Global patent war could reach an armistice, sparing the companies billion in mutual business

Apple, Inc. (AAPL) and Samsung Electronics Comp., Ltd. (KS:005930) ended 2011 in a virtual tie for the global lead in smartphone sales.  Apple is the maker of the iconic iPhone, pivotal in the smartphone craze, which took off in 2007 after the early efforts of the likes of Research in Motion, Ltd. (TSE:RIM) and Microsoft Corp. (MSFT).  Samsung, meanwhile, has emerged as the world top phonemaker of the world's top platform -- Android.

I. Settlement Talks Announced

The pair on Tuesday agreed before Judge Lucy Koh to participate in "Alternative Dispute Resolution" (ADR) -- a series of settlement talks.  Judge Koh described:

The parties have indicated that they are willing to participate in a Magistrate Judge Settlement Conference ('MJSC'). ECF No. 873. Therefore, the parties are hereby referred to an MJSC with Magistrate Judge Joseph Spero with a 90-day deadline. As the parties have indicated in their joint statement, the chief executive officer and general counsel of Apple and the chief executive officer and general counsel of Samsung shall appear and participate at the MJSC.

While the settlement talks will take place in and primarily pertain to the U.S. District Court for the Northern District of California -- a San Francisco court -- a settlement deal could reach globally, ending the companies’ lawsuits against each other spanning twenty cases in ten different countries.

Samsung v. Apple
"Frenemys" Apple and Samsung have agreed to consider settling.
[Image Source: TechnoBuffalo]

Both companies have created controversy in their bids to ban each other’s best-selling products.

II. Controversial Cases

Apple's ban hopes hinge upon patents such as its prized multi-touch patent, which describes:

A touch panel having a transparent capacitive sensing medium configured to detect multiple touches or near touches that occur at the same time and at distinct locations in the plane of the touch panel and to produce distinct signals representative of the location of the touches on the plane of the touch panel for each of the multiple touches is disclosed.

The only issue is that description -- and the body itself -- covers multi-touch methods that had already been widely documented in research labs, other patents, and tech demos.  The crucial thing is that Apple's patent was on multi-touch on a capacitive display.   

Apple claims it "invented" multi-touch despite decades of prior art.
[Image Source: XDA Developers]

Similar issues have been raised about Apple's "slide to unlock" patents. Apple's legal approach has been matched by Samsung, which attempted to sue Apple using many standards patents it had promised to freely license under the "fair, reasonable, and non-discriminatory" (FRAND) rules.  Samsung's interpretation of non-discriminatory apparently means not discriminating against anyone except Apple.

III. Why Settle?  Try, "$8B USD in Mutual Business"

Despite both companies' controversial tactics and bitter feud, they also share a great deal of business.  As one of the world's largest smartphone chipmakers, Samsung manufactures nearly all of Apple's smartphone and tablet system-on-a-chip designs. The companies reportedly have $8B USD worth of common business a year.

Apple A5
The brains of the iPhones are still made by Samsung, now at its new Austin, Texas factory.
[Image Source: iFixIt]

Thus there's a lot of pressure for Apple and Samsung to settle from a mutual interests perspective.  Then again, Oracle Corp. (ORCL) and Google Inc. (GOOG) failed to reach a settlement in a similar talks, and their case went to trial.

Apple chief executive Tim Cook and Samsung CEO Choi Gee-sung will both participate in the settlement talks.  If a settlement is not reached, a trial will begin this July.

Sources: Reuters, FOSS Patents

"If you can find a PS3 anywhere in North America that's been on shelves for more than five minutes, I'll give you 1,200 bucks for it." -- SCEA President Jack Tretton

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