Michael Finneran
Michael F. Finneran, is President of dBrn Associates, Inc., a full service advisory firm specializing in wireless and mobility; services...
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Michael Finneran | August 27, 2012 |


Apple-Samsung Case: Waiting for the Other Shoe to Drop

Apple-Samsung Case: Waiting for the Other Shoe to Drop Wringing a royalty out of Samsung for every device sold will be a big win for Apple, as one of the key selling features of Samsung's smartphones has been price.

Wringing a royalty out of Samsung for every device sold will be a big win for Apple, as one of the key selling features of Samsung's smartphones has been price.

Apple's victory in its patent infringement suit against Samsung last week is certainly a milestone in the ongoing patent wars, but the war continues. Apple was awarded a $1.05 billion settlement on several counts, some related to the operating software and others on specific Samsung product designs, but this story is nowhere near over. Samsung has announced its intention to appeal, and Apple could conceivably seek triple damages, but the big question is: "What kind of royalty payments will Google and/or Samsung have to pay Apple to use what the courts have decided is its intellectual property?"

Patent challenges have been a part of the technology field since the outset; the first decades of the telephone industry were defined by a patent battle between Alexander Graham Bell and Elisha Gray. It is somewhat surprising that the jury returned a verdict at all given the complexities of patent law and the number of claims that were under dispute. Throughout the trial I was betting on a hung jury.

While this was a blow to the Android camp, clearly the Google-supported ecosystem is not going away. According to Gartner, for the first quarter of this year, Android led the worldwide smartphone market with a 56% share to Apple's 23%. Samsung dominates HTC and Motorola Mobility in the Android segment, and IDC puts Samsung's share of the total smartphone market at 32.6% to HTC's 5.7%; Motorola's share is represented in the "Other" category.

From here there are two available courses of action for Samsung. First, the company could develop alternatives to the technologies those Apple has claimed as its own. For example, Samsung engineers have come up with an alternative to Apple's "bounce" feature where the image bounces when you scroll to the bottom of the page. Samsung devices now display a blue glow at the bottom when you reach the end of a page, rather than the "bounce". However, it looks as if Samsung will have to incorporate at least some of Apple's intellectual property into its devices.

The other, and for my money the more likely scenario, is that Samsung simply comes to a royalty agreement with Apple and builds that cost into the price of its products going forward. The court had initially attempted to avoid a trial by getting the companies to agree to some form of royalty payment, but according to testimony presented at the trial, the two never came close to an agreement. Apple had apparently been looking for Samsung to pay $24 per smartphone and $32 per tablet. Samsung countered that those fees would eat up half the profit margin for those devices. Now Samsung has a gun to its head--not the best position for bargaining.

Samsung has announced its intention to appeal the decision, but in the meantime they will likely have to begin royalty negotiations. Wringing a royalty out of Samsung for every device sold will be a big win for Apple, as one of the key selling features of Samsung's smartphones has been price.

In the bigger picture, Apple's real target in all of this is Google rather than Samsung. Google owns Android, but they generate no revenues directly from it. Rather they provide it for free to manufacturers in the hopes of getting a bigger share of the mobile search and mobile commerce markets. Some have suggested that the decision might be a big win for Microsoft, given that their designs are so different from Apple's and Samsung's. However, Microsoft would still have to win customers over to its products, something it has failed to do up to this point.

In the end, the Apple-Samsung settlement is just one more chapter in the jumbled mess we call patent law. I have no idea what the "best" result to this morass should look like, however the amount of time and money that goes into suits and countersuits seems to be detracting from our core objective which is to make people's lives better with technology. Meantime, this is more good news for Apple.


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