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Patent Wars: Samsung and Apple for a remake of “I love you…me neither”?

posted Jun 20, 2011, 11:09 AM by Julien Pillot   [ updated Jun 21, 2011, 9:38 AM ]

According to numerous consulting groups - such as Nomura, Canalys and Gartner - analysts’ very recent notes, Samsung and Apple have probably never been this close to end Nokia’s smartphone (volume) supremacy. The American and Korean majors are actually engaged in fierce competition on the very strategic (and lucrative) smartphone market. Much more than a classic device competition, the two contenders aim to promote their own entire ecosystems. However, if these ecosystems flow from two highly distinct business models (ownership value vs. participative value), the same is far from apply concerning the very device market. Indeed, certain similarities between Apple and Samsung’s cellphones and computer tablets, whether on general design, features, functionalities or interfaces, will not have escaped consumers’ attention. So much so that Apple sued Samsung last April for patent infringement alleging that the Korean giant “rather than innovate and develop its own technology and a unique Samsung style […], chose to copy Apple’s technology, user interface and innovative style”.

Samsung’s retaliation was not long in coming, and the less we can say is that the legal response was both broad and resolute. Only few days later, alleging that Apple uses Samsung’s technologies without paying, the Korean firm intensified the legal dispute in suing the American one in Asia (Japan and South Korea), Europe (Germany)… and on Apple’s own playing field (District Court of San Jose, California). In the last episode of the show (to date), once ruled by the federal judge Lucy Koh to fork over five of its not-yet-released mobile phones and tablets to Apple’s lawyers, the Korean manufacturer has in turn asked the American company to supply a sample of the not-yet-disclosed Apple’s flagship products iPhone 5 (or 4S) and iPad 3. As a very skilled self-defense move, the motion to compel (Civil L.R. 37, Samsung's statement attached below) asks the court to order the non-complying party to reciprocally disclose the requested information or documentation. This sort of arbitration procedure is most common to deal with discovery disputes, especially when intellectual properties are involved.

Despite such a vigorous legal clash whose any new development has definitely no reason to be envious of best Hollywood shows’ cliffhangers, could we expect the two protagonists to eventually settle this out of the court? Presently, such a scenario does not seem realistic. Indeed, although stiff competitors on the final product market, Samsung and Apple are also engaged in a mutually profitable industrial partnership. In February, several well-informed journals and websites mentioned an annual US $7.8 bln contract whose terms bind Samsung in providing most Apple products in RAM and flash memory, LCD screens and A4/A5 chips for iPhone and iPad. On the one hand, Samsung relies on this very important revenue source (almost 4% of its annual revenue according to the Wall Street Journal) in order to sustain its growth and support R&D investments and multiple products policy. On the other hand, in concluding such a long-term agreement Apple, who is facing a huge demand on its products, both minimizes stock shortage hazards and limits Samsung’s capacity to serve direct rivals (Sony, HTC, RIM, Nokia…). As long as the status quo will persist, it must be assumed that settlements and agreements rather than a jury trial will soon resolve most of the legal complaints. Unless the emergence of a third credible ecosystem or of real alternatives to Samsung technologies (TSMC?) is likely to create a new competitive order, Samsung and Apple sound to have currently more interest in working hand in hand to achieve mutual strategic objectives rather than wasting time and scarce resources in dodgy trials. 

Julien Pillot,
Jun 21, 2011, 9:38 AM