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Some licensing rates are roughly 20-fold what Apple is charging others

The bad news for Apple, Inc. (AAPL) is that the U.S. federal court system appears increasingly opposed to outright denying the American gadgetmaker's largest rival -- Samsung Electronics Comp., Ltd. (KRX:005930) (KRX:005935) -- the right to compete in the American market.

I. Battle of the Bans

Samsung is the world's top smartphone-maker, accounting for 28.8 percent of global smartphone ships in Q4 2013, according to the Interactive Data Corp. (IDC).  Apple is in second place and leads Samsung narrowly in profitability, despite its smaller 17.9 percent of sales.

Apple contends that Samsung has "stolen" its designs, including software features and even in case designs.  The latter claim has quieted as Samsung's designs have diverged more sharply in looks from Apple's, but the former -- software patent infringement -- is perhaps unavoidable due to Apple's large mobile patent portfolio.

Lucy Koh
Lucy Koh is prepping for a second Apple v. Samsung case, which will start on March 31 with a jury trial. [Image Source: Vicki Beringer]

Last week at the U.S. District Court for the Northern District of CaliforniaApple's team saw their request to ban a plethora of devices -- including the Galaxy S3 and Galaxy Note -- struck down for a second time.  Judge Lucy Koh had similar struck down a ban request in January, standing her ground despite pressure from some of her colleagues at the Federal Circuit Court of Appeals, which ranks a step higher than her Federal District Court.

But the good news for Apple is that its chances of a major payday increased when Judge Koh sided with it late last month, throwing out expert testimony of a Samsung witness, while allowing the jury in the upcoming case to hear the testimony of an Apple witness.

II. $40 per Device?  Say it Ain't So!

The eye-popping figure is Apple's targeted per-device royalty -- $40 USD.

Apple's expert witness arrived at that figure by incoprorating "lost profits" into the valuation estimate, and also by arguing that Samsung's strong position makes it reasonable to seek larger damages.

40 dollars
[Image Source: Mevvy]

Rachel Krevans, J.D., a top lawyer at one of Apple's law firms -- Morrison Foerster (which goes by the humorous abreviation "MoFo") -- argues that while her client agreed to a relatively small licensing settlement with a battered HTC Corp (TPE:2498), that the Samsung case was an entirely different monster.  HTC's CEO Peter Chou indicated his company pays Apple around $5 USD per device, although the precise figure has not been made public.

Ms. Krevans argued:

HTC is not one of the horses in the two-horse race.  There is no showing that has been made that any of these terms would have been terms that would have been acceptable in a hypothetical negotiation.

One of Samsung's lawyers -- Scott Watson of the law firm Quinn Emanuel Urquhart & Sullivan, LLP -- complained that Apple was looking to charge his client $12.49 USD/device for a patent that was priced at $0.60 USD/device in its stalled legal war with Motorola Mobility (who was formerly owned by Google Inc. (GOOG)).  He argued that 20-fold markup was information the jury needed to know, arguing that such information had never been excluded before in such a case.  Apple disagreed, saying that giving the jury more information might confuse them about Samsung's guilt.

Mr. Watson complained:

The only reason Apple is bringing this motion is because the licensing data is completely inconsistent with the idea that anyone would pay $40 for five smartphone patents per unit.  Apple shouldn't be permitted to just throw up a huge number and then sit down and we've got our hands tied and we can't even show the jury that it's totally disproportionate to what actually happens in the marketplace.  In this case, they're asking for $12.49 [per device] for [a patent licensed to Motorola for 60 cents per device].

And I submit there's simply no Federal Circuit case, or even a district court case, where a court has excluded a license on the exact patents at issue... and the jury is not permitted to see that, and the defendant has to go to trial with no licensing evidence to show the jury at all.

But Judge Koh decided that it's time for a first, and she denied Samsung the ability to present licensing rate comparison to the jury and struck down its expert witness's opposing valuation as inaccurate.  Meanwhile she gave Apple nearly unchecked ability to present its expert witness's claims.

II. Samsung Appears at a Modest Disadvantage for Round II

Samsung's lawyers suffered a blow to their reputation in court last year when they appeared to unethically leak documents of Apple's payment agreement to Nokia to Samsung executives, a disclosure that may have helped Samsung to squeeze a more favorable licensing settlement from Nokia.

The case goes on trial on March 31, and after losing $929.7M USD in the first round Samsung looks to start the second trial with the back against the wall.

Samsung Galaxy S4
[Image Source: Getty Images]

Depsite turning their backs on a second set of mediation talks in January, the second trial is believed to largely be a battle over settlement leverage and public image.  Apple wants to damage Samsung's American brand image by portraying it as a copycat.  And a second large verdict could do precisely that, plus elevate pressure for a higher settlement.  On the flip side, an Apple loss could let Samsung off the hook.

But given the distraction the case is posing to both companies and the snail-slow pace of court proceedings, most believe that the pair will settle when the dusts drops after the second round.

While Apple's $40 USD valuation may indeed be some unfair or "ludicrous", it is not without precedent, to some extent.  Microsoft Corp. (MSFT) is believed to charge Apple and most Android device makers between $5-10 USD per device.  But it charges Samsung a significantly higher rate -- reportedly around $15 USD per device.

Sources: ArsTechnica, Bloomberg



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hmm
By p05esto on 3/13/14, Rating: 0
RE: hmm
By DT_Reader on 3/13/2014 5:40:32 PM , Rating: 2
Samsung was not able to license these patents because Apple's publicly stated intent was/is to drive Android in general and Samsung in particular out of business, not earn royalties. Even at $40/phone the court is doing Samsung a favor by allowing them to stay in business. In essence, the court is forcing Apple to license their patents over Apple's objections.

So the question now is which is better: Buy Samsung products in a show of support, or avoid Samsung products to deny Apple their extortion money?

Buying Apple products is, of course, out of the question.


RE: hmm
By tonyswash on 3/13/14, Rating: -1
RE: hmm
By brshoemak on 3/13/2014 6:18:26 PM , Rating: 5
Not "drive Android out of business" but instead Steve Jobs (as quoted from a biography approved by Jobs personally) said:

"I will spend my last dying breath if I need to, and I will spend every penny of Apple's $40 billion in the bank, to right this wrong," Jobs reportedly said. "I'm going to destroy Android, because it's a stolen product. I'm willing to go thermonuclear war on this."

...so yeah, there's that. Steve Jobs represented Apple as a company - he 'was' Apple for all intents and purposes so I would say that counts as a statement from them on the subject.


RE: hmm
By retrospooty on 3/13/2014 6:24:42 PM , Rating: 3
"I will spend my last dying breath if I need to, and I will spend every penny of Apple's $40 billion in the bank, to right this wrong," Jobs reportedly said. "I'm going to destroy Android, because it's a stolen product. I'm willing to go thermonuclear war on this."

Bah... just more illogical ranting from a narcissistic asshat. Too bad it will never happen. This "stolen product" - while you were belly aching over being copied (not) it has caught up and surpassed your little IOS. It's like Ford being mad at NASA for going faster. pfapf.

Good luck with that war ghost of Steve. Meanwhile this. http://www.huffingtonpost.com/2013/11/12/google-an...


RE: hmm
By Reclaimer77 on 3/13/2014 7:27:42 PM , Rating: 4
quote:
This "stolen product" - while you were belly aching over being copied (not) it has caught up and surpassed your little IOS.


Yup.

And is it just me, or did they pretty much lift every improvement in iOS 7 directly from Android and others?

But oh yeah, the world just waits to copy Apple...


RE: hmm
By retrospooty on 3/13/2014 7:48:39 PM , Rating: 2
No, its obviously not just you. The rampant hypocrisy on this issue is just sickening. It's like watching politicians.


RE: hmm
By Monkey's Uncle on 3/14/2014 8:53:55 AM , Rating: 2
Apple's Motto:

If you can't beat 'em sue 'em!


RE: hmm
By retrospooty on 3/14/2014 10:38:48 AM , Rating: 2
LOL... I hear in my head the old Schoolhouse Rock song about teeth and brushing - "Exercise your chompers" , only its "Exercise your lawyers really sue sue sue"


RE: hmm
By Kazinji on 3/15/2014 9:02:29 PM , Rating: 2
I see Apple as being more of a bully in this. I patented rectangular with rounded edges(one of the things called into question). Are you kidding me. What other shape can you make a phone. Whats more anti-competition than trying to ban phones from the company that sells more than you do. Must be doing something right if they sell so many more than you. Stop trying to sue each other into the ground and make a better flipping phone.


RE: hmm
By lawrance on 3/14/14, Rating: -1
RE: hmm
By Cheesew1z69 on 3/14/2014 7:03:48 AM , Rating: 2
quote:
Are you ignorant regarding the history or are you just too much of an ass to acknowledge it? Eric Schmidt stole the iOS UI while serving as an Apple board member.
Talk about ignorant...


RE: hmm
By retrospooty on 3/14/2014 8:36:21 AM , Rating: 5
"Are you ignorant regarding the history or are you just too much of an ass to acknowledge it? Eric Schmidt stole the iOS UI while serving as an Apple board member."

No, I am just tired of the tired schoolyard chant "stop copying me, stop copying me". All companies build on the successful ideas of others, and so does Apple. If you people that think Apple should own the modern smartphone design must also think Ford should be the only auto maker because they pioneered how to make it for the masses. No, that is ridiculous, that is how business works and has always worked. If anyone should own the modern smartphone design its Palm and RIMM, the ones Apple build off of. While Apple has been concentrating on lawsuits because of its silly perceived notion that everyone is copying it, the competition they are suing has passed them by. The competition has better phones, better UI, better hardware and better prices. Its very much like the horse and buggy company suing Ford for copying their 4 wheel design - as in the design existed prior to the horse and buggy company yet the horse and buggy company seems to think they own it.

I personally commend Apple for their contributions to the industry and thank them for the iPhone. It was leaps and bounds better than anything else on the market at the time and it literally forced everyone else to raise their games. We all benefit from that. We all benefit from their push on higher resolutions too. Now go back to the drawing board and design stuff, the courts aren't going to do it for you and shouldn't have too. You are already 4th in a 4 man race (meaning they offer less features and functionality than Android, BB, WP).


RE: hmm
By BSMonitor on 3/14/2014 4:18:40 PM , Rating: 1
http://www.technobuffalo.com/2011/10/27/android-be...

ROFLMAO

quote:
modern smartphone design its Palm and RIMM


If the f'cking modern smartphone looked and acted like this:

http://www.engadget.com/2012/04/25/oracle-v-google...

You are truly clueless to what a google ball sucking d-bag you are.

It is one thing to look across the IT landscape and piece together a new all-in-one computing product like a "smartphone". It is an entirely different thing to sit in the board room of a company, see their upcoming product, and go back home and copy the look and feel of the entire design.

Again, how many of these were sold?? None? Sweet.

http://www.engadget.com/2012/04/25/oracle-v-google...

But don't worry, I still idolize you for your amazing contributions to the smart phone sheep war.


RE: hmm
By BSMonitor on 3/14/2014 4:19:48 PM , Rating: 1
RE: hmm
By retrospooty on 3/14/2014 4:27:37 PM , Rating: 2
Hmm... Maybe you are right. Only Apple should be allowed to make smartphones. Then we could all have tiny low res screens with a MASSIVE lack of features. That would be great wouldn't it.

So, copying the whole concept of a smartphone, putting and OS and apps is less important than adding a multitouch screen?

YOu are really reaching.

You dont like Apple? HULK SMASH!!!!


RE: hmm
By Camikazi on 3/15/2014 3:18:31 PM , Rating: 2
Because Microsoft's Pocket PC design didn't influence Apple at all, I mean having a touchscreen, apps, a good OS didn't give Apple any hints. Apple just took what was there and refined it and the company that put it there was MS, just like they made the proto tablets that Apple copied to make the iPad. Apple has no place to talk on copying since they did it too and from MS no less.


RE: hmm
By Cheesew1z69 on 3/14/14, Rating: 0
RE: hmm
By tonyswash on 3/14/14, Rating: -1
RE: hmm
By retrospooty on 3/14/2014 8:18:53 AM , Rating: 1
No, I think iPhones cost more and do less than pretty much every other competitor (Android, WP, BB phones) and that is a bad combo to me. As a business model, they obviously have it down.


RE: hmm
By BSMonitor on 3/14/14, Rating: 0
RE: hmm
By retrospooty on 3/14/2014 4:31:21 PM , Rating: 1
Oh how nice, Did your petty little brand get offended and you came back just to reply to me and only me? I am flattered.

Someone wants a list of things you cant get with an iPhone.

/paste

- Larger Screens
- Higher resolution screens
- Higher DPI
- Better Edge to Edge display (no giant iBezel)
- Micro SD card
- Removable batteries
- NFC
- 802.11ac
- Mini HDMI port
- Can set default apps
- Back button
- Better Notifications
- Better Voice search (Google Now > Siri)
- Better Mapping software
- Widgets
- Live wallpaper
- Plays HD content without downscaling
- Greater than 5x4 icons
- Multi user support
- Multi Window support
- pop up browser(in a window)
- Wireless charging
- Eye scrolling
- Waterproof models
- Air gestures
- Active stylus support
- Better OS
- Better UI
- Micro USB
- Plug and play as a flash drive to copy files
- Flexibility in OS (Tons of Custom ROM's, etc)
- Flexibility in hardware (qwerty models, waterproof models, removable batteries, larger models, smaller models, high end models, mid range models, cheap models)

Some in severe denial will balk at items on this list, but its not about the individual things that THEY may not need, again, its about flexibility to support thing that others DO need. Its a HUGE list that demands respect.


RE: hmm
By retrospooty on 3/14/2014 5:25:31 PM , Rating: 3
Oh, and BS... BTW on top of that MASSIVE list of things you cant do with your precious iPhone, here are 10 things that iPhone copied from Android .

Read more: http://www.businessinsider.com/features-android-ha...

I know your gonna be angry at that! But wait, Apple infvents everything. It cant be they copy! NOOOOOO!!!!


RE: hmm
By Reclaimer77 on 3/15/2014 10:36:16 AM , Rating: 2
What's funny is that was written in 2011. There's way more features today they stole from Android since.


RE: hmm
By retrospooty on 3/15/2014 11:00:23 AM , Rating: 2
Yes but remember, its only "stealing" when others copy from Apple. When Apple copies from other it's called "improving". /s


RE: hmm
By tonyswash on 3/14/14, Rating: -1
RE: hmm
By Cheesew1z69 on 3/14/2014 7:16:03 AM , Rating: 1
quote:
but if the more blatant of the current copiers get punished enough then Apple hopes that that will act as a deterrent to future copying, especially if and when they enter a new product category.
It's quite a shame then, considering there is no "blatant" copying going on, but of course, you would obviously think so.


RE: hmm
By retrospooty on 3/14/2014 10:42:34 AM , Rating: 4
Translation. It's only OK to copy when Apple copies others. When others copy Apple, its a legal matter.

"lets face it the whole of the computing industry has been shaped over decades by designs emanating from Cupertino"

Seriously? LOL. Just LOL. Your revisionist history knows no bounds. Apple was one of many. Not the "one"


RE: hmm
By Piiman on 3/15/2014 9:33:17 AM , Rating: 1
"
Can post a link to any statement from Apple where it said it wanted to drive Android or Samsung out of business."

LOL Seriously you must have a selective memory if you don't remember your Gods (Steve jobs) statements about Android.

You're such and Apple Goober its not even funny anymore.


RE: hmm
By Motoman on 3/14/2014 10:35:17 AM , Rating: 2
quote:
Buying Apple products is, of course, out of the question.


Always has been. All of you cretins who keep giving Apple money are the ones to blame for this. Especially granted that you keep doing it.


RE: hmm
By Morawka on 3/15/2014 3:37:09 PM , Rating: 3
You know the patents apple is charging $20 for have to do with "slide to unlock", Rubber Banding UI, and 2 finger scroll.

Now if it were some badass super efficient code, or a actual peice of hardware that was revolutionary to anything that has ever existed, than, ok, charge 20 bucks.

but not for stupid arbitrary gestures that are natural to humans and nature. that's like patenting a keyboard that has the same key layout as other brands. its just retarded stupid


RE: hmm
By Piiman on 3/15/2014 9:29:31 AM , Rating: 2
wasn't Apple just bitching about having to pay, someone, either Samsung or Moto, license fees it claimed were too high? Now they turn around and demand 20x normal them self??? This Judge is starting to look like a Apple corporate shrill.


Good Luck!
By Reclaimer77 on 3/13/2014 4:58:21 PM , Rating: 2
quote:
Apple wants to damage Samsung's American brand image by portraying it as a copycat.


Good luck doing that when you release the large iPhone which frankly looks like a direct copy of the Galaxy S3.

Samsung needs to force a change of venue somehow. As long as these cases are tried in California, the wacko helicopter verdicts will keep on coming.




RE: Good Luck!
By DT_Reader on 3/13/2014 5:45:20 PM , Rating: 2
The problem, of course, is the laughable notion of "a jury of your peers." Any peer of Samsung - that is, anyone with any knowledge of the tech business - would cut this award to $10/phone for all five patents, at most. But Samsung is stuck with know-nothing members of the general public at best, and Apple fanboys at worst. I'm guessing at least half the jury has an iPhone in their pocket, knows someone who works at Apple, or both.


RE: Good Luck!
By retrospooty on 3/13/2014 6:06:10 PM , Rating: 2
"Samsung needs to force a change of venue somehow. As long as these cases are tried in California, the wacko helicopter verdicts will keep on coming."

It will happen by default. No matter what, this goes to appeals at a higher level court. I wouldnt worry at all about what this clown judge in Apples backyard (and back pocket) thinks. You will go to your wireless store and buy whatever phone you want just like always.


RE: Good Luck!
By kickoff on 3/13/2014 7:07:23 PM , Rating: 2
Yes, sometimes I wonder if Koh is intentionally coming off so poorly that appeals courts will have no choice but to throw out her rulings. That way she can still get whatever favors she gets from Apple (and the locals...not sure if she's elected or appointed out there, but helps her either way)...and Apple still loses in the end.


RE: Good Luck!
By killerroach on 3/13/2014 9:20:48 PM , Rating: 2
I don't think there's anything of the sort going on - Koh just happens to be Apple's pet jurist. There's a reason why they fight like hell to make sure cases involving them get tried in her court.


Sorry... go again...
By Amiga500 on 3/14/2014 9:36:26 AM , Rating: 2
quote:
Samsung's lawyers suffered a blow to their reputation in court last year when they appeared to unethically


A couple of things need clearing up here:

1. How does a lawyer suffer a blow to their reputation? Surely that is like saying there is a temperature colder than absolute zero.

2. Are you implying that lawyers do things that are ethically right?




RE: Sorry... go again...
By Reclaimer77 on 3/14/2014 9:43:26 AM , Rating: 1
I guess Apple lawyers submitting falsified photoshoped "evidence" designed to manipulate phone comparisons was an example of good ethics as well.


RE: Sorry... go again...
By wookie1 on 3/14/2014 12:13:44 PM , Rating: 2
Well, sometimes you really need to have a lawyer. You may not like it, but yet without a lawyer you'd be really screwed. When that is the case, you have many many lawyers and firms to choose from. There are more lawyers than there is business for them, so they compete with each other. One differentiating factor between them is their reputation. Probably more so than cost, since losing a court case usually has extreme consequences. Therefore, a lawyer's reputation is extremely important to both the lawyer and the client.


I don't see the downside for Apple
By wookie1 on 3/14/2014 12:18:21 PM , Rating: 2
Samsung is selling more phones than Apple (correct me if I'm wrong, maybe it's only the overall Android sales that are larger), and now they get $40 from phones that Samsung sells with no costs to them. No production to manage, no inventory to manage and potentially write off when it's obsolete, no sales/marketing expenses, etc. The better Samsung's marketing and sales, the better deal it is for Apple.

Seriously, if you take whatever Apple's gross profits are, back out the costs of marketing, distributing, etc. I wonder if they make about the same money on selling an iPhone as the royalty they'll get from Samsung.




By Cheesew1z69 on 3/14/2014 12:22:24 PM , Rating: 2
quote:
now they get $40 from phones that Samsung sells with no costs to them.
They don't get that, they are ASKING for it. And I seriously doubt that is going to happen. Once these appeals all happen, Apple is going to get nothing at all IMO.


Which product needs to pay?
By w8gaming on 3/13/2014 7:58:25 PM , Rating: 2
I am curious based on what ground Apple can still ask for loyalties on the new devices which do not look like iphone or ipad? If they are still talking about $40 for Galaxy S2 might as well just settle, because who at this point is still buying a S2? Of course, the trial can be very unjust and just force a $40 fee on all future products as long as it has the word smartphone or tablet in it. In that case I guess the best counter is to increase the storage of the device to 64GB as a standard and charge that extra $40. That might destroy Apple market since Apple is so insistent in charging lots of money for higher capacity.




Healthcare
By Scootie on 3/14/2014 1:50:03 AM , Rating: 2
I'm seriously going to be sick from this patent wars. There is something wrong on the other side of the ocean.




Why not test the price?
By ppi on 3/15/2014 8:18:21 PM , Rating: 2
Easiest way to confirm the price level is to test it.

Samsung sells the phone with those five features disabled and the user will have to pay $40 in order to enable them (and then they would get passed to Apple).

If less then some low percentage of users (say 5%) opt for that within trial period (say 6-12 months), the Apple patents would be deemed valid, but worthless, so no penalty for breaking them. Or the license fee per device would be determined as $40 * % of buyers during the trial period.




By Any14Tee on 3/17/2014 8:14:44 PM , Rating: 2
Apple and Android, Jesus what's all the fuss? If you're 15-16 years (mostly girls) and listen to Cold-play buy a frigging Apple. you like Nirvana -Rape me yeh - Android - no questions, it's definitive real men like Androids. Smoky bacon couple of eggs and hash brown on the side if you're little kinky.

Every morning going to work I drive pass this disheveled tree-hugging cyclist, one hand on the bar and the other holding a frigging iPhone, swaying left to right in the middle of the road, detached from any sense of reality (there's an euthanasia in there somewhere). One day just one day, I'm going to open my frigging door.

May be not the cyclist but we all know the eventual direction Apple is going, it's going to find it nice little niche, 2% of the smartphone market-share. True we all can't afford a Porsche but hey my Ford does everything I want it to do and more.




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