Companies agree to limit their legal battle to the U.S., pursue settlement agreement

On Wednesday South Korea's Samsung Electronics Comp., Ltd. (KRX:005930) (KRX:005935) and Cupertino, Calif.'s Apple, Inc. (AAPL) -- the world's top two smartphone and tablet computer sellers -- agreed to drop the majority of their patent litigation against each other.  Under the deal, the pair will drop all lawsuits outside the U.S.
A joint statement read:
Apple and Samsung have agreed to drop all litigation between the two companies outside the United States.  This agreement does not involve any licensing arrangements, and the companies are continuing to pursue the existing cases in U.S. courts.
The pair dropped lawsuits in:
  • Australia
  • Japan
  • South Korea
  • Germany
  • Netherlands
  • the U.K.
  • France
  • Italy
Apple sued Samsung in early 2011, claiming its Galaxy S smartphone -- introduced in 2010 -- was a "copycat" of the iPhone, Apple's best-selling smartphone which entered the market in 2007.  The bold legal attack on the veteran South Korean firm, which had been offering cell phones for nearly two decades before Apple's arrival was met with a firm rebuke.  Outraged at Steve Jobs' claim that it "slavishly copied" the iPhone, Samsung filed expanded the legal war, filing countersuit not only in the U.S., but multiple other jurisdictions.

Apple and Samsung
Apple and Samsung have spent the last three years blowing millions on a global legal war that ultimately has delivered little action for either company. [Image Source: Ubergizmo]

Overseas courts sorted out the mess relatively quickly, banning certain Samsung models or features that were a bit too derivative of Apple's.  Foreign courts tended to issue brief bans, but shirked at Apple's request for longer turn bans.  Instead, they prodded Samsung to engage in a series of minor redesigns and tweaks to make its Android products more unique, a policy which arguably worked out to Samsung's benefit in the long run.

Many hoped that the "thermonuclear" patent war against Android -- started by late Apple CEO Steve Jobs would be settled amicably when Timothy Cook took over as Apple's new CEO in 2012.  Things didn't work out that way, though.

Back in the U.S. Apple's lawsuit and Samsung's initial countersuit came to a climax in 2012.  In court Samsung documents were presented that showed that Samsung executives internally admitted to modifying their designs to be more iPhone-like after 2007.  Samsung further struggled given that the case was tried just a short drive away from Apple's Cupertino hometown and several of the jurors admittedly had family members who were Apple shareholders.  Unsurprisingly it lost the first case and was ordered to pay $890M USD, after some minor corrections to the damages rate.

In May of this year, Apple and Samsung were back in the same court, wrapping up a second lawsuit/countersuit over more recent devices.  This time around the result was far less one-sided.  The federal court jury ruled ultimately both Apple and Samsung's recent devices were guilty of stealing patented features.  Apple was ordered to pay $158,400 USD for "accidental" infringement of one key Samsung patent, while Samsung was ordered to pay $119.6M USD for willful infringement of two patents across most of its device lineup, and infringement of another Apple patent across parts of its device lineup.

Galaxy vs iPhone
Samsung fought Apple to a draw in the pair's second U.S. federal court trial. [Image Source: Getty Images]

Following the stalemate of sorts Samsung and Apple agreed to the first major drawdown of their legal war.  Both companies agreed to drop their ban request before the U.S. International Trade Commission (ITC).  The latest wind-down of the legal campaign is welcome news to U.S. legal observers, including many federal judges who admonished both companies for monopolizing the courts' time with their quibbling.
Apple and Samsung will still likely wage war in a third U.S. trial, but at this point it appears clear that they're just jockeying for position, with each company looking to better its hand when a licensing settlement is negotiated.  Villanova University law professor Michael Risch said the wind-down was unsurprising given that the global lawsuit campaign had produced "mixed results" and was "not worth it" for either firm.
Both companies are facing increased pressure from resurgent players like Microsoft Corp. (MSFT) and from a host of new market entrants, largely new OEMs from China like Xiaomi and the Lenovo Group Ltd. (HKG:0992).

Source: Bloomberg

"If they're going to pirate somebody, we want it to be us rather than somebody else." -- Microsoft Business Group President Jeff Raikes

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