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Patent Wars: The Samsung v Apple Case

Just last week when Samsung scrapped off its latest, flagship phone, the tech giant also went toe to toe with rival Apple in a long-awaited battle in the highest court in the U.S., a hearing that came less than a week after a federal appeals court reinstated a US $120M jury award for Apple against Samsung.

History

All this started in 2011 when Apple sued Samsung for ‘slavishly’ copying Apple and in 2012 when a jury ordered Samsung to pay Apple around US $1.05B for infringing the latter’s design patents. After several trials, Samsung later agreed to pay Apple US $548M but reserved the right to be reimbursed if the patents are deemed invalid or if it were to win an appeal. On Tuesday, October 11, eight US Supreme Court justices struggled to determine design patent damages in Samsung’s bid to pare back US $399M of US $548M it paid Apple.

Arguments

In summary, Apple argued that Samsung should hand over all of its “total profit” under a law for patent infringement, it is rightfully so to prevent future copyright infringements which “poses chilling risks to the future of design innovation.” While Samsung did not dispute its liability to pay, it however argued that it should pay only to the extent of the value represented by the copied features and not the product’s entirety. Other companies including Google, Facebook, and eBay supported Samsung in its bid for a retrial, arguing in a brief that a decision in favor of Apple could hamper the development of “useful modern technologies.”

Samsung’s Options

Generally, a company has three options when a product is found to have infringed on a patent:

1. Discontinue the product in the applicable jurisdiction

2. Pay a licensing fee to the patent owner and continue selling the product, or

3. Create a new product model avoiding copyright infringement

Samsung cannot afford the first option in its race against Apple to dominate the market for smartphones. Especially since Apple’s stock jumped 2.2% and Samsung’s stock dipped 1.5% after the latter suspended the production of its overheating flagship Galaxy Note 7. Samsung chose the second option, now it has the choice to either shift the cost to its consumers or absorb the cost itself, something that Apple could be happy about.

Apple’s Strategy

The patent war initiated by Apple is not just to protect its technology or design and recover damages as many may see it. Apple may have done it because of these two powerful effects that patent litigation has:

1. Marketing: litigation can have a powerful marketing effect when major newspapers around the world put it as front-page news, affecting the image of competitors’ brands.

2. Patent Strategy: Samsung is not Apple’s biggest rival - it’s Google which produces the open-source system Android. By suing the largest producer of Android-running phones, hardware makers may become more reluctant in using Android, wanting to avoid patent litigation risk. This is however becoming more difficult for Apple since Google is beginning to enter the hardware market after announcing to release its new phones: Pixel and Pixel XL.

Hence, expanding patent portfolios and initiating litigations may be done as an offensive and defensive strategy for companies, a way to both protect themselves and to attack their competitors.

Effects

If Samsung wins the case, it will create a precedence that would decide future design patent cases and lower courts will have to decide the final amount, with Samsung paying less. If Apple wins, more trials for other design patent cases will ensue between the two tech giant firms. Regardless, the decision will affect future design patent disputes and how they are handled. It will risk creating a world with stifled innovation or a world where “copycats” can roam freely.