The Apple-Samsung Battle and its Effects on the Smartphone Industry
Ashish is a member of The Motley Fool Blog Network -- entries represent the personal opinion of the blogger and are not formally edited.
As Apple (NASDAQ: AAPL) and Samsung have laid down their testimony on Friday regarding the ongoing patent infringement trial, the decision about the multi-billion industry now falls on the shoulders of the jury of seven men and two women. Judge Lucy Kohler has already asked the two parties to come to a settlement as she said “I see risk here for both sides, if we go to a verdict.” We believe that the result of this trial, which some consider to be the tech trial of the century, could have huge implications for the entire smartphone industry.
Apple’s Case:
Samsung -- A mimic?
According to evidence presented by Apple, Samsung seems to have changed the basic form factor of its smartphone following the arrival of iPhone in the market.
Apple’s illustration of Samsung phones pre and post iPhone launch| Source: Apple trial brief
Google -- The Advisor: Apple also presented evidence in which Google (NASDAQ: GOOG) advised Samsung to change the form factors so that its products don’t look “too similar to Apple.”
Google forced Samsung to redesign its Galaxy Products | Source: AllThingsDigital
Please Don’t Copy Us: In evidence presented by Apple, Apple tried to negotiate a value of $12 per Android smartphone after giving a discount of 50% on product impact and 3% for not copying Apple in 2010.
Apple offered a chance to Samsung to license their products| Source: AllThingsDigital
Samsung’s Case:
Apple copies Sony, Why Can’t we copy Apple:
The foundation of the accusation is a 2006 Businessweek interview with Sony product designers Takashi Ashida and Yujin Morisawa in which Morisawa talks about NW-A1200 with a square screen without buttons. Samsung argues that this article was circulated in the inner Apple corridors and that certain points in it helped Apple to derive its iPhone design. According to a deposition of Shin Nishimori (Apple’s design engineer) presented by Samsung, Nishimori acknowledged that Jonathan Ive asked him to draw a sketch of an iPhone “if Sony were to make an iphone”.
How the iPhone evolved according to Samsung |Source: Samsung filings
Apple needs to pay royalty for patent infringement
Samsung considers that Apple infringed on its patents for wireless standards and for media standards. Apple argues that Samsung should have disclosed the technology rights before the 3GPP standard (Michael Walker, a former chairman of ETSI acknowledged that Samsung failed in providing timely disclosure related to the patents) was adopted and should have licensed its property to prevent monopoly in the business.
The Implications:
If Samsung Wins
We believe that this trial is largely a proxy for the ongoing mobile battle between Google’s Android and Apple’s iOS. Samsung manufactures many of Android’s recent flagship devices, most of which are framed for infringements in the trial. Through an attack on Samsung, Apple has indirectly stated that Android devices generally copy their iOS counterparts while Google still resists saying that Android is an original design. A Samsung victory in the US trial would likely validate Google’s Android devices as independent designs. Furthermore, as Samsung’s devices are the flag bearer for Android ecosystem, a victory would likely allow other Android hardware manufacturers including Motorola (NYSE: MMI) and HTC to continue their momentum in Android smartphones. A Samsung victory might also affect Apple’s ongoing global patent infringement proceedings with Motorola and HTC, lessening the legal pressures that they face.
If Apple Wins
Vis-à-vis, an Apple victory could potentially question the ingenuity of Android devices and might persuade Apple to file an increased number of IP litigations, slowing the momentum of the Android ecosystem. Google has invested heavily in Android as it acquired Motorola Mobility for $12.5 billion, apart from the R&D costs incurred. Accordingly, an Apple victory could potentially have a significant impact on the future revenues and ROI that Google derives from Android.
Our Take on the Outcome
While Apple played several trump cards during the trial, Samsung just took some potshots at Apple. Samsung’s case regarding the iPhone being ultimately derived from Sony’s Walkman seems a little too farfetched to us. While we are not patent or legal experts, Apple’s case look more compelling.
The article is co-authored by Rahul Agarwal and Ashish Sharma. Both have no positions in the stocks mentioned above. The Motley Fool owns shares of Apple and Google. Motley Fool newsletter services recommend Apple and Google. Try any of our Foolish newsletter services free for 30 days. We Fools may not all hold the same opinions, but we all believe that considering a diverse range of insights makes us better investors. The Motley Fool has a disclosure policy. If you have questions about this post or the Fool’s blog network, click here for information.
