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A trial could deeply hurt the pair's relationship, regardless of the outcome

Samsung Electronics Comp., Ltd.'s (KSC:005930) and Apple, Inc. (AAPL) will have one final talk before they take their case before a federal court jury in the United States, in a war that could limit U.S. consumer selection or grant artificial dominance in the smartphone market.

I. A Bitter Battle

As the world's largest display manufacturer and a top maker of DRAM, NAND, and mobile CPUs, Samsung is vitally important to Apple.  Samsung makes the system-on-a-chip (SoC) brains inside every iPad and iPhone.  

Yet in 2010, growing competition between the pair in the tablet and smartphone space prompted late Apple CEO Steve Jobs to accuse Samsung of "slavishly copying" his company's devices, filing suit in U.S. District Court for the Northern District of California.  Samsung hit back shortly thereafter, and the war was on.

The court battle has been fierce.  

Judge Koh
Judge Koh has admonished both sides in the case, at times. [Image Source: IB Times]

Judge Lucy Koh has admonished Apple's lawyers for belligerent filings, while earlier chastising Samsung from destroying potential evidence.  

The case currently dangles in the realm of subjectivity.  

While emails and internal documents demonstrate that Samsung was indeed looking to imitate traits of Apple's highly successful star tablet/smartphone, Apple was shown to borrow ideas for those devices from Samsung, Sony Corp. (TYO:6758), and other players who predated its market entry.

There are some visual similarities between Samsung's original Galaxy S smartphone and the iPhone -- likewise for iPad and Galaxy Tab.  There are also noticeable differences.  

At the end of the day much of Apple's design claims boil down to its assertion that it "owns" exclusive rights to produce rectangular tablets/smartphones with rounded edges.  Apple claims that some tablets/smartphones may be sufficiently different from the iPad/iPhone to escape design infringement, but its design experts have struggled to quantify discrete details of how Samsung and others can escape design infringement.

II. One Last Effort at Peace

Amidst this backdrop Samsung CEO Kwon Oh-hyun will call Apple CEO Tim Cook, in a final chance at settlement before the trial heads to the jury for a verdict.

Tim Cook and Kwon Oh-hyun
Apple CEO Tim Cook (left) and Samsung CEO Kwon Oh-hyun (right) will have one last attempt to make peace. [Image Source: Reuters (left); (right)]

At stake in the battle is the $219.1B (valuation by Bloomberg) smartphone market.  Combined with the tablet sector, these two markets could easily eclipse a trillion dollars in the next several years.

Apple would love to gain a monopoly in the smartphone market, to complement its dominant position in the tablet space.  But it has seemed sluggish in advancing the experience of its handheld devices opting for a slower pace of changes than Android.  As a result Android devices today have many capabilities and hardware advantages that their Apple counterparts do not -- such as larger screens, LTE modems, and near field communications.  Those factors have given Android phonemakers approximately 68 percent of the global market at last count [source].

To counteract that, it’s taken up the sword.  Apple is looking for $2.5B-$2.75B USD in infringement damages, as well as multiple sales bans on Samsung product -- a crippling outcome.  It is still pursuing similar terms in its case against HTC Corp. (TPE:2498), as well.  In the U.S. only Motorola Mobility -- a Google Inc. (GOOG) subsidiary is free from the wrath of Apple, after the pairs legal strife was twice dismissed "with prejudice" by a federal judge.

III. Samsung Presents Quandary for War-maker Apple 

The Samsung case is made unique by two factors.

First, Apple and Samsung are expected to do $12B USD in business in 2012, up 50 percent from the $8B USD in 2011.  Without Samsung's chips Apple could not make its products.  Fortunately, regardless of the lawsuit outcome, Samsung is contractually obligated to provide those chips to its archrival.  But the danger for Apple comes for the future.

If it hurts Samsung too bad, Samsung could retaliate by refusing to renew chip production contracts.  And given the level of design expertise employed by Samsung in making the chips -- particularly the SoC -- that could amount to almost a redesign for Apple of its smartphone chips.  Further, quality would likely suffer -- initial trial runs with third-party fabs reportedly did not go well for Apple; it was hard for them to match savvy Samsung's level of chip-making prowess.

Samsung iPhone 4S
Without Samsung, the iPhone could get a lot dumber. [Image Source: Snapguide]

Second, Samsung is the largest of the Android phonemakers, and the only one to approach Apple in profitability.  However, the promise of killing Android's superstar offers powerful motivation in the other direction -- for war.

It was Judge Koh who suggested the second peacemaking effort, with Samsung and later Apple agreeing.  The Judge called herself "pathologically optimistic" in her hope that this second round of intimate talks between company chiefs would produce a different outcome.

If it does not, the jury should be in for an arduous trial, as both companies -- after initial reductions -- argued that they were unable to further reduce their claims or exhibits.  At least one member of the jury has family members who reportedly hold a significant number of shares of Apple stock, something Judge Koh said was okay, as the individual themselves would not directly profit off of damaging Samsung and boosting Apple.  Still it's hard to imagine that couldn't introduce a certain level of bias in that member's mind.

Source: Bloomberg

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Anti-Apple bias much?
By anon2650 on 8/20/2012 5:12:20 PM , Rating: -1
This article reeks of someone with an agenda to push.

I do not much care for Apple (I used Windows phone and have used Android in the past) but in this case I think there is at least some infringment going on by Samsung with their "Sense" UI.

This article however has something to prove... Examples:

"a war that could limit U.S. consumer selection"
^If I were a lawyer I would refer to this as "facts not in evidence"

"At the end of the day much of Apple's design claims boil down to its assertion that it "owns" exclusive rights to produce rectangular tablets/smartphones with rounded edges."
^outright lie. Centeral to this case is the "sense" UI used by Samsung. Also its worth noting that all smartphones and tablets are regtangular with rounded edges... Since like... Ever.

"but its design experts have struggled to quantify discrete details of how Samsung and others can escape design infringement."
^Once again... Nope.

"and the only one to approach Apple in profitability. "
^pumping up Samsung. They do not "appoach" AAPLs profitability. Try 1/5th as much.

Like I said I have no dog in this perticular race but, with apologies to the author, this article is shit.

RE: Anti-Apple bias much?
By Adam M on 8/20/2012 5:41:44 PM , Rating: 2
One cannot help but be persuaded by such on point arguments such has "Nope". How can you not read this article as biased when you over look key points like that of Samsung being the nearest ANDROID competitor to Apple. Meaning that HTC, Motorola and the others fall behind Samsung not that Samsung and Apple should be listed in the same league as one another. I find the "if I were a lawyer" statement intriguing as you previously professed an excelling knowledge of Apples case, as if you were some kind of legal professional, maybe one working on the case. Apple has made claims to the effect of owning the rounded rectangle, whether or not that is central to their case is probably left to those litigating the case.
I smell bias but its not in the article. An agenda? Maybe that of a blogger who is getting tired of petty patent battles,and a blogger that can foresee detrimental outcomes for all involved, including the end user.

RE: Anti-Apple bias much?
By Etsp on 8/20/2012 5:45:14 PM , Rating: 2
Er, here's one of the main patents in question in this case:

If you disbelieve something you read on the internet, at least LOOK UP MORE INFO, rather than (wrongfully) calling the author a liar.

RE: Anti-Apple bias much?
By amanojaku on 8/20/2012 6:12:41 PM , Rating: 6
"At the end of the day much of Apple's design claims boil down to its assertion that it "owns" exclusive rights to produce rectangular tablets/smartphones with rounded edges." ^outright lie.
Orly? That's an outright lie?
Now looking at apple’s patent 677 filed in Nov. 2008. It’s for an electronic device with a rectangular shape, rounded edges and a flat, transparent surface with black color, and rectangular display centered on the face. A lozenge-shaped button on the top.

Now looking at Apple’s 087 patent, filed in July 2007. It discloses a similar design to the 677 patent but adds the bezel around the phone.

Sherman says all three patents show a rectangular phone, with rounded edges, a bezel with flat screen. “My opinion is that JP638 renders both of these patents (Apple’s) obvious,” Sherman says. There are relatively minor differences between Japanese design and Apple’s designs, but not different enough to support Apple’s design claims, he says.

There is other prior art that invalidates Apple’s claims, Sherman says.It includes Korean Registered Design KR547, issued on July 6, 2006. It discloses a portable phone that has an overall rectangular shape with evenly rounded corners with a display centered on the front of the display, flat face, lozenge-shaped slot at the top.

Samsung is now showing photos of the LG Prada phone, which Sherman says was released in late 2006 before Apple filed its patents.

LG Prada is a mobile handset that is rectangular, with rounded edges, flat front, black, lozenge-shaped slot at the top.

Sherman says there’s another patent — JR 383 — a Japanese design registration issued in June 2005. It is also rectangular, with four rounded corners, flat front.

Now all four patents are being compared to two Apple patents. Sherman says that JP638 in combination with the Prada make Apple’s 677 patent obvious. As to Apple’s patent 087, he says if you combine JR 383 and JP 638 yields the Apple design.

As for the display, you’re trying to maximize the size of the display on the screen on a rectangular screen, Sherman says. And rounded corners have significant benefits in terms of usability. It’s easier to hold, they’re more comfortable and they dont’ snag when you’re trying to put them into your pockets. Sharp corners may bend and break, while rounded corners are easier to manufacture, he adds.

There is now an internal Apple email on screen. It’s from an Apple designer to Jonathan Ive, Apple’s chief designer, saying that the rounded corners had advantages.
In this patent war, Apple has accused Samsung of copying its genius. Samsung has defended itself saying the similarities aren't design choices but utilitarian parts of a tablet. In order to prove Samsung wrong, however, Apple came up with a list of suggestions with different aesthetics Samsung could have gone with to avoid this infringement. Here were some of the things Apple came up with:

* Overall shapes that are not rectangular with four flat sides
* Or that do not have four rounded corners
* Front surfaces that are not completely flat or clear
* And that have substantial adornment
* Thick frames rather than a thin rim around the front surface
* Profiles that are not thin
* Or that have a cluttered appearance

RE: Anti-Apple bias much?
By moriz on 8/21/2012 2:29:40 AM , Rating: 2
or translation: the only way apple will allow samsung to make a tablet, is for samsung to not make a tablet.

RE: Anti-Apple bias much?
By inperfectdarkness on 8/21/2012 8:47:39 AM , Rating: 2
This morning, I heard that Apple is now officially the most valuable company of all time...

I for one will be praying that Apple DIAF during this trial. I've advised everyone I know to sell their Apple stock before this trial. Either Apple is going to lose, or the free-market is officially dead; either way, you won't want Apple stock.

RE: Anti-Apple bias much?
By seamonkey79 on 8/20/2012 7:31:02 PM , Rating: 4
Sense is HTC ;-)

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