So Samsung was estimated to be worth a billion dollars less in the wake of a Presidential veto in their latest patent skirmish with Apple. The news came down over the weekend, when U.S. Trade Representative Michael Froman announced that President Obama had made a rare decision to veto an ITC ban against some models of the iPad 2 and iPhone 4. And, predictably, Apple’s net worth grew by nearly seven billion dollars as the stock price continued to rise.
In June, the ITC voted to ban those models due to the alleged violation of a single industry standard patent owned by Samsung. Had the ban remained in effect, AT&T would have been unable to sell you an iPhone 4, nor would an iPad 2 with cellular support been available. While that wouldn’t seem to be such a significant issue, given that they are older models and all, the iPhone 4 remains quite popular. So Apple was in danger of losing a lot of potential sales — and money — until the next generation iPhone arrived.
Now the ins and outs of the latest patent skirmish are complicated, and probably boring to most of you. But it seems as if it all involved a single patent involving in a single chip. Even though Apple bought the chips to use in the iPhone 4 and older models, and the purchase price presumably included the license fees the manufacturer, Infineon, had to pay to license Samsung’s technologies, Apple was expected to pay yet again.
Does that make sense to you? What if you bought a new car, with many thousands of parts, and no doubt loads of patents covering the technology, and got a bill from some unknown patent holder requesting another $750 so you could legally keep the car? After paying for license plates and insurance, that would be the unkindest cut of all, but it seems to be the same logic Samsung used in their claim before the International Trade Commission. No wonder the ruling was vetoed.
Now Samsung’s biggest weapons on their ongoing intellectual property disputes with Apple are “standard essential” patents that are supposed to be licensed under Fair, Reasonably and Nondiscriminatory rates, known as “FRAND.” What this means is that the patent holder should be making it easy for any company to license their technologies at rates that are, within reason, pretty much the same. No disputes involved. It’s just the cost of doing business.
Of course, overturning the ITC ruling won’t end the conflict. Samsung is already appealing, because demands involving three other patents weren’t approved. So the fight will no doubt continue. Apple and Samsung will be keeping their legal teams at work for years with no resolution in sight.
Now in the real world, we don’t see Ford actively suing General Motors or vice versa because of ongoing patent disputes. The car makers have found a way to compete on the alleged merits of their motor vehicles, not on who owns the patent for the automatic transmission or the brake pedal.
While I wouldn’t presume to want to analyze the ins and outs of Apple’s or Samsung’s patent portfolios, I do understand Apple’s logic. Consider that, before the iPhone arrived, Samsung’s smartphones resembled a BlackBerry. After the iPhone appeared, and proved unexpectedly successful, a Samsung smartphone closely resembled an iPhone. Maybe too close. While imitation is common in many industries, too much imitation causes the lawyers to examine a company’s patent portfolio for possible infringement.
Yet with all the back and forth legal battles, it doesn’t appear a whole lot has been accomplished. Sure, Samsung has made a few minor software workarounds to avoid stepping on a few Apple patents, but that’s about it. There has to be a better way.
And maybe there is.
Just recently, there were renewed reports that Apple and Samsung are engaged in ongoing discussions about a settlement. Certainly Apple has been there before; in recent years with Nokia and HTC. It’s friendly, it’s quiet, and the companies can go about their business selling whatever they are selling, knowing full well where the limitations lie.
Besides, you’d think Samsung and Apple have a large incentive to settle. Samsung earns billions of dollars selling parts to Apple. Period. Despite reports that Apple has sought other suppliers, it appears that Samsung is still a key supplier for some key components, such as processors and displays. Isn’t that a huge incentive to cut a deal and get on with their business?
Of course, Samsung is nothing if not a ruthless competitor, so it may be that the company isn’t above playing dirty. Consider the recent revelation that some code is present on a Galaxy S4 smartphone to enhance its benchmarks in some testing apps. Sure, Samsung denies the charge, but that only makes them look more culpable. Any company that pulls a silly stunt like that is not above slavish copying. That seems logical, but Samsung will not lose face signing a deal with Apple to stop the patent litigation once and for all. As with the Nokia and HTC deals, people will soon forget that any of it ever happened.