For a number of years, Samsung have been one of the primary manufacturers of processors and memory chips for Apple products, most notably manufacturing the flagship “A” series of processors which form the heart of the iPad, iPhone, iPod Touch and Apple TV. In the early years of smartphones, from 2007, Apple and Samsung had a mutually beneficial relationship, as Samsung did not themselves manufacture consumer products to rival Apple’s devices. All this changed in 2010 when Samsung launched their own smartphone, the Galaxy S, a direct competitor to Apple’s iPhone.
This has led to a tricky relationship between the two companies, with Apple finding it difficult to avoid being reliant on Samsung as a component supplier while they are a direct competitor in the smartphone market. Although Apple’s iPhone has been one of their most successful products, sales of Samsung’s smartphones now exceed those of the iPhone, in terms of units shipped. With the two companies now competing directly in the very crowded smartphone market, with devices exhibiting many similar features and technologies, Apple and Samsung have looked towards their intellectual property to try to gain the upper hand against each other.
What is now a major battle in the smartphone patent war, started in the spring of 2011 with Apple suing Samsung in the US for patent and trademark infringement, as well as unfair competition and false designation of origin, owing to sales of Samsung’s Android smartphones and associated devices, including the Nexus S, Epic 4G, Galaxy S 4G and the Galaxy Tab. Soon after, Samsung counter-sued in Korea, Japan and Germany for infringement of a number of their patents relating to 3G and wireless data transfer technologies. By the end of the year the battle was truly global with actions having been filed in the UK, France, Italy, the Netherlands and Australia.
Over the past three years a mixture of decisions have been reached, with wins and losses for either side. Patents have been found to be both valid and invalid, injunctions have been both granted and refused, damages have been both awarded (sometimes in amounts reaching into billions of dollars) and denied. In most jurisdictions actions are still ongoing with many appeals having been filed, such that final decisions have yet to be reached. Further actions have been filed, with the end of this battle not looking to be reached any time soon.
One such example of a patent case between Apple and Samsung has recently had an interesting development. In June 2011 Samsung sued Apple in the UK, asserting that Apple had infringed three of its European patents relating to 3G and wireless communication. Initially the patents were found in the High Court to be invalid, with Samsung’s applications to amend two of the patents being judged to not render them valid. Samsung were given leave to appeal the invalidity decisions, but independently of filing this appeal, Samsung applied at the European Patent Office to make use of their central limitation procedure, which if accepted, enters the limitations in all the countries in which the European patent is in force. At the same time they applied to stay the UK appeals pending the outcome of the central limitation. This bypassed the hurdle in the UK Patents Act that post-trial limitations are only allowed if they do not require a new trial to determine the validity of the amended patent.
Apple requested that the stay of the appeal be refused, unless Samsung withdrew their application for central limitation, arguing that it was an abuse of process. Apple’s reasoning was that if the stay of the appeal was granted, they would have to face essentially a new trial on Samsung’s amended patents, which was contrary to the provisions of the UK Patents Act. However, in March 2014 the Court of Appeal rejected Apple’s arguments saying that it was Samsung’s right to apply for central limitation, which was enshrined in UK law, so this was not an abuse of process. Furthermore, the stay should not be too long, because central limitation is a straightforward procedure compared to oppositions at the European Patent Office, for example. It would also ensure that the Court of Appeal were not ruling at appeal on a patent which was not in its final form.
In the meantime, other battles have been taking place between Apple, Samsung and many of the other players in the smartphone market, including HTC, Google, Nokia, Motorola and Microsoft. While there are still a number of battles continuing, a number of the parties have agreed ceasefires, with deals being reached between Apple and HTC, Microsoft and Nokia, and Google and Motorola, to name a few. However, the most prominent of these deals, and the one of most concern to Apple, is the ten year patent licensing agreement reached between Samsung and Google in January 2014.
The deal between Samsung and Google was advertised as promoting collaboration on research and innovation between the two companies, and while it will undoubtedly cement their already symbiotic relationship owing to Samsung’s almost exclusive use of Google’s Android operating system in their smartphones, it must surely also be a strategic alliance against Apple. As evidenced by Samsung’s smartphone sales now eclipsing those of Apple, as well as Apple’s recent fall in share price, the agreement between Samsung and Google comes at a time when the market appears to be shifting from Apple products to Android based devices, and Google also battling with Apple in the courts over their patents.
It is difficult to see Apple and Samsung reaching a similar deal while Samsung are continuing to be so successful in sales of their own smartphones, and at a time when Apple and Samsung value their intellectual property considerably, being two of the world’s most numerous filers of patents. Indeed an attempt at mediation in February 2014, albeit ordered by a US court, failed to deliver any progress.
Following the failure of the mediation, a Californian court ordered for a trial (which took place from March to May 2014) to decide the latest issues, stemming from a suit Apple filed against Samsung in February 2012 alleging infringement of a number of its patents. Samsung counterclaimed, alleging infringement of a couple of its patents by Apple. The patents forming the subject of the trial include five of Apple’s (all relating to software features: quick links, universal search, background syncing, slide to unlock and automatic word correction) and two of Samsung’s (camera and folder organisation, and video transmission functionality). The devices alleged to infringe Apple’s patents included a number of Samsung’s Galaxy range of smartphones and tablets, and the Apple devices alleged to infringe Samsung’s patents included later generations of the iPhone the iPod Touch, i.e. their flagship products.
All of the patents at issue were found to be infringed by at least some of the other side’s smartphones and tablets, with the damages being the major issue at stake. The jury ordered Samsung to pay a total of $120 million to Apple, and Apple to pay a total of $158,000 to Samsung. Although the damages are heavily skewed in Apple’s favour, this will be seen as a pyrrhic victory as the level of damages Apple have won is only a small fraction of the $2.2 billion they were seeking.
Both sides have indicated that they will appeal various aspects of the decision, so this is far from the final say in this long war. However, with the damages recently awarded being paltry in comparison to what both sides (and particularly Apple) were claiming, and the amount both sides have spent on litigating against each other surely being exorbitant, it makes one wonder when the balance will finally tip in favour of reaching a settlement.
Earlier edition published in Business Review Europe, June 2014