the single largest player in the US smartphone market, its position is nowhere as dominant as when this war started. Samsung has established itself as a respectable second largest player despite the legal setbacks.
     

  3. Changing Political Climate: Conservative ideology is on the rise among the US population and leadership, and popular opinion is moving increasingly against foreign companies. While Apple, Samsung and just about any other electronics company continue to manufacture products in China and whereabouts, Apple is seen essentially as an American company while Samsung essentially as a Korean company. While that has always been a disadvantage (no matter the jurisdiction), it is definitely more pronounced now than ever in the preceding few decades.
     

  4. Newer Technologies: Apple’s focus on perfection often means Apple lags behind other companies in introducing new technologies to the market. The cases at the end of the day are a distraction from Samsung’s latest strides in foldable displays, artificial intelligence and other offerings that arguably leave Apple behind.
     

  5. 5G: As 5G technologies come to fruition, Samsung no doubt would be among the first OEMs to support 5G networks when they launch – hopefully before Apple has a chance to upgrade its iPhones. Samsung for example has already announced Galaxy S10 that supports 5G for launch in 2019, while Apple has been characteristically silent about how 5G affects its ecosystem.

 

In the end of course, both Apple and Samsung understand that the world really is big enough for both giants to peacefully co-exist.

 

 

 

 

 

 

 

 

 

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