Shaking Down Apple’s Money Tree
Karen is a member of The Motley Fool Blog Network -- entries represent the personal opinion of the blogger and are not formally edited.
Lost in the shadow of Apple’s (NASDAQ: AAPL) big win over rival Samsung (SSNLF) are a string of legal losses that are impacting Apple’s bottom line and opening up the company to extortion through frivolous lawsuits.
Apple has sunk billions into R&D to develop new and innovative products at breakneck speed, and is understandably protective of their intellectual property. And while no one would deny Apple’s right to defend their patents, it seems the company’s nasty habit of suing competitors to stifle competition has backfired.
Ever hear of Apple vs. Nuevas Tecnologias y Energias Central? It’s a ridiculous suit Apple filed against a very small Spanish software company in November 2011. It seems Nuevas developed an Android powered tablet named the NT-K Pad that vaguely resembled the iPad, and the software giant promptly filed a commercial and criminal suit against Nuevas. The Spanish court, seeing that the only two things the tablets had in common were that they were both flat and rectangular, quickly dismissed the suit. Nuevas has counter-sued for damages and requested the Spanish courts open an investigation into Apple’s anti-trust activities.
Samsung won a decisive round against Apple this past June in the Netherlands when the Dutch court upheld Samsung’s claim that Apple had violated a Samsung patent. It seems that Apple liked Samsung’s internet connection technology so much they “borrowed” the idea and put it in some of their iPhones and iPads without letting Samsung know.
Losing to longtime rival Google (NASDAQ: GOOG) had to rankle on a personal level when Federal Judge Richard Posner dismissed Apple’s patent infringement suit against Google’s Motorola Mobile unit with prejudice. In his June 22nd opinion, Judge Posner stated, "Apple is complaining that Motorola's phones as a whole ripped off the iPhone. But Motorola's desire to sell products that compete with the iPhone is a separate harm-and a perfectly legal one- from any harm caused by patent infringement." The Judge made no secret of his annoyance with Apple’s courtroom antics in his order dated April 26th: “I’ve had my fill of frivolous filings by Apple.”
China in particular is discovering just how deep Apple’s pockets run. To settle a protracted (and costly) iPad trademark dispute, Apple agreed to pay Chinese company Proview Technology (Shenzhen) $60 million dollars. During the dispute, Proview Technology had requested stores remove the iPad from their shelves, effectively shutting down iPad sales until the legal wrangling was resolved. “The settlement is great news for Apple," said Teck-Zhung Wong, a Beijing-based analyst with technology research firm IDC. "It just allows them to get on with business and stop being distracted. The new iPad has been so late to the China market that if they drag it any longer, Apple will stand to lose quite a bit more."
The ink wasn’t dry on that resolution before another Chinese company filed against Apple. Jiangsu Xueboa, a household chemical company that trademarked “Snow Leopard” years ago, filed a trademark infringement claim based on Apple’s OS X being named “Snow Leopard.” Jiangsu Xueboa is requesting $80,000 and an apology from Apple.
Will Apple pay off Jiangsu the way they paid off Proview Tech? Yes. $80,000 doesn’t even qualify as chump change in the Apple universe and from a practical standpoint, it would cost more in attorney and legal fees to fight the suit. It also kicks opens the door for companies to file a lawsuit, no matter how obtuse the reason, and demand a sum small enough to make it worthwhile to file but not large enough for Apple to litigate.
Apple has filed approximately 50 lawsuits in at least 10 countries against Samsung alone for perceived patent infringement and Apple is named as plaintiff and defendant in numerous other lawsuits. Regardless of the outcome, this endless round of protracted litigation will continue to cost Apple’s bottom line through protracted legal costs and in settlement payouts.
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