Print 115 comment(s) - last by Motoman.. on Aug 30 at 10:39 AM

  (Source: Tech Digest)
Samsung lost an estimated $12B USD in worth from the decision

The weekend has passed, but the shock is still setting in after a potentially precedent setting jury verdict at the U.S. District Court for the Northern District of California, which left Samsung Electronics Comp., Ltd. (KSC:005930) on the hook for approximately $1.05B USD and facing at least temporary bans on most of its product lineup.

I. "Appleflation"?  Cupertino Company's Win Stirs Controversy

Apple, Inc. (AAPL) was quick to gloat about the victory, whose foundation certainly had some controversial aspects -- such as Apple's ability to re-patent inventions (pinch to zoom) in the context of capacitive multi-touch, Apple's ability to (essentially) patent the animation of natural phenomena (the rubber-band animation is a textbook visualization of nature's transient response e.g. see spring), and Apple's ability to "patent a shape" (Apple's attorneys argued that its design patents offered an exclusive right to make rectangular smartphones with rounded edges).

Thus in the aftermath of the trial, much of the controversy has focused not on whether the jury made the right decision, but whether the U.S. Patent and Trademark Office was crippling the free market with its lacking scrutiny.

Tech mogul Mark Cuban (also a prominent venture capitalist featured on the show Shark Tank) blasted Apple's decision in a series of Twitter posts, as noted by Neowin.  He implies that he is going to boycott Apple's products as a result of the lawsuit, and accuses Apple of conspiring to raise prices for electronics customers a term he calls "Appleflation":
Mark Cuban
[Image Source: Twitter/Neowin]

Mark Cuban
[Image Source: Twitter]

Google, Inc. (GOOG) makers of the Android operating system also chimed in, writing that the claims in the case "don't relate to the core Android operating system", explaining:

The court of appeals will review both infringement and the validity of the patent claims. Most of these don't relate to the core Android operating system, and several are being re-examined by the US Patent Office. The mobile industry is moving fast and all players — including newcomers — are building upon ideas that have been around for decades. We work with our partners to give consumers innovative and affordable products, and we don't want anything to limit that.

While that may sound like Google is throwing Samsung to the wolves, Google is aiming to offer Samsung and other Android OEMs powerful long-term protection, by filing a major new suit against Apple, which seeks to ban almost Apple's entire product lineup.

II. What's Next?  Bans, Appeals, Appear Likely

Reuters reports that after the ruling South Korea's markets had a wild day of trading, with 1.27 million shares of Samsung stock changing hands, and the company facing its worst single-day value loss in nearly four years.  Overall, Samsung shed $12B USD of its $160B USD valuation.  Apple, meanwhile added approximately $12B USD to its market cap this morning, reaching $634B USD, and creeping ever closer to Microsoft Corp.'s (MSFTrecord 1998 valuation, which adjusted for inflation totals around $850B USD.

Korean Won
The verdict cost Samsung $12B USD in value. [Image Source: 
SeongJoon Cho/Bloomberg]

In a statement to Dow Jones NewsWires, Samsung complained that the ruling would limit consumer choice, writing:

We will move immediately to file post-verdict motions to overturn this decision in this court and if we are not successful, we will appeal this decision to the Court of Appeals

It is unfortunate that patent law can be manipulated to give one company a monopoly over rectangles with rounded corners or technology that is being improved every day by Samsung and other companies.

In other words, Samsung will first try to sway Judge Lucy Koh to reduce the infringement and damages in the trial verdict stage.  The jury's ruling is only guidance for the judge's verdict/sentencing in this kind of civil case, although it usually closely resembles the final ruling.

If it cannot sway Judge Koh, it will begrudgingly move up the food chain with its appeal, while it continues to challenge the validity of Apple's broad patents in complaints to the USPTO.

A memo to employees from Samsung's management highlights how the U.S. ruling was much more punitive than rulings in other countries, who largely rejected Apple's design claims (Germany is the only other region to embrace Apple's design claims).  Samsung writes:

We initially proposed to negotiate with Apple instead of going to court, as they had been one of our most important customers. However, Apple pressed on with a lawsuit, and we have had little choice but to counter-sue, so that we can protect our company.
The NDCA verdict starkly contrasts decisions made by courts in a number of other countries, such as the United Kingdom, the Netherlands, Germany, and Korea, which have previously ruled that we did not copy Apple’s designs. These courts also recognized our arguments concerning our standards patents.

The Korea Times quotes a senior Samsung Electronics executive as saying; "It’s absolutely the worst scenario for us."

A South Korean patent lawyer involved in the case asserted, "Judge Lucy Koh will make the final ruling in the next few weeks. Samsung will try best to persuade Koh that we didn’t willfully infringe on Apple’s design patents. Samsung, however, is ready to bring the issue to the Supreme Court as the verdict was based on protectionism."

But a Samsung executive appeared more aware of the likely grim reality, remarking, "As far as I know, it’s very rare for the presiding judge to make a decision going against the verdict by jurors."

Thus Samsung's next move is to move the matter to an appeals court, and (likely) to work on emergency software patches to remove features like tap/pinch to zoom and new body designs, to escape product bans.

Unless the Samsung Galaxy S III escapes an ITC ban, Samsung's entire lineup may be temporarily forbidden from sale on the U.S. market.
Apple's next move will be to push for speedy product bans.  It will also likely seek to pressure the U.S. International Trade Commission to ban the Galaxy S III, not involved in the case, pointing that it has similar features as Samsung's infringing lineup (e.g. pinch to zoom).  If Apple can ban the Galaxy S III, it may be able to achieve the unthinkable -- secure a complete ban on the products of America's current top smartphone seller.

Sources: Samsung [memo], Mark Cuban on Twitter, Google via The Verge, Reuters

Comments     Threshold

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By hiscross on 8/27/2012 11:38:51 AM , Rating: -1
Before all the stupid anti-Apple hate people start showing their ass, Apple is Not limiting choice. they are protecting their work. Every smart home manufacture can make an unique and compelling product. Microsoft has done so with WinMobile 8 (or whatever they call it). Samsung and Google took a short cut through Apple’s orchid and fell into one of Steve’s traps of Don’t steal my companies ideas. If you have a mind, then use it by Thinking.

RE: Choice
By Motoman on 8/27/2012 11:47:40 AM , Rating: 5
Sorry, dipsh1t. Apple isn't "protecting their work."

A rectangle with rounded corners isn't an's geometry.

Apple's patents are specious. They shouldn't have been shameful enough to seek getting them in the first place. The USPTO shouldn't have been moronic enough to have granted them. And Apple shouldn't continue to be so shameful as to use them to troll the market.

There isn't the slightest virtue in Apple. Nor is there any in their defenders.

You, sir, are a tool.

RE: Choice
By RjBass on 8/27/2012 11:50:15 AM , Rating: 2
So then why isn't Apple suing makes of WinMobile 7 or 8? Their phones are rectangles with rounded corners, use pinch to zoom etc....

Apple is a bully, and closer to a monopoly than any electronics company in the past has gotten to include Microsoft.

RE: Choice
By Zuul on 8/27/2012 12:07:28 PM , Rating: 3
MS and Apple have cross licensing agreements in place whereas Apple will get $$ from MS and vice versa for using each other's patents.

btw it's Windows Phone, not Windows Mobile.

RE: Choice
By BSMonitor on 8/27/12, Rating: -1
RE: Choice
By Motoman on 8/27/2012 12:15:18 PM , Rating: 4
Think you'd be OK paying a license fee to make a product in a rectangular shape?

Apple's patents are laughably specious. As are their defenders. GTFO.

RE: Choice
By messele on 8/27/12, Rating: -1
RE: Choice
By Solandri on 8/27/2012 4:14:35 PM , Rating: 2
"Rectangle with rounded corners" refers to the design patents Samsung was found to infringe upon. You can read through them really quickly (they're just pictures and a list of references). They actually don't look very much like any of the Samsung phones, so the only way one could construe Samsung to be infringing is if one interpreted the patents to be on any design of a flat rectangle with rounded corners.

Samsung was found not to be infringing on the similar patent for the iPad. Apparently the jury agreed sufficient prior art (Star Trek, Knight-Ridder) existed to invalidate the patent. Samsung was barred from introducing similar prior art for phones (namely, its internal designs for phone prototypes it was working on before the iPhone was released) due to a technicality (missed a court filing deadline).

And no it was not an overall look and feel case. Each individual element, each patent, was individually examined in detail and determined to be infringing or not infringing. There was no "overall look and feel" infringement. That's a cognitive dissonance fabrication of the folks who wanted Apple to win but were honest enough to admit that these individual patents were too basic and obvious to be patented.

RE: Choice
By gixser on 8/27/2012 4:45:09 PM , Rating: 2
Can you patent something so intangible as "look and feel"? (Not saying there is no protection, e.g. Copyright.)

The 5 requirements of patentability are discuseed here:

In Diamond v. Chakravarty the Supreme court said the scope of patentability should be broad but also held "abstract ideas are not patentable."

So, is "look and feel" an abstract idea and consequently not subject to patent protection?

RE: Choice
By ritualm on 8/27/2012 12:24:45 PM , Rating: 2

The single biggest reason why most companies refuse to enter into patent licensing deals with patent trolls: the former ends up legitimizing the behavior of the latter. Apple is a patent troll, even if it does "produce" something.

Microsoft did this for Apple, not simply to save the company from ruin, but because of pre-existing antitrust issues if they don't.

RE: Choice
By theapparition on 8/27/2012 12:15:10 PM , Rating: 3
Apple isn't suing MS because they can't. They have broad cross licensing agreements between the two companies.

I completely weep from this action. This is completely against any sort of innovation.

Imagine if you will, how the automotive market would be now if our legal system was similar 100 years ago? The complete lack of innovation and stifling competition.

OMG, someone else made a car with 4 wheels too. Even though we had covered wagons and horse drawn carriages with 4 wheels, this is a self propelled 4 wheel design. IT MUST BE PROTECTED AND WE DEMAND JUSTICE!!!! They can't "willfully" copy our 4 wheel car!

What's that? Someone added brakes and a windshield. Clear case of infringement.

RE: Choice
By spamreader1 on 8/27/2012 1:06:12 PM , Rating: 2
You'd be suprised how much patent wars play out in the background by auto manufacturers. My favorite was the windshield wiper delay patents suites.

RE: Choice
By Solandri on 8/27/2012 4:24:54 PM , Rating: 2
Yeah, the wiper patent was really stupid. You had pre-existing mechanical wiper delay systems. But someone patented the exact same system using electronics (control systems are mathematical constructs - whether the elements are mechanical, electrical, chemical, or whatever is irrelevant - that's why you can build a computer using mechanical relays, electronic transistors, or even Minecraft blocks). A non-engineering analogy would be like taking an existing method of drawing using a pencil, and patenting that same drawing method using a pen.

But the same patent drama already played out in the automotive industry. Seldon patented the idea of sticking an engine onto a carriage, and held the entire industry hostage for 16 years. Eventually Ford won the lawsuit and modern manufacturers' automobiles were found not to be infringing.

RE: Choice
By ritualm on 8/27/2012 11:50:59 AM , Rating: 1
So much nonsense. Apple doesn't want anyone to use their so-called design and software patents. Oh if you want to use them, you gotta pay so much in Apple taxes-cough-licensing fees your own competing products end up being too uneconomical.

The only winner here is Apple. Everyone else loses. How is that "not limiting choice"? I bet you don't have a clue iota what you're talking about.

RE: Choice
By retrospooty on 8/27/2012 1:11:26 PM , Rating: 2
Lets not forget they havent "won" yet. At best you can call this a single case that was won by a Jury of 9 jurers and a Judge from the Silicon Valley, just minutes away from Apple HQ with key evidence disallowed by the judge. Let the appeals courts do their job. They are a "higher level court" for a reason.

RE: Choice
By Theoz on 8/27/2012 2:54:56 PM , Rating: 1
All these "consumer choice limited" articles and complaints are ridiculous. Patents are limited-term monopolies. Monopolies inherently limit consumer choice. The US government (patents are in the constitution!) and every other developed nation has determined that innovation incentives, in the form of patents, are more important than consumer choice. I personally would rather have incentives for innovation than more choices of unnecessary tech toys.

RE: Choice
By rountad on 8/28/2012 12:09:33 PM , Rating: 2
Aren't you a patent attorney?

"I'm an Internet expert too. It's all right to wire the industrial zone only, but there are many problems if other regions of the North are wired." -- North Korean Supreme Commander Kim Jong-il

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